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| A Medicaid home modification entrepreneur on why she shut down a business that was working

| Entrepreneur Katy Dodd has a sophisticated understanding of the ways that policy and business interact. An alumna of the Goldman Sachs 10,000 Small Businesses Program currently working as an expansion strategist at Master Care, Inc., she cut her teeth in the family business founded by her mother, Katheen Dodd. LifewiseCHM (Clinical Home Modifications) specialized in clinically driven home remodeling and safety updates to support aging in place. The company paired certified contractors with licensed occupational or physical therapists to evaluate needs and goals, generate custom scopes of work, and manage the modifications.

Lifewise was well positioned, receiving more than 10,000 referrals and completing between 6,000 and 8,000 projects across Midwest, South, and West. But shifts in Medicaid reimbursement policies exacted a heavy toll, and the company closed earlier this year — depriving older adults of a vital service that prevents falls, allows them to remain in their homes, and, ultimately, saves the government money. Here, she reflects on her journey and how the system is failing not just entrepreneurs like her but the growing population of older adults across America.

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What made Lifewise different from a remodeling contractor?

What set us apart was the integration of clinical expertise with construction. Clinicians and contractors worked together to understand what each member needed to remain safely in their home, with the clinician establishing the medical necessity for those modifications. 

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How did you scale from Kansas to seven states?

We began working with managed care organizations in Kansas around 2015. Through relationships developed at industry conferences, we expanded into several additional states, including some of the country’s largest Medicaid markets. Over time, our strongest presence was concentrated in a handful of states across the Midwest, South, and West.

What did the pandemic do to the business?

At our peak, we completed approximately 1,300 projects in a single year. During COVID, there was a major push toward delivering services in the home and significantly more funding was available. To the credit of the states and health plans, they invested in those services. So despite everything happening in the broader world, it was a period of substantial growth for us.

Then the public health emergency ended.

We all anticipated redeterminations would be difficult, but the impact was more significant than many expected. Almost overnight, the financial environment changed. Although larger plans often have multiple lines of business that help them absorb fluctuations, many still pulled back quickly amid the uncertainty. Approvals tightened as plans tried to understand what the loss of membership and revenue would mean for their longer-term financial position.

How did that change what you were allowed to build?

One of the things we advocated for early on was recognizing that members have a finite amount of funding available – anywhere from $5,000 to $15,000 as a lifetime benefit. The plans would say, “Medicaid is the payer of last resort, so look only at what this individual needs right now.” Our response was, “This member has a $7,500 lifetime benefit, and you’re asking us to piecemeal parts of what they need. That will gradually consume the benefit and limit the member’s ability to make a more substantial modification when they truly need it.”

After COVID, the plans shifted from, “Yes, look more holistically at what the member is going to need now and in the future,” to, “No, we only want you to look at what they need right now.” As a result, we went from completing projects in the $6,000 to $7,500 range to seeing many projects fall into the $2,000 to $3,500 range.

Read more: America’s Infrastructure To Support Older Adults Is In Limbo

Why couldn’t the business absorb that?

This is fundamentally a low-margin, volume-driven business. As an intermediary, the revenue may have looked substantial, but roughly 90 percent of it went directly back out the door. As the volume generating that revenue continued to decline, we had to ask whether the remaining opportunity justified the effort and infrastructure required to support it.

When did you decide to close?

We were facing headwinds from every direction, including constant questions about why we were making certain recommendations. We explained repeatedly that our entire process, from the portal and photographs to the underlying assessment, was designed for complete transparency. The goal was to show that our recommendations were evidence-based, not arbitrarily inflated. We had earned the plans’ trust, but once the implications of H.R. 1 became clear, I knew the business was no longer sustainable.

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The standard operating environment in Medicaid is one of constant strain. I knew that going in. But eventually, the level of strain we were expected to absorb became unsustainable. In a nutshell, the math wasn’t math-ing.

What happens now?

In the markets we left, there was a bit of a vacuum and I know home modifications are not going away. My remaining hope is, in the states’ and plans’ quest to find the cheapest option, they don’t lose sight of quality. One of the things we consistently emphasized was, “Cheaper is not better.” You need to understand what you’re getting, know how to evaluate the bids, and know how to properly vet the contractors.

There are a few companies who have entered the market that I think are very professional, but they don’t place the same emphasis on relationships. Medicaid is not a copy-and-paste business. Every state is different and every plan within that state interprets the rules and the service definitions differently. If you enter a market expecting to move hard and fast without first understanding those dynamics, you will eventually run into the limits of that approach.

And you’re back in Medicaid.

Toward the end, I was admittedly burned out and questioned whether I wanted to reenter the industry. But there aren’t many businesses where you can use your understanding of complex systems to make a meaningful difference in people’s lives. Eventually, I thought, “Who am I fooling? I love this business. And here I am again.”