Cheryl Smith and Brett Graham may live in Salt Lake City — but you’d be hard pressed to find them in Utah these days.
The pair lead the health exchange practice at the consulting firm Leavitt Partners and, ever since the health care reform law passed, they have been in hot demand.
“I looked at my calendar for this past year recently,” Graham told POLITICO during his swing through Washington. “And I’ve been to something like 20 or 15 different states.” Smith is in the middle of 33 consecutive days on the road, including a recent six-day stretch that took her from California to Washington, D.C., to Mississippi.
Smith and Graham aren’t the only Leavitt Partners employees pulling extra hours. Staff at the firm has doubled over the past year, as has office space in the Salt Lake City headquarters. Leavitt has forged new partnerships across the industry and has even begun turning down some potential clients because of lack of capacity.
The secret to its success: the health reform law and the millions of dollars it invests in health exchanges, the new marketplaces that states must launch by 2014 or risk the federal government coming in and taking over the task.
More than $300 million in exchange grants has already flowed into the states since the Affordable Care Act passed. That number will grow exponentially in the coming months, as states move from the initial steps of passing exchange legislation to the more lucrative task of setting them up.
For health consultants and information technology vendors, it’s already shaping up to be a gold mine.
State health exchange planning documents obtained by POLITICO read like a who’s who of top health consulting firms, with contracts awarded to health vendors large and small. Between Indiana and Washington state — two of the three states that have received grants to establish exchanges so far — Deloitte Consulting, Mathematica Policy Research, Wakely Consulting Group and Milliman all have received exchange-related federal dollars.
That’s likely only a small sample of the businesses that will soon jump into the exchange space.
“It’s a tremendous opportunity,” said Steven Auerbach, president of the health IT company Connextions, which has added more than 2,000 jobs this month alone as it gears up to compete for both private and state exchange business.
While Connextions has focused mostly on private exchanges, running some of the country’s largest marketplaces, it plans to pursue public contracts as more opportunities become available and is already in preliminary conversations with Indiana, which received a $6.8 million establishment grant last month.
“The conversation has been very favorable,” Auerbach said. “We’ve talked to Gov. [Mitch] Daniels about how to drive innovation. There are a number of states that are focused on not partnering with large, government contractors.”
The opportunity is, seemingly, everywhere. Even in states that have used executive orders and heated rhetoric to push back against implementation of the reform law, vendors still see possible contracts.
“There is a group that feels as though they don’t want to be associated with the Affordable Care Act,” said Leavitt Partners CEO Michael Leavitt, who was Health and Human Services secretary under President George W. Bush. “Privately, though, it’s clear that several of those are planning behind the scenes, because they don’t want to have a federal exchange.”
Major health vendors have also begun to form partnerships. Leavitt and Connextions recently announced a partnership, as did the benefits administration firm Ceridian, which will partner with tech giant Microsoft to develop and sell a small-business health exchange system.
“When I look at how much we’ve already committed, Ceridian has identified this as one of its largest business opportunities in the long term,” said John Hunter, executive vice president of Ceridian Exchange Services. “We’re investing in a way that is going to make us very relevant to the marketplace. A lot of it has to do with timing: We want to be ready for what has to occur before 2014, when exchanges have to prove their ability to work.”
Moreover, health information technology vendors told POLITICO that the ACA has had an unintended — and lucrative — side effect: amping up interest in private health exchanges to capture the remaining individual market, largely among those who earn too much to receive a public subsidy.
“We see some form of the exchanges happening no matter what,” said Eric Paternoster, CEO of Infosys Public Services, which recently launched a new platform to support financial transactions on a health exchange. “Along with the legislative exchanges, we’re seeing an unanticipated side benefit of some private insurers setting up their own private exchanges, in parallel to whatever the state is doing.”
Paternoster said Infosys Public Services has invested about half of its products and solutions budget on developing the exchange product, and he hopes to take its framework into about a third of half the states.
“What’s great about the opportunity here is it’s not a competitive scenario,” he said. “The Department of Health Services in Ohio doesn’t compete against the one in Kentucky. There’s the same need in each state for someone to deliver these services, rather than build their own application from scratch.”