Last week we looked at the European methods of providing non-emergency medical transportation and made some claims about America; we compared the American brokerage models to Europe quite unfavourably. It is only fair that we provide more evidence to justify this. There is much to be drawn upon; the states and their agencies have produced large amounts of research and commentary on the brokerage model. The media have also written about brokerages, particularly when things go horribly wrong. For the curious, and for those who have any stake in this industry, we have collected some of this discourse. In consideration of the American theme we have organized our findings into three categories: the good, the bad, and the ugly.
When the California government was considering adopting a broker model in 2009 they did some research looking at what had happened in other states. The California report identified some benefits. Brokerages provided a consistent and simple contact point for patients. Which leads to better service, as the broker will know the location of the patient and their destination, and will also know where the best positioned service provider is. It will be in their interest to connect the patient and service provider in the most efficient way. Brokers also centralize information management, allowing the state to know exactly who is using their service, which is important when trying to get Medicaid reimbursements. The major benefit of the brokerage model is cost management. Under typical arrangements the brokers are paid with monthly capitated premiums; which is a common form of payment in Medicaid. Capitated premiums are a set payment rate based the number of patients served, not the amount of service that they receive. In the case of medical transportation, capitated premiums are paid for the number of patients transported regardless of how many trips the broker actually provided, or how long they are. This allows the state to accurately predict annual costs and forces the brokers to bear the risk if they underestimate usage. The extra control, certainty and possibility of savings is why at least 40 states have now adopted some form of broker model.
The broker model has not always succeed at controlling costs. Washington D.C. had a system with over two dozen small and medium sized transport companies which was able to meet increasing demand for service. In 2006, D.C. switched to one large broker operator that took over 70% of the market. Rather that improving service, this has increased the cost of transport and also increased the number of complaints. Apparently the broker model is not always the best way to reduce costs. In 2012 the North Carolina Division of Medical Assistance reported that for their NEMT program the average costs per patient per month was $2.45; compared to the 40 states with the broker model where it was as high as $6.50. They concluded that North Carolina should keep its own system. The state of Wisconsin spent $31.6 million in 2007-2008 on medical transportation, before they adopted a broker model. After they contracted a broker, LogistiCare, the cost increased to $37.5 million in 2012. In 2014, after Wisconsin replaced LogistiCare with another broker, the cost had risen to $56.1 million. Clearly savings from the broker model are not a sure thing.
The 2009 California state report on brokerages noted some possible drawbacks of capitated premiums. These schemes might be able to delegate financial risk away from the state and on to private companies, but they also create a perverse incentive for the broker to turn away legitimate patients in order to protect the bottom line. The predictions were confirmed in Wisconsin when the state contracted with LogistiCare, one of the largest NEMT brokers in America, in 2012. The full scope of the LogistiCare story has been covered by the Wisconsin paper, the Journal Sentinel. Just 20 days after LogistiCare took over the state was inundated with hundreds complaints from patients. The situation deteriorated and legislators demanded audits of LogistiCare on multiple occasions due to the volume of complaints about missed appointments and long wait times on phone lines. Then things got worse.
Part of the contract with the state was a stop-loss clause; which allowed LogistiCare to back out of the contract if they were spending more on providing service than they were being paid. A contract with such a clause makes the entire concept of capitated rates absurd and meaningless. The state had shifted the risks of variable costs onto a private company that could leave as soon as those costs changed unfavourably. In late 2013, LogistiCare’s CEO sent a letter to state officials claiming that the company was losing money; the Milwaukee area needed twice as many rides as they had predicted and he blamed the state for not making more people ineligible. For these reasons they were invoking the stop-loss clause and ditching their contract.
Wisconsin then rushed to replace LogistiCare with another broker, MTM. And then things got worse. In January of 2014, MTM was fined $25,500 by the Department of Health Services for not providing enough vehicles for trips. One state senator, Kathleen Vinehout (D – WI) was angry enough publicly criticise MTM in a letter where she summed up the issue: “The state pays more for fewer services”. The state was not the only aggrieved party. The service providers were being crushed; one taxi company manager complains that his company: “could do 1,000 rides a day. Now I’m doing 15 or 20 a day for MTM. People say, ‘MTM told me you were all booked up.’ But I never received a call.” A 2014 audit of the Wisconsin NEMT industry reported that out of 311 transport providers more than half were not satisfied with the “trip scheduling process, trip volume, and the amount of compensation provided”.
Wisconsin’s issues hold several lessons. A question we should all ask is what kind of industry are we building? The broker model where the state steps back and lets a private company perform service is just legislatively creating a monopoly. This is generally not a good practice. Layers of bureaucracy and regulations have made it impossible to provide a simple service without the “help” of these middle man companies that provide no real value to the service and instead exploit actual transport companies and their customers. A North Carolina NEMT operator Steve Stone summed up an alternative approach: “The state might be better off to take money paid to a broker to invest in technology and county transportation agencies”. That is an attractive option but what can we do to achieve it? To start, we can all complain about bad service and policy decisions whenever we see them; it is easy and cathartic. So if you are unhappy with the direction that the industry is going let us know at the comments on our blog at www.pantonium.com/blog, or contact the media and your state representatives; any action is better than inaction.