Affordable Care Act Opens Doors of Opportunity For Entrepreneurs and Venture Investors

Shannon Beeman
May 23, 2013

The rollout of the 2010 Affordable Care Act, or ACA, is shifting into high gear this October with the launch of health insurance exchanges where individuals who do not have access to public coverage or affordable employer coverage will be able to purchase insurance. The comprehensive health reform law, dubbed Obamacare, has already brought significant changes to the nation’s health-care system, along with considerable confusion spawned by its complexity and the far-reaching nature of its coverage provisions.

On the positive side, this quantum shift in the way America delivers, receives and pays for health care has opened doors of opportunity for creative entrepreneurs and nimble venture investors who are able to identify a new niche or fill an unmet need and then build a business that capitalizes on it.

“As a venture capitalist, this is very exciting,” said David Jones Jr., chairman of Chrysalis Ventures, who appeared on a Wednesday morning panel at the MGCS to discuss the impact of the ACA. “The exchanges are a terrific opportunity. A year from now, that race will be over. [But] health-care investment will be a fertile field.”

An estimated 370,000 Michigan residents and seven million people nationwide are expected to purchase coverage during the first exchange open enrollment, said Marianne Udow-Phillips, director of the Center for Healthcare Research and Transformation at the University of Michigan. Beginning in 2014, the ACA will require that most individuals have health insurance, and the number of uninsured people in the country ─ currently about 48 million ─ will drop by 14 million, a 24% decrease. Special “navigators” will be needed to help consumers sort through the bewildering array of insurance plans offered online. “Illinois will have six insurance carriers with 165 products,” Udow-Phillips reported. “It will be a messy implementation and very confusing.” It will also be expensive, if individual exchange premiums see the hefty price increases that many are predicting.

On the provider side, physicians and hospitals will face new cost-containment, benchmarking and care-quality pressures, as the nation switches from volume-based to value-based care payment. “Physicians are under tremendous assault,” said John Popovich, M.D., CEO of Henry Ford Hospital and chief medical officer of Henry Ford Health System. “Access to primary care is not necessarily linked to payment.” Alternative-care options and consultations supported by technology will fill the gaps created by the expected shortage of primary-care physicians as the Medicaid expansion rolls out. The move toward a continuum of integrated care and away from lengthy, expensive hospital stays also will impact the bottom line at doctors’ offices and medical facilities.

The panelists pinpointed several areas where entrepreneurs and investors might find demand for new products and services:

  • New online payment processes for health care, similar to PayPal, which consumers without credit cards or bank checking accounts can use to pay for their insurance coverage
  • Data and analytical tools that can be used for benchmarking, cost reductions and value-added initiatives
  • New IT tools to help physicians adopt and implement electronic health record, or EHR, systems
  • New options for buying products that enable health systems to leverage their purchasing power and lower costs
  • Redesigns of medical facilities and workflow to promote greater efficiency
  • New technology interfaces and outpatient systems to help physicians and health-care institutions manage the continuum of patient care

While some of the bugs still need to be worked out of the ACA, its implementation over the next 18 months will transform American health care significantly. “Right now, 34% of our spending is in the hospital,” Udow-Phillips said. “Every other country spends less by paying providers less and limiting the services provided. We in America want everything for everybody.”