HIE/RHIO Finance

Studies in Healthcare Information Exchange Finance

Michael Christopher, principal author, Senior Development Analyst, and Martin Jensen, Chief Analyst, Healthcare IT Transition Group

All components of the two-year study: 129 pages; 79 charts, tables and illustrations; fully indexed

See separate components below for sample pages and tables of contents.

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Or you may order components separately:

Sustainable RHIO Finance and the Emerging Business Model (2007 Component)

819 term index

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$149 Immediate Downbload

Funding RHIO Startup and Financing for Life (2006 Component)

760 term index

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Methodology

After qualifying the portion of respondents that were bona fide health information exchanges (HIE) or RHIOs, and that provided answers to required demographic and other pivotal questions such as lifecycle stage and legal structure, the 2007 responses of thirty-eight HIE or RHIO organizations were found eligible for inclusion in our analysis. Of these, 52% identified themselves as being in the “startup” stage, 24% in a “transition” stage, and 24% in the “production” stage. The study broke these six categories further into the six categories established by eHealth Initiative for its annual survey of health information exchanges in order to permit a degree of cross correlation by investigators. While these comparisons are not cited per se, they were used in the background phase of the study's analysis to, for instance, explore respondent eligibility factors. The authors are grateful to eHealth Initiative for its early assistance with project.

The 2007 sample represents 23% of the total U.S. HIO cohort, based on estimates of the number of U.S. health information exchanges (HIEs) by eHealth Initiative. Respondents were located in 28 U.S. states and territories from coast to coast, and ranged in age from newly formed to well-established entities with more than a decade of experience in what the study now defines as “RHIO.”

The study's financial analysis of the HIE space began with an examination of revenue streams, service offerings, and stakeholders as sources of revenue. The study divided revenue streams generally into contributed, earned, and others (including repayables such as loans and investor proceeds), and further divided earned revenue

U.S. RHIO Technology Market Analysis

The full study (2007 component) also includes data on RHIO technology spending. Investigators gathered budget data, percentages spent on each of eight categories of technology goods and services. The study combined these, along with year-over-year growth data, to arrive at a U.S. RHIO Technology Market, providing estimates for 2006 and 2007, and a projection for subsequent growth. The estimate for 2007 indicated a scant $128.6 million total U.S. RHIO technology shopping cart. With recent high-visibility announcements of nine digit HIE development plans, this segment of the U.S. market is poised for substantial growth.

The report includes analysis of the RHIO purchase decision process, including a finding that RHIOs exercise substantial autonomy in purchasing with little dependence on third parties and parent entities.

Our report provides an estimate of the U.S. RHIO market for each of several product categories, including hardware, software, and consulting services, among others.

RHIO Earnings versus Contributed Income

While the percentage of income represented by earned versus grant income increased during the two-year period in production-stage RHIOs (see the chart at right), budgets showed little gowth, indicating a net decrease in grants. Furthermore, startup-stage RHIOs reported increased percentages of income from grants, up from 73% for the first year to 84% for the second year.

Zero Entry Cost Model and RHIO Value Creation

On the earned income side, the data indicate that RHIOs may not be acting strategically with regard to pricing structure. Most continue to opt for membership fees rather than volume-based fees, with about three times as much revenue coming from the former as from the latter. The study shows that this may significantly cramp the RHIO value creation engine over the longer term. The study also presents data which shows that RHIOs appear to be experimenting with an alternative “zero entry cost” model in order to attract critical mass in a positive attempt to hasten the development of value, and describes the economics that drive that process in some detail.

Emerging RHIO Business Model

The report includes a substantial discussion of the de facto RHIO business model as an arguably sustainable one, and we describe the emerging model as a grant-supported capital base upon which is built an infrastructure for earnings to sustain operations. The study describes RHIOs’ execution of this model as problematic, however, and show how the majority have not optimally used the resources at their disposal. The study describes federal support, and show 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. In this discussion the study makes note of the much larger nonprofit community’s deft use of grants as leverage toward sustainability; the 38,000 U.S. nonprofit healthcare entities represent less than 2.4% of the 1.6 million U.S. nonprofit organizations, and that certain key financial best practices established in the broader nonprofit sector have not been adopted by RHIO.

The survey data provides the basis for other analyses, including a shift in RHIO geographical reach toward a more typically statewide service area, a change in service offerings toward more “core” services, staffing levels, and top sources of earned revenue and grants.

Studies in Healthcare Information Exchange Finance

All components of the two-year study: 129 pages; 79 charts, tables and illustrations; fully indexed

$247 Immediate Download