Can three titans of modern industry revolutionize your health care?
By Ford Vox, CNN
(CNN) - Can three titans of modern industry bend health care away from its ruinous path of disorganization and waste, toward the kind of efficiencies these men regularly achieve in their core businesses? The announcement Tuesday that Amazon, Berkshire Hathaway, and JPMorgan Chase are joining forces to create an independent company that will provide their US workers with a better health care option is dangling the possibility of a major disruption in this complex market.
The question is: Can they deliver on the mounting hype? These three companies are certainly well positioned to make an important contribution. After all, each holds pieces of health care's puzzle.
Jeff Bezos's plans to enter health care in a big way have been the subject of widespread chatter for years now, coming to high resolution last year as Amazon set the pharmacy industry in its sights. Amazon is building up its pharmacy expertise and forming relationships that make it clear the company intends to compete with the likes of Walgreens and CVS to offer direct consumer medication fulfillments over its robust commerce platform.
Warren Buffett's Berkshire Hathaway group's distributed businesses include companies selling all types of insurance, ranging from GEICO auto insurance to worker's compensation and even medical malpractice coverage. Buffett's already figured out a way to profit from the ups and downs of health care delivery: his health insurance reaps profits when things go smoothly, and because care sometimes go awry, providers always endure the risk of lawsuits, keeping their money flowing into his professional liability insurance.
As for Jamie Dimon, his company, JPMorgan Chase, is a banking behemoth that already knows the finances of the health care industry in extraordinary detail, serving clients at all levels of the health care industry. Some people in key positions at Chase come from health care companies, and their expertise will be vital for financing the kinds of enterprises they once operated.
The three men will focus their vaguely described health care enterprise on their own employees -- a population totaling 1.2 million, representing enough diversity of health care needs that any cost-savings they can eke out should be applicable to the rest of us.
But Amazon, with the most employees (540,000 and growing) and arguably the best track record for technological innovation (they've already disrupted multiple industries), is probably the most important piece of the puzzle. I talked with a Seattle-based physician who says whenever she meets a management-level Amazon employee, whether around town or in the hospital, they predictably begin to ask her questions about her "process" and how she goes about her work day -- topics nobody else asks her about. She's long thought something big was up. Of course she's right.
Amazon already has wholesale pharmacy licenses in multiple states, and it's already selling professional-level medical supplies via its business-to-business operation. Not so long ago, Amazon was dabbling in drug products in a dangerous way, selling prescription drugs without a prescription via its marketplace, something I documented in an investigative report.
The company has since cleaned up its act considerably, beginning with a wave of enforcement actions on third parties that use its marketplace to sell health products.
Health care is a field ensnared in regulations that have long hobbled big dreams. But Amazon, Berkshire, and Chase have the potential to build out a new health care model from the ground up, potentially delivering means of access and communication between providers and patients never seen before.
To date, the most innovative schemes touted as reshaping health care simply rearrange financial incentives amongst providers. Whether bundled payments, pay-for-performance, or accountable care organizations, these structures and policies are all about having providers and hospital systems become better resource and money managers, sometimes even playing the role of insurer by attempting to hold on to the dimes they don't spend on health care. Generally speaking, these approaches aren't working, and I suspect that's because you can only do so much playing around with profit margins.
That's why the most interesting aspect of the trio's press release is the promise that whatever health care innovation they deliver will be "free from profit-making incentives and constraints."
It'll take such structural change to get costs down. Even the world's most talented doctor is but a cog in a much larger machine over which she has no real control.
I hope we'll see something more than Alexa scheduling doctor's appointments, or employee discounts for healthier choices at Amazon-owned Whole Foods. From my perspective as a practitioner, much of the waste in health care results from inaccessible information, poor communication between providers, vast swaths of time wasted on documentation rather than delivering care, and extra tests and services ordered more to satisfy perceptions rather what the health care professional actually believes is necessary or effective.
But if some of today's market leaders in commerce, insurance, and finance can really steer this ship, they're going to need more than slick apps: they'll have to change the way everybody in health care goes about their work day.
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