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February 5, 2018

Media Coverage on Amazon Misses Point

Summary:

Many experts discount the Amazon/Berkshire Hathaway/JPMorgan announcement, but the effects could well be far-reaching.

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

Scoffers, “experts” are gleefully predicting this attempt to do something really different will fail miserably, a 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 has incentives that are NOT aligned with employers’. If the big health plan 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 more than $24,000 per family and heading inexorably higher. Unless A/B/J 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 to address healthcare costs; things like:

  • publishing prices and outcomes for specific providers, a.k.a. “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)

See also: Is Insurance Like Buying Paper Towels?  

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 Bezoses, Dimons and Buffetts 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 effort.

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About the Author

Joseph Paduda, the principal of Health Strategy Associates, is a nationally recognized expert in medical management in group health and workers’ compensation, with deep experience in pharmacy services. Paduda also leads CompPharma, a consortium of pharmacy benefit managers active in workers’ compensation.

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