Anyone familiar with the non-emergency medical transportation industry is familiar with LogistiCare, the nations largest Medicaid broker. LogistiCare currently operates in 39 states and the District of Columbia. They are a wholly owned subsidiary of the publically traded Providence Service Corporation (NASDAQ: PRSC) and boast annual sales in excess of $1Billion. In 2015, LogistiCare managed more than 65 million rides for nearly 24 million recipients.
LogistiCare’s national success and compounding annual sales of 25 percent in 2015 can be attributed to, in many instances, per-trip profit margins in excess of 75 percent.
A long-standing practice in the NEMT industry by LogistiCare is to leverage independent operators in key markets. The reason is obvious. In the opinion of LogistiCare, independent operators require less per-trip reimbursement because they have less overhead. Despite many lawsuits against LogistiCare in California and other states for violation of state policies and insurance fraud, such practices have led to exponential increases in profit margin and rapid national market share for LogistiCare.
But LogistiCare has been implementing even greater “innovations” to further bolster their profit margins. In recent conversations with providers in Virginia, LogisiCare has been working to convince independent operators to work as “volunteers.”
According to LogistiCare, such a creative classification will allow the independent operator two “benefits.” First, the independent operator can write off their vehicle related expenses on their personal taxes. Second, LogistiCare will reimburse the operator a fixed rate of $.40 per mile.
Note: That is NOT a typo!
In that same year LogistiCare managed more than 65 million rides, 2015, the IRS mileage rate was 57.5 cents. Then, in 2016, LogistiCare began offering “volunteer” operators a reimbursement of 40 cents per mile – roughly 30 percent less than IRS standards of 2015.
Needless to say, LogistiCare’s creative “innovations” is far from new. To the contrary, they echo to practices long ago. It’s called “sharecropping!” The irony – this practice is completely subsidized by the government, LogistiCare’s client.
LogistiCare has a long-standing reputation for taking advantage of transportation providers – approving trips then finding cause for denying reimbursement, and much more. But now, LogistiCare further diversifies their tactics by offering unsuspecting operators just enough financial sustenance to keep their single vehicle operational yet not enough for operators to enjoy the true benefits and bounty of entrepreneurship.
It is expressly important to understand that such “innovative” strategies are NOT designed to save the government money. To the contrary, when LogistiCare and other brokers are successful in experiencing greater per-trip savings it adds to their bottom line versus savings to state budgets.
You have to understand, when LogistiCare and Medicaid brokers negotiate their contracts with state governments they do so based on the total number of Medicaid recipients in each state. Hence, the reason why LogistiCare and other brokers were the strongest advocates for the once Obamacare and the expansion of the Medicaid enrollment process. Such expansion directly increased LogistiCare’s prospective clientele and, thus, their profit earning potential.
The laws of economics will always prove true. When you increase volume while reducing expenses you experience increased profit. To the detriment of unsuspecting providers and operators, this very model is exactly what LogistiCare and other brokers are experiencing in partnership with the government.
In 2012, LogistiCare experienced their own “Boston Tea Party” in the state of Wisconsin. Providers grew tired of the sharecropping and rogue tactics of LogistiCare and, essentially, forced LogistiCare out of the state under the cover of darkness before the full-term of their contract. Needless to say, The industry is going to experience new “revolution!”
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