As the debate continues over how to provide healthcare to all Americans at a reasonable cost, a recent episode in Wisconsin offers an instructive lesson.
When LogistiCare won a contract to serve Wisconsin’s Medicaid and BadgerCare Plus members, we – as we do in every state where we operate – built a program based on data provided to us by the Department of Health Services (DHS). The data, which should have closely estimated how many people rely on this service and the characteristics of their usage, was compiled from the local counties that previously managed these services.
In preparing to implement our service, we hired personnel for a Madison call center and built a transportation network of Wisconsin-based small businesses to transport members based on this data. Unfortunately, by the state’s own admission, the data wasn’t accurate; and, since we based this operational implementation on that data, we deployed a transportation network and call center staff at levels that grossly underestimated the number of members and demand (capacity utilization) from those members.
“We recognize that there were limitations to the original RFPs. The Department had limited data to share regarding utilization of these services and prospective bidders, including LogistiCare, did not have all of the data needed to submit a reasonable estimate of the costs to adequately staff to serve as the state’s non-emergency medical transportation manager,” DHS Secretary Dennis Smith acknowledged in a Nov. 21, 2012, news release.
When a government contracts with a private sector company to provide a service under a risk based arrangement (as was the case here), the typical intent is to transfer the business risk, generate savings for the taxpayers, reduce fraud/abuse and improve service levels. While private businesses recognize those objectives and accept the increased risk, it is critical that the state provides accurate data if it expects a certain level of operational execution.
Without quality data, the state needs to have more business and operational flexibility and build in a contractual mechanism to develop periodic review of the data to revise the business relationship and insure smooth continuity of operations for the stakeholders.
As a result of the inaccuracy of the data, our operation and pricing estimate to support Wisconsin were significantly understaffed and underpriced. In response, we quickly brought on more capacity to support this unanticipated influx, and to meet the performance metrics called for in the contract – at our expense.
LogistiCare lost more than $6 million over a 20-month span – an untenable amount for any organization. So, we made a business decision and in accordance with our contract terms we resigned from the program, but remained a committed partner – even though we continued to incur massive losses – until the state’s contract with a new company took effect July 31.
According to published reports, the contract with the new contractor for managed transportation is 34.5 percent higher than it was a year ago, which clearly validates that we were not being paid close to what it takes to run the program effectively. The state of Wisconsin now has the data – as long as the service parameters do not change – to expect the new transportation broker to have a reasonable operation.
Our company has been in the business of providing ancillary medical services such as non-emergency patient transportation for more than 18 years. We do this successfully in 43 states and the District of Columbia and take pride in delivering this service 44 million times annually with 99.8 percent of those trips occurring complaint free.
We recognize the risks and rewards of the marketplace. But, unless Wisconsin – or any state for that matter – has the flexibility to make the necessary mid-course adjustments driven by the needs of its citizens, this scenario will repeat itself. It is only a matter of time.
Big data is an amazing tool, but only when it is precise, comprehensive and analyzed by skilled professionals with experience in a real world, practical application of that data. Administrators must ensure the statistics provided to the private sector or other state departments are comprehensive, accurate and reflect reality.
Wisconsin now has a structurally sound program in place including transparency of the operation and, its data is now reliable. LogistiCare established a comprehensive, statewide system to provide consistent, cost effective access to healthcare and a way to measure. We leave knowing the citizens of Wisconsin are in a significantly better place today than when we entered.
While we will no longer directly serve Wisconsin residents, we are committed to the state. We would like to come back to the state if the opportunity presents itself and continue to maintain a base of employees in Madison to support our work in 43 other states.
Herman Schwarz is the CEO of LogistiCare.