Look! Out in the distance! What’s that creature that’s destroying everything in its path? Why, it’s the scariest three-headed monster this side of Cerberus! It’s… it’s… it’s BerkshAmazMorgan! Will any of us be safe from this dreaded, rampaging beast?
In announcing their intention to join forces and form an independent company “to address healthcare for their U.S. employees,” Berkshire Hathaway, Amazon and JPMorgan Chase left many U.S. healthcare executives and investors with visions of Cerberus, the three-headed monster of Greek mythology fame, trampling our nation’s long-established healthcare system. It also set off a market firestorm that removed billions of dollars in equity value from healthcare companies across all major industry sectors. But are investors right to be worried?
In this post, we’ll delve into how this new entity might leverage the partner companies’ individual strengths to change the healthcare picture for their employees. We’ll prognosticate on what the collaboration likely will do—and also what it very likely won’t try to do—while still operating within the constraints of our complex healthcare landscape. The second post in this two-part series will consider what this collaboration could mean for U.S. healthcare overall: How will the rest of the healthcare ecosystem react? What could U.S. healthcare look like in the future if this corporatization trend continues? And what should pharmaceutical and medical technology companies do to prepare?
As for what BerkshAmazMorgan might do, the collaboration has offered up very few details at this point, aside from a few clues about developing tech solutions that focus on quality and cost, and expanding the employers’ wellness models to keep employees healthier. However, given the dynamics of the companies and leaders involved, and the prestige and wealth of these organizations, there are four key attributes that could serve as signposts of where this healthcare collaboration might head. First, all three of these companies are relentlessly (and famously) focused on cost and value. Second, they all tend to play the long game. For example, acquiring under-valued companies to operate, as Berkshire Hathaway does, is an inherently long-range strategy.
Third, Amazon brings world-leading technology capabilities to the partnership. Fourth, each organization’s leader is prominent on the public stage. Buffett and Amazon’s Jeff Bezos are household names, and JPMorgan Chairman and CEO Jamie Dimon is, too—at least among business news consumers. With those attributes in mind, it’s likely that the BerkshAmazMorgan collaboration will focus on:
1. Bringing healthcare in-house: With lots of employees at single locations, these companies could introduce a new model for primary and pediatric care—one that leverages existing networks of healthcare providers, negotiates cost-savings rates, and welcomes employees and their dependents to on-site care. To address the needs of employees in smaller satellite locations, the companies could fund or build remote care centers complete with 24/7 telehealth care providers available to address concerns ranging from a baby’s fever to a concerning mole.
2. Rethinking the complex pricing and payment patchwork: Instead of a single system for establishing healthcare prices and payments, the U.S. has a complex patchwork in which the price of a particular service and the patients’ out-of-pocket responsibilities may differ based on where a service is provided or a drug is consumed. And the different financial incentives and reimbursement structures across delivery settings distort the ability to make decisions and drive up costs without necessarily improving care quality and outcomes, while giving patients few useful tools or avenues to seek lower-cost and more efficient solutions.
In building a health benefit from the ground up, the tech-savvy venture may well seek to design a capability that solves the payment and pricing burden. Imagine if a patient seeking an MRI could open a smartphone application to see the prices for her exact procedure at every facility within 10 miles of her home. Combined with an out-of-pocket benefit structure that encourages her to receive treatment at one of the lower-cost facilities, the savings would reach from employer to patient.
3. Realizing value with timely interventions: Better preventive care has long been touted as a means to improve health and save money. On its face, the concept is appealing: An ounce of prevention is worth a pound of cure, as the saying goes. Even though studies show few savings opportunities from typical preventive care activities, some targeted and timely interventions have been shown to improve outcomes and save significant sums of money. For example, patients who don’t take their blood pressure medication (which often costs pennies per day) are at significant risk of cardiac events that bring both direct healthcare costs and indirect costs through work absenteeism for treatment or family care. A drug adherence program could be well worth the effort.
While, in principle, payers have the information available to identify these sorts of high-risk situations, there are two gaps that limit the effectiveness of potential interventions: messy data infrastructures (owing to legacy systems cobbled together through various corporate mergers over the years) and insufficient customer engagement. These gaps prevent payers from consistently and accurately compiling basic patient information, and producing clear communications for their customers. In a healthcare environment in which men receive mail reminders to schedule their mammograms, micro-targeting of interventions seems far off.
A venture that can build the right data infrastructure for accuracy, apply high-quality predictive analytics to identify risks, and then engage with the patient in a targeted and meaningful way has a chance of being significantly more successful at driving high-value behavior changes than today’s healthcare incumbents.
In their corporatized healthcare system, Berkshire Hathaway, Amazon and JPMorgan Chase might be able to accomplish this. They’d “own” the patient from employment to healthcare coverage to care delivery and back again. They could apply their tech prowess to launch a patient wellness program that incentivizes employees for healthful behaviors. Maybe employees would get a Whole Foods bonus for buying 1% milk. Maybe wearables would play a part, allowing the employers to track and incentivize employee fitness.
Also, with employers potentially supplanting payers in the healthcare equation, the employers could take steps to try to control not just the cost of employees’ healthcare but the costs associated with lost productivity due to employees’ health-related absences. The employers could hold far more sway in influencing healthful behaviors than payers can.
JPMorgan Chase is already there. As Dimon recently told Business Insider: “JPMorgan Chase already buys $1.5 billion of medical, and we self-insure. Think of this: We’re already the insurance company, we’re already making these decisions, and we simply want do a better job.” The financial services firm offers lower deductibles for healthy lifestyles. “If you do your wellness stuff now, if you take care of yourself, if you don’t smoke, we give you benefits and the deductible effectively goes to zero,” he told Business Insider. “So we’ve kind of really made it easier for folks to get proper medical care.
4. Providing the right resources (human and machine): As healthcare technology evolves, adoption is hindered by both the opposition of powerful provider incumbents and one of the most frustrating challenges in healthcare innovation today: determining how to pay for innovations that don’t fit into 20th-century boxes like “consult,” “drug” or “procedure” where billing codes and processes are already well defined.
Though much of healthcare continues to be delivered through highly trained, expensive physicians, lower-cost options for basic treatments like retail clinics have emerged in recent years, frequently over the objections and organized lobbying efforts of physician associations. Those battles are just a trial run for the significantly greater disruptive potential of artificial intelligence to supplant the role of physicians in areas like radiology and pathology. A group of savvy employers with a willingness to adopt newer technology solutions and the public voice to stand against regulatory policies that enshrine current practices can realize the promise of these innovations to bring better care and lower costs.
Meanwhile, creating a modern health benefit untethered to the old ways of defining payment terms can build the flexibility required to pay appropriately for any treatment whether it’s a knee replacement, a pill for diabetes, software that diagnoses a bone fracture, a mobile application that provides cognitive behavioral therapy, or something that has not been dreamed up yet.
It’ll be interesting to see if any of our prognostications hit the mark, but the point here is that the corporatization trend has the potential to spur the reinvention of U.S. healthcare far beyond the walls of Berkshire Hathaway’s or Amazon’s or JPMorgan Chase’s HQ. It could influence how healthcare is accessed, priced and paid for well beyond the confines of corporate America, with this recently announced collaboration just one of many beastly disruptions to come.