Sustainable RHIO Funding and the Emerging Business Model

Released on: September 6, 2007, 2:37 pm

Press Release Author: Healthcare IT Transition Group

Industry: Government

Press Release Summary: The 2007 RHIO finance survey report Sustainable RHIO Funding
and the Emerging Business Model has been released at href="> Analyzes
revenues, services, stakeholders, capital strategies, and technology spending, and
estimates the current U.S. RHIO technology market.

Press Release Body: 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

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


Free public summary of the 2007 RHIO finance survey report

Free public summary of the 2006 RHIO finance survey report

Web Site:

Contact Details: Healthcare IT Transition Group
5810 East Skelly Drive, Suite 715
Tulsa, Oklahoma, 74135
Tel 918.406.3998

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