Volume 4 Issue 3, January 31, 2017
The inauguration of President Trump has prompted concern among executives in the intellectually/developmentally disabled (I/DD) marketplace. What's going to happen next? What should companies do to protect themselves against reimbursement cuts and other potentially catastrophic changes?
What's Going to Happen ...
Based upon my reading of Trump's appointees and on the statements from the Trump administration, the following changes are imminent:
- Block grants will be initiated: The Trump administration and the Republican-led Congress have been urging the return of block grants as a way to give more fiscal oversight to individual states in order to control the inexorable growth of Medicaid-funded services. The experiment will begin this year and I/DD leaders need to pay careful attention, because national I/DD expenditure is nearly $100 billion each year. Big budgets make big targets.
- Managed care will be expanded: To help cost effectively administer their funds, states will increasingly turn to managed care organizations (MCOs), which may merge all long-term care subpopulations (including elderly and physically disabled individuals). MCOs offer the advantage of being relatively politically agnostic with more sophisticated operations than most states can deploy.
- Providers will be required to upgrade their technology: Compared to behavioral healthcare organizations, I/DD providers have largely resisted the implementation of electronic health records (EHRs) and other outcome-oriented technology that is increasingly required by MCOs and other payers. TrumpCare is likely to force the issue. Providers will have to adopt or perish.
- Less expensive service options will be rewarded: While consumer choice will remain a value at the foundation of I/DD services, there will be strong pressure to develop less costly options, such as host homes and in-home care, while moving away from more expensive supports, including intermediate care facilities (ICFs). This will pose a significant challenge in areas of the country that aren't yet prepared to make the transition.
- Consolidation will accelerate: Given the inevitable turmoil resulting from the above trends, consolidation of the market into fewer and larger providers is inevitable. The I/DD marketplace is one of the most fragmented in healthcare, so TrumpCare will fuel significant merger and acquisition activity.
What You Can Do ...
If you're the owner or executive of an I/DD firm, you have at least three choices:
- Investigate your options: If you're not sure exactly which approach is right for you, we can help you evaluate your options, while simultaneously strengthening the financial value of your firm.
- Sell your company: Due to the expected increase in M+A activity, there may not be a better time to sell your company, if that's been your plan all along. At VERTESS, we recommend that owners planning to sell within the next two years do a full audit of strengths and weakness in order ensure the best possible price.
- Acquire another company: As the consolidation continues, economies of scale will come into play. Owners wishing to remain in the market should consider growing through acquisition, rather than through the slower process of organic growth. If that's your plan, we can help you find the best match for your strategic needs.
Tom Schramski was interviewed about the national impact of TrumpCare on Bloomberg Radio’s “Taking Stock” with reporter Carol Massar on January 13th. To hear that discussion, click here.