Media coverage of Amazon/Berkshire/JPMorgan misses the point.

The coverage of the JPMorgan/Amazon/Berkshire Hathaway healthcare initiative has been universal, breathless, and mostly superficial.

Scoffers, “experts” are gleefully predicting this attempt to do something really different will fail miserably, victim of ignorance and hubris. While there are no guarantees, these naysayers ignore:

  • the three CEOS and their staff are brilliant, powerful, have almost unlimited resources, and are very, very cognizant of the difficulties they face. These are as far from idealistic newbies as one could get.
  • the “competition” is pretty lousy, hasn’t delivered, and their incentives are NOT aligned with employers’. If the big healthplan companies could have figured this out on their own, you wouldn’t be reading this.  It’s not like A/B/J are taking on Apple, Salesforce, or the old GE.
  • the financial incentives are overwhelming; healthcare costs are over $24,000 per family and heading inexorably higher. Unless these companies reduce and reverse this trend, they’ll have a lot less cash for future investments.

Many are also talking about “initiatives” that are little more than tweaks around the edges; things like:

  • publishing prices and outcomes for specific providers aka “transparency”
    My view – research clearly demonstrates consumers don’t pay attention to this information, so there’s no point
  • using technology to monitor health conditions and prompt treatment/compliance
    My view – lots of other companies are already doing this, and this is by no means transformational
  • use buying power to negotiate prices
    My view – it’s about a lot more than price, it’s about value.

Here’s a few things A/B/J may end up doing.

  1. Own their own healthcare delivery assets.
    My view – Insourcing primary care, tying it all together with technology, and owning a centralized best-of-breed tertiary care delivery center would allow for vastly better care, lower patient hassle, and cost control.
  2. Buy healthcare on the basis of employee productivity
    My view – Healthcare is perhaps the only purchase organizations make where there is no consideration of value – of what they get for their dollars. To the Bezos’, Dimons, and Buffets of the world, this is nonsensical at best. They will push for value-based care, defined as employee productivity.
  3. Build their own generic drug manufacturer
    My view – No-brainer.
  4. Allow employees to go to any primary care provider they want, but require them to go to Centers of Excellence for treatment of conditions that are high cost with high outcome variability.
    My view – No brainer.

I’d also expect many more large employers will join the coalition, for the simple reason that they have no other choice.

What does this mean for you?

Do not discount this.

 

11 thoughts on “Media coverage of Amazon/Berkshire/JPMorgan misses the point.

  1. As to —“build their own generic drug manufacturer;
    My view – No-brainer” —watch for possible acquisition of Canadian-based global generic pharma giant Apotex whose founder and controlling shareholder Barry Sherman and his wife were found dead in a suspected targeted murdered in their Toronto mansion in December. The turmoil at Apotex now also includes the sudden exit of the CEO in connection with charges of theft of Teva trade secrets.

  2. I agree Joe, this didn’t get the coverage it deserves. This has the potential to be the long overdue disruption in healthcare delivery. Sure, there are no guarantees. But if anyone can eliminate waste and reduce cost in a delivery mechanism, Bezos can. I have daily free deliveries that prove it! Hopefully the media will stay on it.

  3. What about A/B/J buy Multiplan for $10bn, retire its debt and merely reinvest its $700 million or so in annual earnings back into the system? That seems like low hanging fruit to me. Perhaps they could, over time, even raise the veil on the contract “discounts” PPOs provide?

  4. Another great post Joe. You are on fire lately….

    You are correct in that they will have victories in decreasing costs. They are too big not to get their way on some of these items….

    My question is “do you think that people will be healthier?”

    My take is that they will turn what is now a cost center to a profit center.

    They will struggle to improve the health of individuals. Hope I am wrong……

    • Thanks Jim.

      I’m more positive; by definition these employers WANT healthier employees and families. They can be more productive, miss less work, are happier and would be more loyal to their employers.

      In reality, A/B/J have a lot more incentive and motivation to improve employee health than do UHC, Aetna, or Anthem.

      • Amen on all levels! My brain is still “popping” with thoughts on the evolution normals to come for our industry, as a result of this new declaration; coupled with the other profound impact of the “Gig” economy quickly on track to be the majority (or at least half) of the American workforce. Mind blown!

  5. So far, the prognosticators are still mainly talking about incremental shifts in care delivery and plan design through already existing structures. Cost savings through better process and efficiency in those areas are definitely low hanging fruit. But we should watch carefully to their integration of the preventative disciplines across health plan, comp, disability silos that have proven to drive order of magnitude cost reductions for large employers and health/comp/DM systems alike. It’s hard to fathom a “re-engineering” of a health delivery system without careful attention to this. “Watch this space” as the pundits say…..

  6. Agree in all respects but one – the last part about “any primary care provider they want”. First, there’s a conflict there with your first bullet. More importantly, Kaiser Permanente and a few of the other remaining staff model HMOs have clearly shown that their type of integration is where the value is. You can say it “restricts” choice, but they regularly win lots of quality awards, deservedly imo. And remember that the best performing Medicare ACO plans were the ones that solved the care transition problem; vertical integration a la Kaiser gets you a long ways down that road. These 3 employers have lots of employees, but they’re not distributed randomly – several centers with employed primary care docs plus telemed would cover everything nicely, and then add in all your other suggestions. Not what everyone wants to hear perhaps, and it doesn’t solve every problem in healthcare, but it’s where I’d go.

    • Dr Deitz – thanks for the comment and observation. I should have been more precise; my views on what the consortium might do were different ways they might address the overall problem and weren’t intended to be one solution.

      I imagine they will try several models, some of which may appear to be in conflict, to see what works where and why, and build out from there.

  7. New reimbursement strategies that pay more to the primary care Docs who improve health status would change everything. You get what your pay for. Our current “disease treatment hodge-podge” is getting exactly what it is paying for- lots of procedures and encounters.
    Rolling WC, an American anachronism, back into the usual health care is another possible big win, but the barriers are formidable.
    Thanks Joe

  8. Joe,
    Might be interesting If consideration of this plan were one of the criteria for selection of HQ2.

    Excellent take on the news. I may be biased, but “my take” is any real innovation will be employer driven.

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