EMH Insights

The Affordable Care Act: Boon or Burden?


When most people, regardless of partisian affiliation, think of the Affordable Care Act (ACA), the first thing that comes to mind is probably not the Act’s effects on the birth of entrepreneurial ventures in the health care industry. Depending on where one lies on the political spectrum, s/he may feel that the Act is replete with burdensome regulations, or that it will provide healthcare access to millions of Americans who have previously been discriminated against by excessively high health care costs. This paper is about neither of these popular public perceptions (and it also is in no way intended as political commentary by EMH Strategy on the Affordable Care Act); it is instead concerned with what (if any) effect the reform will have on inspiring entrepreneurs to capitalize on new opportunities created by the legal requirements of the ACA.

In the December 1st, 2012 issue of The Economist, the author of an article entitled “Fighting fit” explains how while many consider the ACA to be a headache for businesses, others in the health care industry are looking to take advantage of the economic opportunities presented by the new law. The companies that are poised to benefit the most from the ACA are those that are able to serve the consumer directly and those that can be utilized by the hospitals that will now be forced to become more efficient entities. Consider the latter first. The new law rewards hospitals that (apply and) are accepted as “accountable care organizations,” or institutions that can keep their costs low and the quality of the medical services provided high. This incentive, coupled with the fact that government payments to hospitals will be reduced, will require hospitals to become more efficient. In order to abide by the new law, hospitals in turn will increasingly rely on smaller companies to improve their internal processes and eliminate waste. Starting in 2014, insurers will be allowed to sell directly to consumers, and companies that allow customers to select insurance options online (e.g. will see an increased demand for their services.

For example, the ACA is indeed creating opportunities for digital service providers for the healthcare industry in New Orleans. Our neighbors in the New Orleans BioInnovation Center, VoiceHIT, operate a web-based software platform that utilizes real time data to provide a more streamlined and efficient experience for both patients and physicians. Doctors are mandated to make the transition to electronic medical records, and VoiceHIT’s technology will prove essential as hospitals try to eliminate inefficiencies. Dr. Peter Ragusa, Co-Founder and CEO of VoiceHIT, said that his company was “born in 2010 out of the dramatic changes in healthcare that were pending on the horizon, coupled with the fact that we were faced with a healthcare system that was going to require more resources without the framework to meet the increased demand. The supply of proactive, computer-free resources like VoiceHIT that realign the incentives to allow for the patient’s involvement in their own care is limited, and VoiceHIT is looking to extend those resources to keep the healthcare system from collapsing under its own weight” (Ragusa. Personal interview. 14 December 2012). According to The Economist, the amount of money invested by venture capital funds in digital-health firms in the first nine months of 2012 increased by 70% over the same period in 2011; Dr. Ragusa points out that in the past year VoiceHIT has also definitely seen “an uptick in receptivity to their product from investors.” Ultimately, Dr. Ragusa believes that his company will be more successful because of the Affordable Care Act. “The Affordable Care Act is only going to increase demand. Everybody knows that things cannot continue the way that they are, and in order to meet demand for tomorrow’s healthcare, we have to extend these resources.” VoiceHIT’s continued success with raising capital is living proof that it pays to be aware of how exogenous shocks to the system, in this case the ACA, can and will affect your business.

The Affordable Care Act: a red-tape laden, onerous piece of legislation replete with regulation that only kills business, or an opportunity for the growth of technologies that will prove vital for the survival of our healthcare system? Let us hear from you.