Funding Sources Vary Widely Among Standards Associations

This blog is the second in a series discussing the different funding models for standards development organizations (SDOs). In our initial post, X12 clarified a commonly held misconception that all funding models for SDOs in the United States are essentially the same. Published July 2023, the article described four types of funding sources for SDOs and potential challenges to their sustainability: membership fees; government grants; licensing use of intellectual property; and charitable donations such as foundations, donations, and gifts.

Now that we’ve established that organizational funding models can vary greatly, let’s take a closer look at the variability of a few related SDOs across a couple of the funding sources: membership dues and government grants. Each organization’s total revenue is comprised of different funding sources, which are shaped by the SDO’s program mission, objectives, members, and offerings.

Here is the latest publicly available data for three SDOs including X12 and a related association. Actual organization names are undisclosed with the exception of X12.

A - (X12) Develops and maintains business-to-business data exchange standards that drive business processes globally.
B - Creates standards promoting information exchange within the pharmacy industry.
C - Provides a framework and standards for the global exchange of e-health information in healthcare.
D - Provides guidance on how to use and leverage the healthcare industry’s collective technology.

The following are key points associated with membership dues based on total revenues as shown in Figure 1. The data source is the IRS form 990, Part VIII “Statement of Revenue” section under the “Membership Dues” line item.

• Figure 1: Percent of total revenues attributed to membership dues for the most recent year
  - About half, 51% to be specific, of X12’s total revenues are attributed to membership dues in 2022
  - “B’s” total membership dues are only 8% of 2022 total revenues
  - 37% of “C’s” revenue came from membership dues in 2021 (2022 data is unavailable as of December 21, 2023)
  - Almost 68% of “D’s” 2022 revenues came from membership dues

• Figure 1: Trends in membership dues as a percentage of total revenues for the past four years (2019-2022)
  - X12’s revenue has become less reliant on membership with the growth of its licensing model
  - “B’s” membership dues are unchanged
  - “C’s” percentage of revenue from membership dues increased slightly from 2019 and 2021, respectively (2022 public data is unavailable)
  - “D’s” membership dues remain their largest source of revenue through 2022 

The following are key points associated with government grants based on total revenues as shown in Figure 2. The data source is the IRS form 990, Part VIII “Statement of Revenue” section under the “Contributions, Gifts, Grants, and Other Similar Amounts,” line item 1E titled “Government grants (contributions).”

• Figure 2: Organizations receiving government grants and those who did not
  - X12 did not receive government grants through 2022
  - “B” did not receive government grants through 2022
  - “C” reported the most significant government grants for the years 2019, 2020, and 2021 (2022 data is unavailable as of December 21, 2023), totaling between $1.5 and $2.3 million per year
  - “D” reported revenue includes a small percentage from government grants (Paycheck Protection Program) in 2021 only, totaling about $140,000

In summary, funding sources vary widely among standards organizations, validating that “one size does not fit all.” Some base their revenue on a high percentage of government grants, while others are funded almost exclusively through membership dues and/or licensing agreements. In recent years, the amount of grant funding has increased significantly for some organizations while membership dues have decreased.