Healthcare Reform and New mHealth Business Opportunities: What mHealth Entrepreneurs Should Know After the Presidential Election

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[author: Mitch Goldman]

mHealth Newsletter

mHealth investors and mHealth entrepreneurs may struggle to understand what business opportunities are present in the U.S. healthcare system since the passage of the Patient Protection and Affordable Care Act. Even if the Affordable Care Act is repealed or delayed, in whole or in part, it is likely that some of the initiatives under the law will move forward.

The Affordable Care Act has authorized the creation of new delivery models, a complex set of state and federal regulations, financial relationships and performance incentives. Many of the provisions of the Affordable Care Act offer mHealth entrepreneurs and investors new business opportunities and sources of revenue. Outlined below are some of these opportunities and markets that mHealth entrepreneurs and investors may want to consider:

  • Accountable Care Organizations (ACO). ACOs were prominently featured in the Affordable Care Act and have gained currency throughout the healthcare system. An ACO is an entity that consists of member hospitals, physicians (primary care and specialists), nursing homes, home healthcare providers and other ancillary providers. These providers are all collectively at-risk for delivering care to a population. The ACO contracts with an insurer for a global payment with incentives for better outcomes and lower costs. Instead of billing an insurer, the providers bill the ACO. All the providers are at risk for providing cost-effective, value-based care that is coordinated among the providers. Care coordination is one of the key values of the ACO that distinguishes it from health maintenance organizations (HMO) where there are no incentives for providers to do any care coordination. HMO providers are paid on a fee-for-service basis and are incentivized to provide more care. For the mHealth entrepreneur, there are numerous potential purchasers of mHealth apps, including member providers as well as the ACO. Both the ACO and all of its diverse provider members would value and pay for any mHealth app that promotes effective care coordination between and among healthcare providers, fosters positive consumer healthcare behavior and reduces the cost of delivering care.
  • Medical Home. The medical home is a new delivery model for the care of patients with chronic illness that incorporates many of the key elements of the ACO—care coordination, pay for performance and collective risk assumption by all providers. Patients with chronic illness typically bounce from specialist to specialist for care, with no single professional or team of professionals managing care. The medical home is responsible for providing and coordinating all the care of a patient with a chronic illness such as diabetes. The captain of the medical home is a primary care physician, and all the other providers are at risk for the care of a patient. The medical home contracts for a capitated payment with an insurer or an ACO and pays its providers directly on a shared risk and pay-for-performance basis. The providers are paid to provide value-based, not volume-based, care. Similar to ACOs, the new entities and their member providers are likely to be a significant market for mHealth apps that improve care delivery, lower costs and further care coordination within a medical home.
  • Self-Funded Employers and Third-Party Administrators. Companies that self-insure for their employees' health insurance also have an interest in reducing healthcare costs and can pay for new mHealth apps from their self-insurance trusts. However, most self-funded employers retain a claims manager, known as a third-party administrator (TPA), who manages the claims and provides other services to the self-funded employers, including negotiating discounted rates from healthcare provider networks. TPAs may also be a significant customer for mHealth apps that can potentially reduce healthcare costs by managing health claims from providers, improving employee health or making employees better purchasers. In addition, TPAs will likely have to redesign new payment models for providers to compete with the new approaches of ACOs and medical homes.
  • Health Insurance Exchanges. Under the Affordable Care Act, states have the option to create electronic marketplaces for health insurance for individuals and small employers. Health insurers in each state will compete to offer four different types of plans. Consumers will purchase insurance through a portal. Similar to LendingTree, an individual would enter his or her specific data and receive several competitive insurance options. This new marketplace in each state will also offer mHealth app entrepreneurs new business opportunities from state agencies, vendors that develop the exchanges, insurers that participate in the exchanges and individuals and companies purchasing insurance policies.
  • Professional Liability Insurers. While these insurers were not directly impacted by the Affordable Care Act, mHealth entrepreneurs should be aware that any mHealth app which improves the quality of care could be one that a professional liability insurer may want to buy or may want to offer a reduction in the insurance premium to the insured hospital or physician for purchasing the app. This could be an effective distribution channel for some mHealth apps.

The Affordable Care Act is likely to have a long-term impact on the healthcare system, potentially changing providers' and payers' behaviors. The new delivery models and the new government-supported programs appear to offer all mHealth entrepreneurs new business opportunities to improve healthcare quality, reduce cost and advance care coordination.

Mitch Goldman focuses his practice on the finance and corporate aspects of healthcare delivery, with an emphasis on reimbursement, structuring corporate transactions between and among providers, advising clients on the impact of government regulation, and developing and financing startup healthcare-related companies.