Opportunities & Challenges of Industry Disruption

On September 9, 2019, I delivered the keynote speech at the first annual conference of the Non-Emergency Medical Transportation Accreditation Commission (NEMTAC) held in Scottsdale, AZ. Founded in 2018, NEMTAC’s mission is to create a high standard of care for the non-emergency medical transportation industry by distinguishing organizations that deliver high-quality customer service, ethical business practices and safe vehicle operations. Any organization that receives NEMTAC accreditation will be able to indicate to its customers that it has exceeded the minimum requirements and achieved the Non-Emergency Medical Transportation (NEMT) industry standard of excellence.

For my keynote address, the room was packed with a combination of industry professionals, including software providers, brokers, mobility companies, Transportation Network Companies (TNCs), industry trade group representatives, taxicab owners and operators, and paratransit operators. The NEMTAC conference made it clear to me that the next round of disruption in ground transportation is currently underway, with a unique combination of technology companies, TNCs, and even traditional taxicab operators looking to upend the broker system that has not been rattled since its inception. The stakes could not be higher, given the changes to the law and the kettle of subsidies available to companies that are either struggling to stay alive, or for new start-ups seeking a seat at the table, and for TNCs that desperately need to become profitable soon.

This article will provide a brief history of the paratransit and NEMT industries, summarize my keynote speech findings and predictions about the future, as well as my observations at the conference.


I saw many divergent stakeholders at the NEMTAC conference interact for the first time with one another – they were sizing each other up, and not sure about whether a relationship should develop, or what the business model would look like. Nevertheless, it was clear that there was valuable networking as opportunities abound for many in the new NEMT universe. Finally, a plan of action on how to raise the duty of care and take advantage of business opportunities will be set forth, including plans by the International Association of Transportation Regulators (IATR) to develop model regulations for NEMT license, service delivery and safety.

History of NEMT in the USA

Non-Emergency Medical Transportation (NEMT) is a ground transportation service provided to individuals without access to public transportation who need to travel to medical appointments. Generally supported with Medicaid funds, NEMT service was launched as a joint federal and state program in 1966 to Medicaid beneficiaries.

The program’s purpose is best described by Senior District Judge Clary in Smith v. Vowell (1974), a federal case from Texas that laid the foundation for NEMT services, as he describes the benefits of treating individuals for minor medical problems; many different studies have shown that paying for an individual’s transportation to the doctor’s office can prevent the condition from deteriorating into an emergency situation, which costs hospitals and insurance companies thousands of dollars.

Since the inception of NEMT services, Medicaid has grown immensely; legislation expanding Medicaid enrollment has increased 52% alone, from 47.7 million beneficiaries in 2008  to 71.4 million in 2019, which means more people need rides every year. In 2005, Congress passed the Deficit Reduction Act that gave state NEMT programs enough flexibility for local governments to seek out cost-saving opportunities by outsourcing the day-to-day management of NEMT services to brokers. Studies have shown that these brokers, who operate on a fixed budget rather than a fee-for-service amount, have improved service quality and controlled costs. Most recently, the expansion of Medicaid eligibility under the Affordable Care Act (ACA) up to 138% above the poverty line has expanded the enrollment in Medicaid even further by creating a new adult group.

NEMT Disruption

Aside from legislative changes that increase Medicaid eligibility and enrollment, people are also living longer; as noted by a recent study commissioned by the United Nations, which projects life expectancy to rise on a global scale:

As the pie continues to grow, transportation companies have sought to secure NEMT work as a staple of their revenue. Taxi companies, TNCs, and healthcare companies are all actively seeking to develop reliable NEMT services in order to survive in today’s over-saturated marketplace. In an attempt to reserve a slice of the pie for themselves, NEMT brokers are hiring their own independent driver-providers (IDPs), in addition to contracting with local transportation providers. Using IDPs allows these brokers to realize more revenue from the state Medicaid program.

Other organizations in healthcare are becoming even more creative. For example, Hennepin County Medical Center, located in Minneapolis, Minn. launched Hitch Health, a new technology company. Hitch Health integrates with electronic medical records to determine a patient’s eligibility for NEMT service, then connects the patient with the nearest available vehicle once the patient is ready to be transported.

In the TNC space, Uber is turning to NEMT services in an attempt to produce revenues, which may be especially important after Uber has posted record-high losses. Uber Health, which is Uber’s NEMT service, has grown 400% in the past year alone, topping more than 1,000 partners in Healthcare, including hospitals, primary care facilities, specialty clinics and other organizations.

Taxi companies have similar strategies. While traditional taxi companies typically only provided NEMT services to larger state contracts, many are now approaching local healthcare facilities in an attempt to procure private contracts as well.

 Lessons Learned from TNC Disruption – The Duty of Care

A hot topic in the NEMT space as of late is the “Duty of Care,” which is defined as an organization’s “duty to others to exercise the care of a reasonable man [person or company] to protect them against an unreasonable risk of harm to them arising out of the act.” A report which I authored, entitled Contracting with Transportation Network Companies (TNCs): Risk Mitigation & Best Practices for Corporate Travel Managers, investigated the liabilities assumed by corporations when contracting with companies such as Uber and Lyft. Published by the Institute of Travel Management (ITM) and the City University of NY (UTRC at CCNY), the report identified several areas of concern: insurance risks, driver vetting, negligent hiring as a corporate legal liability and privacy, confidentiality, and data security issues. One of my key recommendations from the study was that travel managers require TNCs to comply with the existing duty of care established over decades by corporate travel managers and limousine/black car companies in the corporate sector, including data sharing, rate setting/limits, rigorous insurance levels and proper license vetting, all coordinated as part of longstanding competitive Request for Proposal (RFP) processes.

The multitude of TNC-related issues addressed in the ITM report have severely hindered TNCs from taking over the higher-end corporate travel business, as corporations consistently look to mitigate any unnecessary liability. However, TNCs have made inroads with companies that allow for employee reimbursement for rides outside the RFP process. This has eroded the black car, livery and taxicab industries’ share of the pie.

But the “duty of care” issues identified for TNCs are not limited to corporate travel business alone. NEMT services have the same concerns and more, especially due to the increased liability risks of transporting patients with medical issues. When transporting a patient with a physical or mental condition, extra steps must be taken to mitigate any potential liability.

A hot topic right now is compliance the Americans with Disabilities Act (ADA), since most states have a requirement for transportation companies to provide a service for those with disabilities. Ride-hailing companies, such as Uber and Lyft, are constantly under fire as lawsuits are filed around the country by disabilities advocates who allege a lack of accessible service by TNCs. As a response, the rideshare goliaths contract with local paratransit providers to offer accessibility options for users, fulfilling their requirement to serve the disabled community, yet foregoing the expensive acquisition of wheelchair accessible vehicles.

Worker classification presents itself as a major problem for the NEMT industry as well. As California’s AB-5 law is enacted and the “gig economy” worker status is considered, other states, such as New York, are beginning to take similar action.

While it seems necessary to provide additional training courses for drivers transporting persons with medical needs, companies can expose themselves to worker classification claims; a true independent contractor relationship involves no mandated training by the hiring organization. A business may require that the contractor abide by its workplace policies, but it cannot train the contractor on how to perform the service. If AB-5 equivalents spread throughout the country, any business using the independent contractor model will have to rethink its operating model.

It should be noted that one way to possible avert worker classification concerns is for a third party (like NEMTAC, IATR, a regulatory agency or anyone other than the independent contractor driver) to provide the training or control elements that would create issues; or for the regulatory agency to mandate higher standards (like training), as doing so cannot be held against the provider in a worker classification matter in many jurisdictions.

So, what is the proper standard of care to set for an NEMT provider looking to enter the industry? NEMTAC is seeking to answer that question by being the first organization to offer accreditation for NEMT providers that offer high-quality customer care and safe vehicle operations. NEMTAC offers advanced education and training certification to organizations and individuals who are looking to raise the standard of care in the NEMT industry. As of now, the list includes accessible vehicles, biometric driver vetting, etiquette training courses, and even certifications for driver health.

From the NEMTAC mission statement, it is clear that the ultimate goal is to create a uniform level of service that is maintainable and consistent. Right now, the duty of care is established by the testimony of expert witnesses, and I have been engaged on matters where a party is seeking to establish or defend a negligence action resulting in personal injury through testimony on what the duty of care of a reasonable NEMT or other transportation provider should be. Negligence cases require proof of the existence and identification of the duty of care and whether that duty was breached by the tortfeasor. Depending on the state or local jurisdiction, results can vary wildly depending on the performance of the expert witness and different standards may exist in different areas of the country. The NEMTAC certification process (as well as any efforts by IATR to develop model regulations) could serve as a national acknowledgement of the standard of industry NEMT care in a unified way to solve this problem, as industry and government standards (known as Negligence Per Se), can be relied on in testimony or as proof in court to establish the proper standards.

The Future of NEMT

The road to the future of NEMT is an uneven, gravelly road with a lot of potholes. There is a great deal of regulatory uncertainty, as cities around the country attempt to create a level playing field for TNCs and taxi companies. Worker classification, vehicle automation, and duty of care are all areas of uncertainty as lawmakers attempt to correct the disjointed system that exists today. The field is getting crowded and will soon be overwhelmed with a potential excess of supply, as companies compete for profitability.

One valuable lesson learned from the recent IPOs by Uber and Lyft is that TNCs are not yet profitable. Historically, many adults, especially younger professionals, typically have multiple TNC apps downloaded on their smartphones and are comparing prices, which encourages price-slashing to keep market share. The solution, however, may lie in the NEMT industry – where government contracts and partnerships could provide these companies a reliable source of trips for their drivers, along with a stable source of revenue and pricing model.

Taxi industry players are more involved than ever as they attempt to fill a niche created by TNC disruption – namely, safe NEMT services. Many taxi companies are emphasizing that their business model includes biometric background checks that have been rejected by Uber and Lyft to create a more appealing offer to healthcare organizations to emphasize reduced risks by proper driver vetting procedures.

Perhaps, the brightest star shining in the NEMT industry’s sky is the Federal Transit Administration (FTA) Sandbox grant. The Mobility on Demand (MOD) Sandbox Program is the FTA’s effort to promote innovation, creativity and efficiency throughout the transportation industry. The program grants federal funds to organizations that often use multi-modal integration to create an unconventional solution to budget constraints and other problems that transit agencies face across the country.

Organizations must partner with at least one other organization in order to create a more efficient, elevated level of service; usually this partnership is between a government agency and a private mobility provider. An example is Pinellas Suncoast Transit Authority, which received funding for the Paratransit MOD Demonstration. Pinellas fostered a variety of partnerships with a taxi company, a paratransit service and a car-sharing company to maximize cost efficiency for on-demand door-to-door paratransit service. This type of multi-modal integration is the future of the NEMT industry, as companies seek creative and unconventional ways to solve budget problems and service gaps for their local municipal governments.

One important point to make here is that Mobility-As-A-Service (Maa”) is a part of several of these FTA pilot programs, and should this MaaS movement take-off in the U.S., at least on the public paratransit side of the NEMT world, whatever platform or software providers who receive public contracts have an upper hand as a pre-existing vendor. MaaS is the integration of multiple transport services into a single on-demand mobility service; the ultimate goal of MaaS is to forge new business models that increase efficiency, sustainability and convenience. If public transit, TNC and bike share modes are combined in a multi-modal platform and app to deliver all services under one roof – public and private – it is just a matter of time before public transit agencies decide to possibly add NEMT public paratransit services to the mix. Doing so might involve the elimination and by-passing of middle persons (such as paratransit brokers), and the MaaS contractor with existing contracts may take over that role or be best positioned to win a new RFP as an existing vendor. All of the new and traditional NEMT players could be sidestepped by the MaaS threat.

What Can NEMT Providers do to Survive?

While there is no checklist for steps on how to survive in the NEMT industry, providers should generally adhere to one core concept: elevate the standard of care for the industry. Providers should get ahead of the trend by embracing and creating the changes and innovation that solve problems for local governments. NEMT providers should get acquainted with NEMTAC and help develop their certification program.

Healthcare organizations are constantly looking to minimize their liability – the best way to do that is by contracting with a company that has certified business operations for practicing excellence in safety and customer care. Companies should also experiment with new business and brokerage models for multi-modal integration and new partnerships. Companies that offer only a standard service or on less than the industry-wide standard, will be drowned out by the tidal wave of competition; the only way to survive in today’s industry is to develop a niche and expand on it, solving any problems that the local communities face.

The lesson learned from the Pinellas Suncoast Transit Authority demonstration program is that innovation wins a seat at the table and a slice of the pie. Companies that are open to exploring new methods of multi-modal integration and cost-reducing operations will flourish. The main goal of NEMTAC and lawmakers around the country is to provide a uniform and consistent standard of care that changes the disjointed system that exists today. Also, as indicated, NEMT providers would be wise to put their eggs in multiple baskets, partnering with many different players, or at least get ahead of the MaaS curve by engaging and working with software and platform providers, as they may rule the NEMT world on the public paratransit side.

NEMTAC Working with IATR

The International Association of Transportation Regulators (IATR) is a best practices and non-profit educational organization comprised mostly of international government transportation officials, with a heavy presence in the United States – with most every regulator from every major and tertiary city as members, along with many State TNC regulators. For the past 32 years, the IATR has encouraged close cooperation and sharing of information among the various entities that regulate transportation industries while working to resolve common problems. The IATR membership now includes not just traditional government agencies that regulate taxicabs, liveries, black cars, paratransit and limousines but also TNC regulators, public transit agencies, departments of transportation and motor vehicles, insurance departments, airports, planning agencies and other regulators of new mobility services, including bike sharing, microtransit, pedicabs, technology platforms and car sharing.


The IATR’s 33rd annual conference will take place at the Peabody Memphis Hotel from September 22 until September 25, 2020.

In an article that I authored and published entitled Accessible Transportation Reform: Transforming the Public Paratransit and Private For-Hire Ground Transportation Systems, I describe the rise of different brokerage models related to the expansion of NEMT programs. The IATR conference will continue to explore these models through a highly-anticipated session in our conference agenda, “NEMT (Non-Emergency Medical Transport) Disruption.” Panelists will address how the taxicab industry and TNCs are both disrupting the health care transport field, including both public and private paratransit businesses and brokerage models. An exploration of the latest technological and business developments will be coupled with NEMT duty of care and certification programs, including a workshop to either develop new model NEMT regulations, or to amend the existing IATR Model Regulations for Accessible Taxicabs and For-Hire Vehicles.

There needs to be a uniform standard of care, especially for individuals who require NEMT services. Therefore, the IATR has been working on developing a myriad of model regulations to standardize rules and procedures relevant to transportation regulators. The IATR drafts the model regulations, and then offers its members the opportunity to provide final comments to these regulations prior to publication. At its annual conference, the IATR organizes a final public hearing to review the regulations that have been developed. Alongside developing model regulations for duty of care procedures, the IATR will also contemplate whether NEMTAC certification should be required by government regulations as standards of conduct or licensing criteria.

The bottom line and end result is, depending on how the NEMTAC work is received, the IATR and its regulators may or may not do the following: (1) Adopt NEMTAC certification procedures in their entirety as a condition of paratransit licensure; (2) Develop regulatory incentives for licensees to follow, seek and obtain NEMTAC certification; and/or (3) Take some of the ideas or items of NEMTAC certification and pass laws or rules that mandate certain licensing standards (i.e., training).

Only time will tell, but as with any disruption movement, things can go in any direction and industry stakeholders and regulators alike should be ready and prepared, with a Plan A, B and C – if not more. Lessons learned in terms of regulators and incumbent industry members from the TNC disruption movement should be taken into account to get ahead of the curve, and not be left at the curb!

Article by Matthew W. Daus, Esq.
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