USA TODAY International Edition
Amazon could transform U.S. health care
Online giant already knows how to cut out the middleman
The burgeoning collaboration between Amazon, JPMorgan Chase and Berkshire Hathaway seeking to transform the American health care system is long on ambition and short on details.
By their own admission, the companies are stepping up to the plate without much experience playing the game, which could easily translate into a swift strikeout.
But they’re already being taken seriously — and for good reason.
With two of the world’s three richest people leading the charge – Amazon CEO Jeff Bezos and Berkshire CEO Warren Buffett – as well as JPMorgan Chase CEO Jamie Dimon, the new coalition is hoping to lower health care costs for the companies’ employees and deliver significant advancements for all patients.
The challenge is monumental. Health care spending represented 17.9% of the U.S. economy in 2016, totaling about $10,348 per person, and continues to rise, according to the U.S. Centers for Medicare & Medicaid Services.
Based on their past accomplishments, how might the alliance leaders tackle what Buffett called “a hungry tapeworm on the American economy”?
Any prediction about the alliance’s plans must glean insight from Amazon’s success, which has been based on removing layers of product sales and distribution and adopting new thinking.
With retail, Bezos refused to travel the path established by business leaders. Victims that failed to adapt, such as bookstore chain Borders, are gone. Others, such as Sears, are teetering. The lesson for health care?
The system you know today won’t necessarily exist in its current form for much longer if Bezos, Buffett and Dimon get their way.
To shake up health care, “it takes bold thinking on the part of thought leaders who are willing to go out there and stake a claim that they will be able to do something grand,” said Jean Abraham, a health care administration professor at the University of Minnesota.
One sign the new alliance is building momentum is that more companies are interested in joining them.
The Health Transformation Alliance, which was formed in 2015 by American Express, Macy’s, Verizon and Caterpillar, hailed thenew coalition’s formation. Since its creation, the Health Transformation Alliance has added a few dozen members, including JPMorgan Chase and one of Berkshire’s subsidiaries, BNSF Railway.
“We are interested in exploring ways we can work together, and I trust that we will,” said Rob Andrews, CEO of the alliance.
The new company they plan to establish will not seek to profit from health care, unlike the industry’s leading forprofit insurers, drug makers and many health care providers.
Experts say the alliance will likely focus on several key areas:
Slashing bureaucracy
What if the only way to lower health care costs is to slash the number of people in the industry — or at least reduce the rate of job growth?
The industry employed about 12.4 million people as of 2015, according to the Bureau of Labor Statistics. That’s eight times more jobs than the total U.S. workforce of Walmart.
Amazon has not been shy about pursuing technological innovation to transform the retail industry, gadgetry, Web services and shipping.
The parallels in health care could include a move toward more automation. Data input, automated health care tests, lab work and food preparation are key places where automated equipment and artificial intelligence could deliver savings.
Expanding telemedicine
In an age when people store sensitive personal data online, it’s remarkable that digital communication to help doctors and nurses diagnose and treat ailments remotely, known as telemedicine, remains uncommon.
Many people simply still want to see their doctors in person.
With expanded telemedicine, health care providers could share physicians and nurse practitioners, potentially lowering costs.
Transforming drug pricing
The complex nature of pharmaceutical manufacturing and delivery is seen as a contributor to high costs.
One layer of the system that remains confounding is a category of companies called pharmacy benefit managers, or PBMs, such as Express Scripts and CVS Health’s Caremark.
Those two firms alone control about 50% of the category, the University of Minnesota’s Abraham says.
As middlemen, PBMs handle drug distribution. Some industry leaders blame PBMs for high drug costs.
Amazon has already signaled it may launch an online pharmacy. Could it cut out the middleman again?
Reshaping payment
The way health care is structured today, most providers get paid for the amount of services they provide, not necessarily the success of care.
Andrews says that it’s critical to rework that formula.
“Having three companies with their firepower and brainpower pulling on our side of the rope is a good thing.”