8 Reasons Why The I/DD Marketplace Remains Strong

Screenshot 2015-09-15 12.24.12By Tom Schramski, PhD, CMAA

Volume 2 Issue 19, September 15, 2015

Private equity groups (PEGs) and similar investors are often wary of market “concentration” – the perceived over-reliance on one dominant source of healthcare reimbursement.  While this makes sense, it also ignores the reality of some Medicaid-funded long-term care services, like those provided to individuals with intellectual/developmental disabilities (I/DD).  In this case, there is virtually no other source of funding except some donations, modest local funds, and commercial insurance for specific Autism Spectrum Disorder interventions.

Despite these concerns, here are some reasons why today’s marketplaces for I/DD services remain vibrant:

  • Relatively predictable reimbursement – Medicaid/state waiver funding has been growing steadily and consistently for 40 years with some variation per state and occasional rate adjustments.  The emphasis has been on the movement away from large facilities toward community-based services.
  • Focus on consumer-oriented services – I/DD services typically have a strong philosophical base that drives the direction of service.  The future includes increasingly consumer-centric services that are directed as much as possible by the individual and family members.
  • Increase service cost-effectiveness – In many cases, as services become more customer-centric, they are becoming more cost-effective and less bureaucratized with higher customer ratings of satisfaction.
  • Opportunity for technology – Many current providers of I/DD services are paper-dependent and have not embraced emerging technology that could result in significant service innovation.  This opportunity is available at decreasing expense to all parties – operators, customers, and potential investors.
  • Pent up baby boomer transition – Many baby boomers who began their companies in the 1980s and 1990s have been waiting to transition until stability returned to their market post-Great Recession.  With some settling, there are many owners accelerating their decision to transact given the positive opportunity and the longer term unknown of managed care.
  • Emergence of new leadership – Along with the above factors, there is a growing millennial cadre of leaders who are embracing innovation in services and how the services are provided.  This helps to strengthen the marketplace amidst the transition for older executives and inevitable consolidation.
  • Possibilities within a fragmented landscape – The I/DD marketplace remains highly fragmented with newer niche providers entering the market everyday.  This diversity offers customers more choice while also inviting roll up and consolidation in the face of a new managed care focus by many states.
  • Staying true to values – The I/DD market has one of the strongest value bases of any healthcare vertical for a wide variety of reasons.  This foundation has persisted and grown in sophistication for several decades adding vitality to this area not seen in many other healthcare and human service environments.

While there are always concerns about the civil and economic rights of individuals with I/DD, this market remains dynamic despite the concentration of funding from public sources.  It also remains remarkably agnostic in a political sense, with strong support across diverse political views.