The New Medicaid Business Model

Medical care, whether it is sick care or prevention and wellness care, is in desperate need of new business models. Most physician entrepreneurs have a hard time describing a business model, let alone creating new ones. They are not alone.

As noted before, everything from digital health, to Commoditycare, to Othercare, to medical travel needs a new business model to sustain it.

I like the definition that a business model describes the rationale of how an organization creates, delivers, and captures value. In other words, where and how it does things to create a profit.

Sickcare USA, Inc, generally has one business model- pay for volume, most of which is wasteful, high priced and of low clinical value. We are struggling to get out of that box. Some entrepreneurs, clinicians and payors have taken note of the fact that the roughly 20% of Americans on Medicaid are a special customer segment on the business model canvas and , consequently, have special jobs, pain relievers and expected gains they want a product or service to do.

Here are the trends that particularly affect Medicaid patients.

So, what is the new business model of companies catering to the Medicaid crowd?

1. Addressing the social determinants of disparate health outcomes
2. Serving a population of patients paid for by a single payer and driving down administrative costs. Medicaid Administrative Costs (MACs) are among the lowest of any health care payer in the country. MACs are significantly less than private health insurance plans; typically in the range of four to six percent of claims paid. By comparison, a health maintenance organization (HMO) with administrative costs of eight to twelve percent of claims paid would be regarded as efficient and a well-run commercial health insurer typically would have administrative costs of 15 to 20 percent of claims paid. No insurer has more limited administrative costs than Medicaid. Researchers at Harvard found that 31 cents of every dollar spent on health care in the United States pays administrative costs (nearly double the rate in Canada, by contrast).
3. Responding to pressure and sense of urgency from state legislators, policy makers and regulators desperate to reign in budget busting costs
4. Ecosystems designed around health IT roadmap objectives.
5. Products and services specifically designed for underserved , at risk populations
6. Expanding government funded revenue models
7. Incorporating behavioral health interventions into primary care coordination
8. Leveraging the Medicaid primary care rate increase
9. Taking advantage of the opportunities given Medicaid's role in the opioid epidemic
10. Using AI, data and analytics to manage large populations and drive value.

40 years ago, "indigent patients" used to be loss leaders and were typically seen at publicly owned safety net hospitals. No more. They are the new cash cows and entrepreneurs are planning their next mooo-ves.

Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs