Surgeon Adds C-Suite to Rounds in Bezos-Buffett-Dimon Venture

(Bloomberg) -- The Harvard surgeon and author picked to run a heralded new health-care venture has compared the U.S. medical system to a car built with Porsche brakes, a Ferrari engine and a BMW chassis.

“You put it all together and what do you get?” Atul Gawande asked the audience at a 2012 TED conference. “A very expensive pile of junk that does not go anywhere.”

Now the 52-year-old physician is in the driver’s seat.

Gawande was chosen Wednesday to run a startup company that aims to improve medical care and lower health costs for the more than 1 million employees of Amazon.com Inc., JPMorgan Chase & Co. and Berkshire Hathaway Inc. Whether the venture runs more smoothly than his rhetorical car will depend on whether he can bring down soaring costs, a problem he’s called “the deepest crisis of medicine’s existence.”

While Gawande has left a long trail of magazine articles and speeches that offer clues to how he might run the company, he’s known more as an expert on hospital quality and Medicare costs than as someone who grasps what it takes to manage a giant employee health-benefit program.

“He is widely respected and considered to be a voice for change,” said Jim Winkler, chief innovation officer at consultant Aon Plc’s health unit. “However, he doesn’t have a ton of business-building experience, so the team he brings in will be critical.”

Berkshire Challenge

The key question for Gawande is “what can he do differently, that doesn’t replicate past failures?” wrote Amitabh Chandra, a health economist at Harvard Kennedy School of Government, in one of a series of Twitter posts on Wednesday.

“The challenges of improving health care for Amazon employees in Lexington, KY are quite different than improving them for JP Morgan bankers in NYC,” Chandra wrote.

The unusually decentralized structure of one of the companies, Berkshire Hathaway, could pose a particular challenge for the new CEO. Warren Buffett has run his diverse holding company for the most part without functions such as human resources being shared among the different businesses. The corporate office, which employs just 26 individuals out of the more than 377,000 people at Berkshire, has “minimal involvement” with the day-to-day activities of the subsidiaries.

Analysts said the choice of a big-picture thinker like Gawande suggests that the three companies won’t look at drug costs in isolation, but rather more broadly at the overall health-care system. Investors in drug-supply chain companies had expressed concern that the industry giants would disrupt the pharmaceutical industry.

Gawande wrote a 2009 book, “The Checklist Manifesto,” that made the case that if hospitals were to increase their use of simple checklists before complex procedures, it would save numerous lives -- in much the same way that pilot checklists have made commercial aviation safer. He also was founder of Ariadne Labs, which aims to boost quality through checklists and improving end-of-life care.

Award-Winning Article

Among health-cost experts, Gawande is most famous for a 2009 New Yorker story, “The Cost Conundrum,” that examined why some parts of the country spend far more on health care than others.

That story, though, focused on the government-funded Medicare program for the elderly and disabled, not the corporate employee health-benefits programs that he will be in charge of improving now.

The article, which won a National Magazine Award, examined why the federal Medicare program spent $15,000 in 2006 for patients in McAllen, Texas -- almost twice the national average.

After talking to doctors and visiting hospitals around McAllen, he came to this conclusion: “The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.” That included too many tests, too many surgeries and too many visits with providers.

Gawande was announced Wednesday to head the new venture after being picked by Buffett, Amazon’s Jeff Bezos and JPMorgan’s Jamie Dimon. Ariadne Labs said in a statement that he would continue to practice surgery at Brigham and Women’s Hospital.

Gawande’s impeccable reputation in the medical field should help him recruit other path-breaking experts to the initiative, said Peter Neupert, a board member with health-care diagnostics company Laboratory Corp. of America Holdings.

“He is the type of thoughtful and inspirational leader they need to attract great talent,” Neupert said. “Prospects want confidence that they are going to work on a top team, and he has the ‘brand’ to do that.”

--With assistance from Zachary Tracer, Spencer Soper and Katherine Chiglinsky.

To contact the reporter on this story: Robert Langreth in New York at rlangreth@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Mark Schoifet, Timothy Annett

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