Reshaping shopping habits might translate to health care
The burgeoning collaboration among 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 Hathaway CEO Warren Buffett – along with JPMorgan Chase CEO Jamie Dimon, the newly minted 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 percent 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.
Any prediction about the alliance’s plans must glean insight from Amazon’s success, which has been based on removing entire layers of product sales and distribution and adopting new ways of thinking.
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 and former senior economist on health issues for the White House Council of Economic Advisers.
One sign the new alliance is building momentum is that more companies are interested in joining them.
The Health Transformation Alliance, formed in 2015 by American Express, Macy’s, Verizon and Caterpillar, hailed the new coalition’s formation. Since its creation, the 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, the group’s CEO.
Experts say the alliance will likely focus on several key areas:
Slashing bureaucracy
Amazon has not been shy about pursuing technological innovation to transform the retail industry.
The parallels in health care could in-
clude a move toward more automation. Many areas are heading in that direction, but the industry remains labor-intensive.
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 extremely 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. Maybe that won’t change.
Then again, many people used to say they wouldn’t bank online – and now they do.
Change drug pricing, distribution
The structure of pharmaceutical manufacturing and delivery is widely seen as a contributor to high costs.
One layer of the system that remains confounding is a category of companies called pharmacy benefit managers, such as Express Scripts and CVS Health’s Caremark. Those two firms alone control about 50 percent of the category, Abraham said.
Some industry leaders blame PBMs for high drug costs, including Mylan CEO Heather Bresch, who did so after her company came under fire for hiking the price of the life-saving EpiPen.
Amazon has already signaled it might enter drug sales by launching an online pharmacy. Could it cut out the middleman again?
Promote healthy living
Chronic diseases represent about 90 percent of U.S. health care spending, according to RAND Corp., but many of those conditions could be mitigated with healthier living.
Perhaps Amazon can find technological ways to nudge people to take their medicine, eat healthier and get care when needed.
“They are masterful at understanding consumer behavior,” Andrews said.
Reshape payment to providers
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 said it’s critical to rework that formula. He anticipates that Amazon, Berkshire and JPMorgan will pursue a strategy similar to his organization’s: tying payment to quality of care, which he calls fee-for-value.
“Should we pin our hopes for a complete transformation?” asked former Federal Trade Commission chief economist Martin Gaynor, now a professor of economics and health policy at Heinz College. “No, I think that would be a mistake.”
But “I think there’s some real potential here for upside,” he said. “I don’t think we should let perfect be the enemy of the good, and if there are some things they come up with that make an impact, I am certainly all for it.”