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In the ever-evolving mobility landscape, non-emergency medical transportation (NEMT) is yet another market adapting to the transportation network company (TNC) disruption. If you’re familiar with NEMT, you’ve probably heard commonly touted statistics – several million Americans miss appointments costing the healthcare industry hundreds of billions in lost revenue each year. These numbers represent an opportunity, but don’t tell the story of how the industry is evolving. Americans and policymakers alike are realizing that access to healthcare is an essential social determinant of health. Growing at an estimated annual rate of 6.2%, the total addressable market will surpass $12b in the U.S. by 2023, according to Frost & Sullivan. Spearheading this progress are TNCs, as their technology and business models serve as the foundation for a modern Healthcare Mobility market.

TNCs Enter NEMT Space

It’s no surprise that major TNCs, who are still not yet profitable, would dabble in a rapidly growing market that promises consistent revenue streams. The NEMT space was ideal for TNC vertical expansion. Already boasting the largest fleets of independent contractor drivers across the U.S., Uber and Lyft entered the market in 2016 with minimal investment and strong network effects.

Uber’s first foray into the space was a partnership with Circulation (now Logisticare). The trials were so successful that patients using Uber only reported an 8% driver no-show rate compared with many NEMT providers reporting above 25%. Since then, TNC growth in the NEMT space has rapidly proliferated. In the past 4 years, Uber Health has increased its NEMT network by 400%. With over 1000 healthcare partners, the ride-hailing giant seems committed to succeeding in the NEMT space.

In that same time, Lyft’s growth has been explosive, earning partnerships with 9 of the top 10 health systems and the top ten largest national brokers, including Logisticare, Access2Care, and American Medical Response. In 2019, Arizona approved Lyft as a registered NEMT provider, the first state to do so and the first TNC to directly provide these services to a state entity. Lyft already provides NEMT transportation through partnerships in at least 48 states.

Implications on the Overall Industry

So what does that mean for the NEMT industry participants that have long controlled the market? Widespread change was a long time coming as the NEMT industry has been ripe for disruption. Legacy systems were often criticized for negligence that resulted in rampant fraud, waste, and abuse claims. State entities questioned the efficacy of NEMT spending and contemplated reducing investments without a clear ROI before TNC technology and business models became industry standard. A 2018 study conducted by the American Journal of Public Health estimates a $537 million annual cost savings due to the modernization of NEMT. Digital transportation networks offered by TNC technology offer transparency, accountability, and analytics that provide value to all industry participants by reducing operational costs and improving the quality of service.

Short Term

TNC technology has catalyzed a digitization wave, providing a basis for real-time trip monitoring and routing algorithms that greatly reduce negative claims while expanding the scope of service for beneficiaries. Established players such as brokers are forced to improve the quality of their services to match the standard set by TNCs and emerging NEMT tech platforms. Brokers must develop similar technology in-house or acquire tech platforms to integrate software enabling real-time trip monitoring, payment processing, etc. Despite this forced transition, TNCs do not currently pose a major competitive threat to brokers. In fact, brokers can increase network coverage and margins by outsourcing rides to TNCs when possible.

Mutually beneficial partnerships will continue across the industry for the foreseeable future as TNCs familiarize themselves with the NEMT space. Tech platforms will continue to partner with TNCs while tailoring similar routing software specifically for NEMT services. TNCs massive driver networks allow these tech-driven NEMT players to compete with long-established players. This allows tech platforms to scale their networks without spending resources aggregating providers and managing fleets. What seems like a highly competitive landscape is actually harmonious. TNCs are effectively lowering the barriers of entry for these tech platforms to compete with brokers directly by acting as full-service brokers with access to massive independent contractor driver fleets.

Long Term

Even when TNCs increasingly offer full-service brokerage services, no single platform could serve over 130 million-plus beneficiaries across the U.S. Moreover, the market is growing at such a rate that many segments will profit despite fluctuations in market share. While brokers are forced to update their infrastructure and services, this investment could be the saving grace for legacy players. Adopting this technology allows brokers to act as NEMT-TNCs. Meanwhile, tech platforms will continue to emulate and optimize TNC technology for NEMT. These entities and brokers alike increasingly adopt TNC business models, recruiting and training their own independent contractor drivers to increase margins and retain market share as TNCs increasingly earn state contracts to provide NEMT services.

The future of NEMT delivery will be shaped by healthcare trends and consumer habits. With most of the U.S. still in lockdown due to the ongoing COVID-19 crisis, NEMT providers NEMT providers and TNCs alike realized drops in ridership upwards of 70% according to Uber and Lyft. Patients are less willing to use public and shared modes of transportation, and telemedicine solutions are becoming more popular. More private insurers are providing telemedicine benefits and Medicare increasingly covers telemedicine services. The next wave of healthcare disruption is telemedicine, and virtual appointments will undoubtedly reduce the volume of NEMT trips. As such, players that integrate in-home healthcare services are poised to succeed.

The Importance of Independent Contractor Drivers

As a federally mandated benefit of Medicaid and Medicare, the NEMT industry has largely been insulated from market threatening regulation. That is, until recently. Last year, California passed Assembly Bill 5, aka ‘the gig worker bill.’ CAB-5 forces certain companies to reclassify independent contractor drivers as full-fledged employees, effectively shattering the way TNCs can afford to operate. Without independent contractor drivers, all companies that utilize this asset-light business model to keep costs low and margins high are threatened. As of August 10, the California Supreme Court upheld rulings forcing major players to reclassify independent contractor drivers as employees. Uber and Lyft have already announced plans to leave California, which could cause a ripple effect throughout all industries leveraging TNCs driver networks. As so many players have adopted business models enabled by contracted workers, all segments along the NEMT value chain are treated.

Looking Forward

The future of NEMT will be written collaboratively by many players. TNCs may be pushing the industry transition to a modern healthcare mobility marketplace, but brokers still control the market for the foreseeable future. In order to retain this position, brokers are modernizing services and transitioning into NEMT-TNC hybrids. In states that allow health mobility companies to hire independent contractor drivers, NEMT players will recruit their own network of drivers while also outsourcing rides to Uber and Lyft. Tech platforms will continue to lean on these ride-hailing giants to compete with brokers, but will not yet present a competitive threat to larger companies. TNCs will pursue partnerships and government contracts that guarantee stable revenue streams. Their position in the healthcare mobility market will add value to all segments along the value chain by reducing operational costs and increasing network coverage. As these players continue to work together to improve NEMT delivery, the long term winners in this market will be those who integrate and centralize services – including the next wave of in-home healthcare.

About Nicolas Inchaustegui

Nicolas InchausteguiNicolas Inchaustegui is a Senior Mobility Consultant within the Automotive, Transportation, and Mobility practice at Frost & Sullivan. Bringing his experience from the private and public sectors, such as OEMs and urban cities, he provides a valuable perspective on new mobility business models and their influence on transportation ecosystems.

Nicolas InchausteguiNicolas Inchaustegui

Nicolas Inchaustegui is a Senior Mobility Consultant within the Automotive, Transportation, and Mobility practice at Frost & Sullivan. Bringing his experience from the private and public sectors, such as OEMs and urban cities, he provides a valuable perspective on new mobility business models and their influence on transportation ecosystems.

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