Summary of Findings from the RHIO Finance Survey
This is the executive summary from the 50-page report, Funding RHIO Startup and Financing for Life: The Survey of Regional Health Information Organization Finance. Full text is available at http://hittransition.com/RHIO_Survey_2006.
The Survey of Regional Health Information Organization Finance asked RHIOs to report on organization financial information, and stakeholders’ leadership and financial participation over the lifecycle of the organization, from startup through a transitional period and on into the production stage, where live patient information is exchanged between multiple partners. Data were gathered in March and April 2006. Our report discusses financial leadership/management, as well as contributed and earned revenue participation, that have come at each lifecycle stage.
Respondents reported on the involvement of 32 specific stakeholder entities encompassing nine stakeholder classes such as Government, Providers, Health Plans, etc. The survey was distributed to a list of about 20,000 health IT professionals in an effort to reach out and identify new and unknown projects, as well as those known to the field.
Qualified responses represented fifty RHIOs. Nearly half of respondents (48%) self-identified as being at the startup stage, 22% were in transition, and 30% in production. The majority of respondents are operating as nonprofit organizations; only 10% indicated that they were not. Our analysis indicates that the leading participants in financial leadership are from the government and provider sectors, followed by health plans and vendors. Government involvement may actually increase somewhat as RHIOs reach maturity, rather than declining. Hospitals, physicians and physician groups are key stakeholders involved in financial planning, they are among the most frequently identified contributors of gift and grant income during startup, and are identified by respondents ever more frequently as providing earned income (including membership payments and transaction fees) through the transition stage and into production.
A key finding was that respondents indicated a strong, ongoing reliance on grants and/or other forms of contributed income as the organizations mature. While 68% said that they either are or plan to be self-sufficient, over 80% in each stage of development said that they anticipate applying for grants. Only 44% of RHIOs that self-identified as being in “mature production,” the most advanced stage, said that they had achieved operational self-sufficiency. 89% of the self-supporting mature RHIOs said that they still anticipate applying for grants. This seemingly contradictory finding is in part explained by the use of contributed capital to leverage operational earned income toward self-sufficiency. Perhaps this is a distinction only a CPA could fully appreciate, but it is a key to understanding how RHIOs leverage contributed income to build the means of producing ongoing revenue. It also provides an important clue to identifying the RHIO business model.
As RHIOs mature, there is some movement towards funding operations through earnings. In the startup stage, more than 70% of RHIO income, on average, comes from grants and other forms of contributed income. This declines during transition to about 50% during the production stage. However, in the production stage, less than 30% of RHIO income arrives in the form of membership/subscription payments and transaction fees, while about than 20% comes from other sources identified as earned income. Our analysis discusses a trend towards diversification of revenues.
We found that the often-repeated phrase “If you’ve seen one RHIO, you’ve seen one RHIO” is, in some critical ways, untrue. This “One RHIO Myth” – that RHIO organizations are profoundly dissimilar – is not supported by the survey data, which shows strong correlations among RHIO efforts at the same level of development and even over time. A related assertion, that RHIOs have not yet found a business model, may be more an issue of familiarity than of fact.
While the emerging profile of the RHIOs surveyed does not represent that of a commercial enterprise or fee-based nonprofit healthcare provider organization, it closely resembles other established business models in among charitably-supported nonprofit organizations (NPOs); particularly in terms of governance and tax structures, in ongoing reliance on contributed income to build capacity and expand services, and in the production of services for the public good.
A third notion, that the way RHIOs are now operating is unsustainable, may be less compelling once this new business model is understood and applied. External references are used to show that the resources which sustain such nonprofit organizations are not only available, but are growing at a substantial rate.
The data collected in this survey and others are supportive of a recognition that, at this stage in the build-out of a national health information infrastructure, RHIOs represent a public good and are appropriately being supported through public and private grants and in-kind contributions. Our data suggest that, while there is movement toward operational self-sufficiency, it is prudent to expect that as much as one-third of total RHIO revenues will continue to come from government grants and philanthropy, perhaps into the foreseeable future. We will cite external sources as evidence that this is consistent with other nonprofit organizations which supplement operational revenues with contributed funds to leverage increased capacity and expansion of services.
Because healthcare providers – the top-cited stakeholders in RHIO financial leadership – may be less familiar with a charitably-supported model than the dominant commercial model driven almost exclusively by fee-for-service income and reimbursements, we provide a section titled Analysis and Strategies that speaks prescriptively of how RHIOs may take advantage of the charitably-supported NPO model.
(Published by Healthcare IT Transition Group, http://hittransition.com)