Healthcare IT and Biotechnology News Release
Date of Publication: Friday, June 23, 2006


Congress and the White House have said that the establishment of Regional Health Information Organizations is a top U.S. healthcare p riority, in a long-term effort to build a National Health Information Network (NHIN).
Congress and the White House have said that the establishment of Regional Health Information Organizations is a top U.S. healthcare p riority, in a long-term effort to build a National Health Information Network (NHIN). Currently, significant funding comes from federal and state government. Sustainable financial structures are essential to the establishment and ongoing operations of R egional Health Information Organizations (RHIOs). With estimates of perhaps 100 RHIOs in varying stages of development across the U.S., a new report on RHIO finance provides a timely examination of the evolving financial models. 

Titled Funding RHIO Startup and Financing for Life: The Survey of Regional Health Information Finance, the 50-page report on data provided by 50 U.S. RHIOs helps answer important questions about how RHIOs are addressing funding c

The survey report, prepared by Healthcare IT Transition Group, proposes that RHIOs have found a sustainable business model, and discusses in detail thirteen findings, including:

Most RHIOs remain reliant on contributed income. 89% of even the most mature RHIOs report that they anticipate applying for grants, and this includes the majority of RHIOs who report that they have reached self-sufficiency.
32% of respondents could not state categorically that they expect to become self-supporting. 8% explicitely reported that they have no expectation of becoming self-supporting.
During the startup period, RHIOs rely on grants for 73% of total income, on average. Even at the production stage, grants and other contributed income make up 50% of total income, on average.
The majority of RHIOs are governed by volunteers, and only 10% stated that they were organized as for-profit organizations. The majority are organized under Internal Revenue Code 501c3, which prohibits strictly commercial activities and requires a "charitable purpose."
Government involvement in RHIO finance does not decline as RHIOs reach maturity. In fact, government is cited by more respondents at each successive lifecycle stage.
Philanthropic organizations (private foundations, etc.) are among the least frequently cited participants in contributed income and financial planning. However, hospitals -- often nonprofit themselves -- are second only to g overnment as a source for grants and other contributions to RHIOs.
Citing survey data and external resources, the report identifies in detail a sustainable business model which the majority of respondents are following to one degree or another -- that of the charitably-supported nonprofit organi zation.
The report's principal author, Michael Christopher, stated, "There has been a lot of consternation over the financial sustainability of RHIO operations, and we've heard time and again that RHIOs have not even found a busines s model yet. The data suggests that this simply isn't true. To say that the RHIO hasn't found a sustainable business model is to say that the YMCA hasn't found a sustainable business model."

In predicting that RHIOs are and will remain charitably-supported organizations for the foreseeable future, the report proposes a new perspective on the part of the healthcare industry in order to maximize the financial potential of the R HIO. Christopher added that "You might think that nonprofit hospitals would be able to understand the RHIO's charitably-supported business model. But they may not be able to because the hospitals are only minimally supported by contributions. RHIOs have no reimbursements or patient responsibility to bill. This is a different animal, and it takes not only business-to-business experience, but also philanthropy expertise to suss it out."

"There is significant value creation possible in the health network, and RHIOs are ideally positioned to capture it. The ones that will be most successful, though, are those that embrace certain strategies of the charitably-supported organization model to take advantage of all available income sources. This is a critical period for development of the NHIN, and it's appropriate that the broader community pays part of the price, including government and private philanthropy."

Because the proposed RHIO business model may be more familiar to nonprofit organizations outside of the healthcare field, the report illuminates important aspects of the model, and offers possible strategies for extracting maximu m value from it.

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