Insight, analysis & opinion from Joe Paduda

Jan
30

Disruption of the US “healthcare” “system” is starting

Today’s announcement that Amazon, Berkshire Hathaway, and JPMorganChase are forming a new entity to deliver health benefits to their workers may well be the harbinger of massive change to come.

credit Collaborative Lab, Rachel Botsman

While many details are to be determined, the new company will be:

“free from profit-making incentives and constraints” and

“The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost,”

Here’s what I see as key factors.

  • These three giants have intimate knowledge of health insurers and healthcare providers. The biggest takeaway is they have determined insurers and providers are not performing today, and will not perform tomorrow. 
  • Amazon is a delivery machine – and knows way more about us than we do. The company knows logistics better than any other entity; it is also a world leader in analytics and “behavioral understanding.” Add in the Echo, and it’s current presence in and knowledge of tens of millions of American homes is a huge asset.
  • JPMorgan Chase is a financial empire that deeply understands investments, financial drivers, banking and fund flows. It has massive capital – $2.5 trillion in assets – a giant consumer banking enterprise, and brilliant people.
  • Berkshire Hathaway is huge, diverse, enormously well regarded, and very well run. BH brings perhaps unmatched management capability to the partnership, as well as multiple insurance assets staffed by people who understand risk.

Notably, stock prices for healthplan giants UnitedHealthcare, Anthem, and Aetna – and others are down 5 percent this morning, with analysts crediting the announcement for the damage.

It’s critically important to note that the companies that have dominated the healthplan industry for decades are, in the view of three dominant firms, not performing. In fact, their performance is poor enough that the three CEOs all noted they don’t have all the answers, the implication being they believe they can do a better job than the supposed experts.

The release is here.

 


9 thoughts on “Disruption of the US “healthcare” “system” is starting”

  1. Joe – Thanks for being the first (as usual) to run with this big headline! As I sipped my morning Joe (pun intended ;->) while reading the NYT article, I couldn’t help, but have my brain start firing off with all the current, and future implications of this trifecta. In short, mind blown, and no doubt will be the cornerstone of a new normal to come; one that I am optimistic that we can all learn and grow from.

  2. You know that things have gone completely off of the rails in healthcare and insurance when Buffet, Dimon, and Bezos arrive to ‘help’ us. Regardless of the outcome from these three amigos, we should all be excited by the IDEA that never-ending healthcare and insurance cost inflation is NOT inevitable. We aren’t powerless to come up with new solutions.

    This will definitely be something that deserves close scrutiny in the months and years ahead…a game changer for sure. Let’s just hope that it REALLY is for the better.

  3. Joe, what are the implications for WC? I mean employers have always tried to control the cost and growth of medical prices through various ways (fee schedules, treatment guidelines, formulates, etc.), but this is something completely different. Do you think they can pull this off and, if so, is this just for their own employees? Obviously, if it works… what then?

    1. Hi Frank – I don’t see much in the way of WC impact from this – I do see a lot of implications for health insurers.

      As a former UnitedHealthcare person, I’m not surprised. And I do think they can pull this off.

  4. On the heels of the CVS/Aetna deal, it remains obvious many are scrambling to create transformation in one of these last remaining frontiers called Healthcare. This industry is no different from all others where giants maintained the advantage for many decades until a “disrupter” came along changing the narrative and changing the rules and literally re-writing the book. I look forward to the new world where transparency – real transparency – are the guardrails, technology is the catalyst, and value proposition and sustain competitive advantage become the differentiator.

  5. Our healthcare needs to be disrupted, but the problem is that too many companies are making money with the current system. Therefore, only an outsider can cause this disruption.

    We are finding this on the WorkComp side as well – pushback is coming from the players that will lose when employers save.

Leave a Reply

Your email address will not be published. Required fields are marked *

Joe Paduda is the principal of Health Strategy Associates

SUBSCRIBE BY EMAIL


 

SEARCH THIS SITE

A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

DISCLAIMER

© Joe Paduda 2018. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.

ARCHIVES

Archives