Physicians Decline as Source of RHIO Income: A Good Thing?

Physicians were 88% less likely to be cited as a “significant source” of earned revenues by startup-stage Regional Health Information Organizations (RHIOs) than they were a year ago. Physician contributions to RHIO earnings also dropped among more mature RHIOs.

The data comes from the annual Survey of Regional Health Information Organization Finance (http://rhio.hittransition.com). Investigators analyzing data from thirty-eight RHIOs report that some exchanges may be testing a “zero entry cost” model to attract individual practitioners and physician groups. According to Healthcare IT Transition Group which conducted the study, related data suggest minimal year-over-year growth in RHIO revenues, while service offerings remained more or less stable. Taken together with other data from the survey, these findings could signal a near-term shift in priorities towards more aggressive membership recuitment at the expense of some short-term cash flow.

The problem of attracting smaller physician practices is one of the frictional factors in the RHIO movement. The group suggests that production RHIOs with standing fee-based relationships with their provider members may be less likely to change fees downward for new members, while younger health information exchanges may be freer to experiment. Perhaps more importantly, the stakes are higher for the younger RHIO, whose lower transaction volume and smaller membership present a less-attractive value proposition than a more fully subscribed exchange could offer.

In a related finding, the report, “Sustainable RHIO Funding and the Emerging Business Model,” notes that there has been little movement toward volume-based pricing (in the form of transaction fees). RHIOs continue to favor the flatter membership/subscription fee model, which promises earlier cash flow but lacks the scalar advantages of a volume-based model. RHIO growth – if it is to reach the scale needed to evolve into an envisioned National Health Information Nework (NHIN) – will have to be impressive over the coming years. However, the study raises an important question: How will RHIO reach its potential unless it shapes its business model to operate in ways that take advantage of its intrinsic value creation dynamics? The report pegs growth between 2006 and 2007 at an unimpressive 2.3 percent.

The 2007 survey finds fewer responding RHIOs who would state that they expect to be self-sustaining. Under twenty percent said that they had actually achieved that goal, and, of those, fully 60% said that they still anticipate applying for grants.

Ironically, that may be a good thing, too. Seventy-nine percent of the legally-established RHIOs had chosen a nonprofit structure, which offers numerous benefits. Among these is that private foundations are permitted to make grants to these groups, but not to for-profit entities. U.S. foundations contribute hundreds of billions of dollars annually to nonprofit organizations – many times the funding provided by the federal government. Nonprofit orgnizations often use this contributed income to leverage the production capacity to later achieve increased earned revenues.

The report suggests that the RHIO movement is “leaving money on the table” by not aggressively seeking private philanthropic support; and by attempting to execute a business model that sets high expectations for early commercialization in unmapped territory. Representation from private foundations, Community Foundations and Community-based Public Foundations are notably scarce in the RHIO space, both as financial adviors and as funders, according to the report. Contrasted with the broader nonprofit sector in which similar major projects of high community importance are frequently partnered with local, regional and statewide foundations, RHIO may be missing key development opportunities, say the report’s authors.

The report is available at http://rhio.hittransition.com.

Healthcare IT Transition Group
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Michael Christopher

Healthcare IT Transition Group (HITTG) is a health IT policy consultancy that works with the U.S. healthcare industry to reduce the cost and improve the quality of healthcare through the use of information technology. The company’s clients include healthcare providers large and small, healthcare industry software makers and technical services companies, and some of the nation's largest health plans.

This release was published on openPR.