Thursday, July 06, 2006

RHIO BUSINESS MODELS

Report Examines the RHIO Business Model
by Colleen Egan, iHealthBeat Editor
July 06, 2006


It is commonly believed that operational self-sufficiency is an integral component of a sustainable business model. But is this the case with regional health information organizations? A recent report, "Funding RHIO Startup and Financing for Life: The Survey of Regional Health Information Finance," published by the Healthcare IT Transition Group, surveys RHIOs nationwide and examines the sustainable business model for the data exchange organizations. The report states that "a thoughtful analysis of the survey results demands a challenge to conventional wisdom."

The report analyzed 50 RHIOs in 28 states and Puerto Rico. The mean age of RHIOs was 12 months for those in the start-up stage, 16 months for those in transition and 59 months for those in production. Sixty-eight percent of respondents said they expect to become self-sufficient. However, 83% of RHIOs in start-up mode, 91% of those in transition and 87% of RHIOs in production said they expect to continue to rely on contributed income, according to the report. RHIOs are formed under a federal not-for-profit status and are led by volunteers who are required to serve the public interest.

Finding a Business Model

Defining a RHIO business model is difficult because RHIOs are unlike any other not-for-profit organizations. According to the report, a sustainable business model is "one in which the partners agree that the value received is worth paying for, and at a level that covers all costs of the organization." The community is considered one of those "partners," and the core purpose is for RHIOs to provide a public good, according to the report.

The RHIO business model "lies in a territory which may be much less familiar to the commercial and health care [not-for-profit] leaders represented in RHIO leadership," the report states. To understand the RHIO business model, the report analyzes RHIOs from three points of view:


Commercial for-profit business: Must be operationally self-sufficient;

"Commercial" not-for-profit business: Operationally self-sufficient, income primarily comes from earned revenue; and

Noncommercial not-for-profit business: Do not need to be operationally self-sufficient.


According to the report, "operational self-sufficiency" is defined as an organization whose regular operating costs are covered by earned revenue, but "that is not to say that grants and other forms of contributed income would not be pursued from time to time to build capacity through special capital projects." The study notes that "[g]overnment involvement in RHIO leadership does not decline as RHIOs mature, but may actually increase."

Due to the unique position of RHIOs, they could "most usefully identify as a hybrid of the commercial [not-for-profit] and the charitably supported organization," according to the report. Under this definition, the report states that RHIOs would raise money through "capital development operations," such as grants, and subsidize their operations through ongoing fund-raising activities. While some RHIOs are moving toward operational self-sufficiency, the report finds it likely that "as much as one-third of total RHIO revenues will continue to come from government grants and philanthropy, perhaps into the foreseeable future."

More on the Web:

Healthcare IT Transition Group

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