2007 Survey of Regional Health Information Organization Finance

The Annual Survey of Regional Health Information Organization Finance, conducted by Healthcare IT Transition Group in 2006 and 2007, gathered financial data from U.S. RHIOs (also called Health Information Exchanges) at all stages of development, from earliest startup through the most mature production stage. The survey team’s report, Sustainable RHIO Funding and the Emerging Business Model, is available at http://rhio.hittransition.com.

The sample included 23% of the estimated U.S. RHIO cohort. Respondents were located in 28 U.S. states and territories; 52% reported being in the startup stage, 24% in a transition stage, and 24% in production.

The report’s financial analysis of the RHIO space includes an examination of revenue streams, service offerings, stakeholders as sources of revenue, value creation and capital development strategies. Investigators studied contributed, earned and other income, including loans and investor proceeds. The survey report includes 48 charts and tables that illustrate a broad and deep financial picture for this nascent segment of the healthcare and health information technology markets, but one that still remains hamstrung by various technological and non-technological trials.

Based on data on RHIO budgets and technology spending, the investigators provide a guarded estimate of the current U.S. RHIO technology market for 2006 and 2007, and a projection for 2008. The estimate for 2007 indicates a scant $128.6 million total U.S. RHIO technology shopping cart. With slow growth reported by respondents (averaging 2.3% from 2006 to 2007), this remains a modest market -- about seven tenths of a percent (0.7%) of the total U.S. health information technology market. The report provides breakdowns of technology spending in seven categories, including hardware, software, and consulting services.

With recent high-visibility announcements of nine digit RHIO development plans, this segment appears to be poised for rapid growth, provided that reported challenges can be met. RHIOs report frustrations relating to data controls, security and privacy issues. 53% of respondents reported that cash flow was a significant challenge; cash flow and it led the list of non-technology challenges, followed by partner relations, privacy concerns and legislative/political issues.

Between 80% and 90% of respondents across all lifecycle stages reported that they continue to anticipate the need for grants. Even when investigators considered only those fully operational RHIOs (self-identifying as having reach full maturity), and then further refine the sample to look only at those who state that they are now self-sustaining, fully 60% state that they still anticipate the need for grants.

Contributed income continues to dominate RHIO revenues. Startup-stage RHIOs reported increased percentages of income from grants, up from 73% for 2006 to 84% for 2007.

Most RHIOs continue to base revenue models on membership fees rather than volume-based fees, with, on average, about three times as much revenue coming from the former as from the latter. The report explains how this may cramp RHIO value creation over the longer term.

An interesting observation in the year-over-year data suggests that RHIOs may be experimenting with an alternative “zero entry cost” model. This may be an effort to attract critical mass to hasten network value creation. The report describe in detail the economics driving the process.

The report includes a discussion of the de facto RHIO business model as an arguably sustainable one, describing the emerging model as a grant-supported capital base upon which is built an infrastructure for earnings to sustain operations. 79% of legally-established RHIOs reported that they had elected for a nonprofit model.

RHIOs’ execution of this model has been disappointing to date, with the majority turning away from some of the resources – particularly private philanthropy – which are at their disposal. The report describes current federal support as inadequate, and observes that the RHIO movement has not adequately taken its message to the much more lucrative well of local and regional private foundations and other philanthropy. The report makes note of the much larger nonprofit community’s deft use of grants as leverage towards sustainability. Nonprofit healthcare entities represent only 38,000 of the 1.6 million U.S. nonprofit organizations, and it is apparent that certain key financial best practices established in this broader nonprofit sector have yet to be adopted by RHIO organizers.

The survey data provide the basis for other analyses, including a shift in RHIO geographical reach, changes in service offerings, staffing levels, and top sources of earned revenue and grants.

The full 79-page report is available at http://rhio.hittransition.com.

Healthcare IT Transition Group
5810 E Skelly Dr, Ste 715
Tulsa, OK 74135
media@hittransition.com
Michael Christopher

Healthcare IT Transition Group (HITTG) is a technology, policy and finance consultancy that works with organizations to reduce the cost and improve the quality of healthcare through the use of information technology. Clients include healthcare providers large and small, software developers and technical services companies, and some of the nation's largest health plans. Healthcare IT Transition Group has worked for sixteen years to reduce the cost and improve the quality of U.S. healthcare through the establishment of interoperable information technology standards.

This release was published on openPR.