Your Primer to Healthcare Mergers and Acquisitions

7 Ways The IC Model Is Transforming The I/DD Marketplace

Aug 1, 2017

by Tom Schramski

By Tom Schramski, PhD, CM&AA

Volume 4 Issue 16, August 1, 2017 

The preponderance of contracted services for people with intellectual/developmental disabilities (I/DD) are provided by the employees of organizations, including nonprofit and for-profit entities. Because many of the services are labor intensive, these employees likely number in the hundreds of thousands nationally, with most in direct support of individuals with I/DD. Numerous factors, including worker shortages and downward pressure on reimbursement rates, are undercutting the traditional employee approach, especially in rural America.

In many states, the independent contractor (IC) model is emerging as a viable option. The IC model has a long history in many areas of our economy (e.g. the trucking industry), including private duty home care, and is scrutinized carefully by the US Department of Labor (DOL), as well as the Internal Revenue Service (IRS), for compliance with significant regulations. Recently, the expansion of the IC model for in-home and host home (aka child/adult foster care-type homes) I/DD services points to a new direction in service delivery.

The IC model has the potential to transform the I/DD marketplace in the following ways:

  • Reducing operational expense – IC workers are less expensive to deploy than employees in a very labor-intensive and thin margin service industry. This issue becomes more important with the possible reduction of Medicaid reimbursement in the Trumpcare era.
  • Making the best use of a shrinking workforce – The available workforce for direct care work has been decreasing since the Great Recession. This issue is compounded with changing generational preferences and the lack of available workers in many rural areas throughout the US.
  • Increasing the focus on customer-centric services – IC workers can have a more direct relationship with their customer in all areas and may be more attuned to the needs and interests of their clients than traditional employees. They can easily be dismissed if they don’t deliver the expected service quality.
  • Enhancing service flexibility – Because typical wage and hour restrictions don’t apply, the IC worker is free to negotiate schedule, hours, and location with the client. In a host home setting, this flexibility adds to a sense of home rather than a group home schedule.
  • Improving the financial awareness of workers – One of the unintended consequences of the IC model has been the reported increased financial intelligence of IC workers compared to their employee counterparts. When you have total responsibility for your own tax payments, you apparently pay better attention to all of your financial matters.
  • Increasing the sense of family – The IC model is well-suited to allow individuals to receive services from close friends and family members, a practice that is generally discouraged in most employee models. In the same situation, who would you prefer to be your caregiver?
  • Encouraging entrepreneurship – Many IC in-home care providers note that their workers operate like individual business operators in how they manage their schedules and will seek more hours in this environment rather than looking for a second job. Interestingly, most of these providers note that their overall worker pool and turnover decreased for the same client population size after converting to the IC model.

There is no question that the IC model does not fully address some of the important benefits, like health insurance, that generally are associated with the employee model. Yet, many employers are reducing these benefits to the point of becoming meaningless. What may be most important is a trend that was heralded by Daniel Pink in Free Agent Nation over 15 years ago – a workforce that values independence and autonomy to the point that they feel more secure as an independent contractor than as an employee.

Tom Schramski

Tom Schramski PhD, CM&AA


Tom was the Founder and Managing Partner of VERTESS. He was a Certified Merger & Acquisition Advisor (CM&AA), consultant, and Licensed Psychologist with over 35 years of very successful national experience in the healthcare marketplace, including co-founding and building a $25 million behavioral health/disabilities services company. Tom represented sellers and investors across the healthcare spectrum and was recognized for his executive leadership in the 2005 Entrepreneur of the Year issue of Inc. Tom passed away in December 2018.

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