OSMS Tax Exempt Status
Open Source Medical Software is a not-for-profit corporation organized in North Carolina, March 15, 2005. We were granted tax-exempt status in the State of North Carolina in 2005. The Board of Directors has been pursuing United States tax exempt status, 501(c)(3), since March of 2006.
Currently 501(c)(3) status is pending.
OSMS functions entirely from donations of volunteer time and donations of software to the OpenEMR project using the GPL 2. The most recent accounting of volunteer time and donated software totaled $550,000. The typical median cost of an electronic medical record in the United States is about $25,000 per physician. Costs for a multiple physician practice can easily be $50,000-$100,000. Billing Software is frequently sold separately for $10,000-25,000 per physician. Together, median costs for the electronic medical record and the billing software are likely $35,000.
In September, October, and November of 2008, OpenEMR was downloaded from SourceForge an average of 1,533 times. The OpenEMR project has given away a fair market value of $55 million dollars worth of software per month to organizations that are delivering health care to the many of the under-insured or uninsured citizens of our world.
In the United States, medical practices that are well established can afford the expense of Commercial EMRs. OpenEMR appeals most to young doctors and practitioners who are just starting out and cannot afford these "Commercial Luxury EMRs".
One organization that is using OpenEMR is International Planned Parenthood Federation (IPPF). IPPF has successfully established three pilot projects in Barbados, Indonesia, and Nepal. Assuming successful completion of these projects, they plan to distribute OpenEMR world wide in 150 different countries.
OpenEMR is also developing in popularity in Greece, India, Nepal, and Kenya. Many of the applications in these countries assist physicians in providing health care to poverty-stricken patients.
A number of Foundations who would be willing to help with funding require 501(c)(3) before dispensing funds. It is frequently difficult to explain to decision makers why we want to give our software away free-of-charge. Many "just don't get it" and still think "completely free" still has a catch. 501(c)(3) status makes it "OK" to provide services for free.
Proposed Letter to the IRS requesting expedited handling
Open Source Medical Software 1470 9th Ave Dr NE Hickory, NC 28601-4199 EIN: 52-2455826
Contact Person: Laurie Thrasher Contact ID Number: 50-10511
Tax Exempt and Government Entities Department of the Treasury Internal Revenue Service Washington, D.C.
RE: Expedited handling
Dear Ms. Thrasher:
I am writing to you to request expedited handling of our application for tax exempt status under Section 501(c)(3) of the Internal Revenue Code of the United States. Please accept the following as an explanation and urgent request for that handling.
About our Company -- What is Open Source Medical Software?
Open Source Medical Software (OSMS) is a North Carolina non-profit software corporation incorporated in that state on March 15, 2005 and granted tax-exempt status by the North Carolina Department of Revenue in the same year. The Board of Directors of OSMS has been pursuing tax exempt status under Internal Revenue Code § 501(c)(3) since March 2006.
OSMS develops and maintains software that is classified as “Free Open Source Software”, which is dedicated to improving patient outcomes in economically disadvantaged areas through the use of electronic medical records. Our main product is "OpenEMR", an electronic medical record software suite that allows physicians and practitioners to maintain health records for their patients in an electronic (i.e., non-paper) format. This software has the additional capabilities of prescription management, medical billing management, and accounts receivables management. In addition to increasing medical practice efficiency and reducing practice costs, another substantial benefit of this software is that it ensures compliance by the physician or practice with the privacy requirements for patient medical records imposed by federal law. This is a particularly important feature of electronic medical records software like OpenEMR, due to inherent difficulties in complying with federal requirements using a paper format. In addition, paper records hold other problems, such as a potential lack of security against catastrophic or natural disasters and the inability to securely back-up files in more than one location.
Why is OSMS a non-profit, charitable organization?
OSMS is dedicated to releasing its OpenEMR software product – AT NO CHARGE – to low income medical practices, free health clinics, public health clinics, and community health centers in the United States and in other countries. Many of the physicians and clinics most interested in using OpenEMR operate in rural or economically-blighted urban areas of the United States where typical proprietary electronic medical records software is out of reach financially due to high expenses at current market costs.
OSMS functions entirely from donations of volunteer time and donations of software to the OpenEMR project using what is known in software programming circles as the “GNU Public License 2”, which designates that the software product that is “licensed” to the user is donated at no charge or royalty fee to the user. Our most recent accounting of volunteer time and donated software indicates that we have received products and services valued at $550,000.00. The typical median cost of a proprietary electronic medical record software suite in the United States is about $25,000 per physician, and can total $50,000-$100,000 for a multiple physician practice. In addition, proprietary billing software modules are frequently sold separately for an additional $10,000-25,000 per physician, which creates a total for the electronic medical record and billing software components at approximately $35,000 per physician. We estimate that the minimum reasonable economic value of OpenEMR, while free-of-charge to the users, is about $35,000.00 per software copy. In the last quarter we donated an average of 1,533 copies per month at a fair market value of $54 million dollars per month.
Who would use OSMS and why is Tax-Exempt Status necessary?
In the near future, a meeting is planned with Barbara Pullen-Smith, executive director of the North Carolina Office of Minority Health (OMH) and the Minority Health Advisory Council (MHAC), who is interested in the OpenEMR application because of its potential to ameliorate health care disparities in North Carolina. Her recommendation is that we consider seeking funding for distribution to rural health care clinincs through the North Carolina Department of Rural Health. She is potentially willing to sponsor the use of our application in North Carolina.
Target primary users of OpenEMR in North Carolina include county public health departments. However, most public health departments are resistant to using technology unless it has been certified by the Certification Commission for Healthcare Information Technology (“CCHIT”), an entity that certifies electronic medical records systems for the federal government for both its own projects (such as Veterans Administrations medical facilities and records) as well as for state or other projects receiving and using federal funds. The application fee for CCHIT certification is $35,000. We have begun the application process with the Kate B. Reynolds Charitable Trust to obtain funding to cover this fee, but will not be eligible to receive any such funds from it or similar charities without § 501(c)(3) status. It is also possible that Dr. Pullen-Smith may be able provide funding for the CCHIT certification through the NC Office of Minority Health, but that is contingent on the determination that OSMS is a tax-exempt organization under § 501(c)(3) of the Internal Revenue Code.
Obtaining the CCHIT certification will greatly assist in reaching the important target population of free health care clinics, county public health departments, and rural medical practices in North Carolina. The Women’s Health Services of Santa Fe, New Mexico is a 501(c)(3) Charitable Organization that uses OpenEMR in their clinics. International Planned Parenthood Federation has selected OpenEMR as their electronic medical record and has established three pilot installations with the intent of extending these installations throughout their organization. The United States Affiliate organization of IPPF is International Planned Parenthood Federation/Western Hemisphere Region, Inc. which is recognized as tax-exempt under section 501(c)(3) of the Internal Revenue Code. EIN 13-1845455.
Are there 501(c)(3) Charitable Organizations that donate Electronic Medical Records?
The FreeMED Software Foundation, Inc is a 501(c)(3) non-profit company which was incorporated in Connecticut and provides support for "FreeMed" (a free open source software electronic medical record) and distributes an electronic medical record to physicians free-of-charge.
Why do we need another 501(c)(3) Organization donating Electronic Medical Records software?
While there are many benefits to users in having a variety of software options available to them, one very important reason is that software diversity reduces the risk of security breaches. That point has been very cogently recognized by another major user of open source software developed by § 501(c)(3) entities, the United States Department of Defense.
The DoD commissioned a study, released by the Mitre Corporation on January 2, 2003, of the 115 free open source software systems used by it in its information technology infrastructure. That study states, in pertinent part, that:
FOSS [free open source software] applications tend to be much lower in cost than their proprietary equivalents, yet they often provide high levels of functionality with good user acceptance. This makes them good candidates to provide product diversity in both the acquisition and architecture of DoD systems. Acquisition diversity reduces the cost and security risks of being fully dependent on a single software product, while architectural diversity lowers the risk of catastrophic cyber attacks based on automated exploitation of specific features or flaws of very widely deployed products." [Emphasis added]
The security of all open source electronic medical records software and the privacy of the medical records they contain, including that already in existence like FreeMED, is enhanced by having other such software available to consumers. Having diverse software architecture spreads and reduces the risk that a hacker, who is able to exploit a flaw in a software product, will be able find a similar flaw in other software that performs a similar function.
The Importance of the 501(c)(3) tax exempt status.
A number of foundations and charities who would be willing to help with funding require tax exempt 501(c)(3) status before dispensing funds. In addition, it is frequently difficult to explain to decision makers in medical clinics why we want to give our software away free-of-charge. Many simply do not understand and still think "completely free" has a catch in it somewhere. Paradoxically having the tax exempt 501(c)(3) status helps us give away our free open source software products because the 501(c)(3) status makes it more acceptable to provide this software free-of-charge by lending credibility to the cause.
Why do we need expedited handling?
We desperately need to raise public awareness of this free alternative and raise money for marketing of this free product. Our goal is to be the electronic medical record chosen for national distribution as electronic medical records implementation mandates come into effect. Clearly, this has been the goal of our current president, George W. Bush, and is also the stated goal of president-elect Barack Obama. The consensus of our Board of Directors is that we are simply running out of time to be considered as a serious contender for this important project. Our supporters have contributed far too much time, work, and money to let it all go to waste. In addition, simply having another product available to users reduces the risk of security breaches in all other electronic medical records software, as the DoD study recognized in the context of the DoD’s software.
To date, Open Source Medical Software has existed entirely from volunteer contributions of time and donations of the software development. Yet, we must raise money. Looming on our horizon is the need to raise the $35,000 fee to apply for certification from CCHIT. While certification is not legally mandated at this time, most public health departments are unwilling to "take a chance" on free software without this certification, as they see it as an open door to malpractice liability to utilize non-certified software.
We urgently ask for your earliest consideration of our application. Our application has been in the hands of the Internal Revenue Service since 2006. We have a free product that well serves and clearly falls within the charitable purpose of § 501(c)(3) of the IRC. We need the status to obtain further funds for CCHIT certification and other regulatory compliance. We have a market that needs and wants the product we have to give, but needs the comfort level that § 501(c)(3) status confers.
We therefore request expedited handling of our tax exempt status under section 501(c)(3) of the Internal Revenue Code.
Sincerely,
Samuel T. Bowen, MD
President, Open Source Medical Software
