The Amazon-Berkshire-JPMorgan Health Venture Fails to Disrupt

(Bloomberg Businessweek) -- When Amazon, Berkshire Hathaway, and JPMorgan Chase announced the formation of Haven Healthcare in January 2018 to stem the rise of employer health-care spending, the world expected big results. The mere prospect of Jeff Bezos, Warren Buffett, and Jamie Dimon joining forces so worried investors that the shares of established health insurers and pharmacy benefits managers tumbled on the news. A little more than two years later, those concerns feel like a distant memory. Rather than disrupting health care, Haven finds itself in disarray, with its top two executives departing in the past year and the venture giving few clues as to how it’s going to slow the upward march of health costs in America.

On May 13, Chief Executive Officer Atul Gawande, a surgeon, Harvard professor, and high-profile expert in the field, resigned abruptly after less than two years in the role to instead become the venture’s chairman and devote his time to efforts related to the Covid-19 pandemic. Haven has so far said little about what it’s going to do next as it searches for a new leader, fueling doubts that the venture is anywhere close to having the kind of radical plan to transform the delivery of care that it promised at its inception. “It looks like they were incrementally iterating on something that looks much more like the status quo than most people were anticipating,” says Jeff Becker, senior analyst at Forrester Research.

The Amazon-Berkshire-JPMorgan Health Venture Fails to Disrupt

What Haven has achieved so far hasn’t been earth-shaking. JPMorgan offered 30,000 workers in Arizona and Ohio—just under 20% of its U.S. staff—two plans for 2020 run by Cigna Corp. and Aetna Inc., according to sources. And Amazon.com Inc. offered its employees in Connecticut, North Carolina, Utah, and Wisconsin plans created in consultation with Haven and insurance providers. In other words, instead of taking on health insurers, Haven essentially started by working with them. “It didn’t feel like Haven early on was as focused on the key blocking and tackling,” says Allen Miller, CEO of consultant Cope Health Solutions.

“We are proud of this effort and have an excellent team in place,” JPMorgan spokesman Joe Evangelisti says. “We are in this for the long term.” A Haven spokeswoman declined to comment.

Haven said all the right things at the start, promising to “be relentless” and articulating a mission to “deliver simplified, high-quality, and transparent health care at a reasonable cost.” It’s a worthy goal: The average cost of health care was $13,087 per employee in 2019, with workers shouldering about $3,031 of that in annual paycheck deductions, according to a Willis Towers Watson survey of companies with a total of more than 10.4 million employees. Even as they redesign plans to control costs, employers expect a 4.9% rise in health-care spending in 2020, another of the firm’s surveys found.

While Gawande didn’t publicly say much about Haven’s findings, Dimon said last year that a team of about 40 people was analyzing the companies’ insurance and pharmacy plans and noted in a shareholder letter that giving employees tools to shop around for care could reduce spending.

Haven isn’t the first employer coalition to attempt to tackle health costs. The Health Transformation Alliance was formed in 2016 and includes 54 employers including American Express, IBM, and Macy’s, which among them pay for coverage of 4.5 million people in the U.S. The group is creating a marketplace of health programs for its members to use. One example: Livongo Health, which uses smart devices to monitor patients with chronic conditions, has been selected to help employees manage diabetes and weight loss. The alliance has saved members $700 million in drug spending, CEO Rob Andrews says, and is working to match patients to providers with the best outcomes. “Our biggest problem is a tug of war over data ownership,” he says. “If you can’t aggregate the data, how do you measure any of this?”

People with chronic illnesses and mental health conditions account for 90% of the country’s $3.5 trillion in annual medical spending, according to the Centers for Disease Control and Prevention. So better management of chronic ailments can result in substantial savings, but the incentives have to match up for both patients and providers. “There are a few simple levers. You have to have a network of providers that are high-quality and that are financially aligned incentive-wise,” Miller says.

Health consultants agree that to wring costs out of the system, employer plans need to ensure that doctors are being financially rewarded to lower spending. This can be done through a technique called “capitation,” in which physicians accept a set payment for managing a patient’s care and can even get bonuses for keeping medical costs down.

Another way is by pointing patients to the best-performing doctors in a given specialty to ensure better results. This isn’t easy for large, national employers to do across the country, given the amount of work it takes to identify high-performing medical groups in local markets. But at least one large employer is starting to try: Walmart Inc. is rolling out a program this year that directs employees to higher-performing doctors in Arkansas, Florida, and Texas. The retail giant is encouraging patients to use selected cardiologists, gastroenterologists, obstetricians, and primary-care doctors based on a system designed by data analytics outfit Embold Health that measures whether a given doctor’s typical care has been appropriate, effective, and cost-efficient.

Employers are “playing an increasing role in where their employees go for care,” says Bain & Co. partner Joshua Weisbrod, who works in the health-care practice. “They’re setting up specific networks of physicians and setting up quality networks.” Over the past seven years some large national employers have even started contracting with “centers of excellence,” the most trusted hospitals, to funnel expensive procedures, such as joint replacement surgeries. “They would pay for the person’s flights, they’d pay for their hotels in order for them to get the highest-quality care,” Weisbrod says. Work site clinics are also growing in popularity: Some 38% of large employers had them in 2019, according to consultant PwC, up from 27% in 2014.

The Covid-19 crisis and the potential economic fallout from a slow recovery only put more pressure on groups such as Haven to rein in spending. But employers could benefit if Americans who have flocked to telehealth consultations during the crisis embrace the practice longer term, which can save money by sparing in-person doctor visits.

The lockdown may also make some doctors more open to the idea of getting paid to manage a patient’s care for one all-in fee rather than on a fee-for-service basis. “If no one can get into your office, you’re not getting paid at all,” says Benjamin Isgur, who leads PwC’s Health Research Institute. “Physicians that are employees are getting those monthly payments.”

Despite Haven’s slow start, it would be premature to write it off. “My expectation for long term would be that they would do the same things they do with other industries, learn the ropes of administering the plan from a health insurer but take over those responsibilities,” Forrester’s Becker says, pointing out that that’s how Amazon entered into distribution and package delivery. And Amazon could, perhaps, move Haven into its own drug distribution network, cutting out pharmacy middlemen.

“They might have gotten the market overly optimistic and excited about the way in which they were going to transform and the speed in which they were going to transform,” Cope’s Miller says. But given that the stakes are so high and the potential savings so great, don’t count Haven out. “Maybe it has taken them longer than they thought.”

©2020 Bloomberg L.P.

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