What Happens When Three Giants Come Together to Fix Healthcare?

Isobar Execs Across the Nation React

A few weeks ago Jeff Bezos, Warren Buffett and Jamie Dimon announced plans to try to address the health care problem our nation is currently facing.  We asked around to find out what Isobar execs thought of the news and how it might actually play out and, surprisingly, the responses weren’t all the same.  Check out our different takes on the big news:

Colt Whitall, Client Partner

It further demonstrates what we already know which is that benefits managers (employers) want to shake up the healthcare establishment. They are tired of paying health plans to move money around without really driving down the cost and increasing the quality of care. The health plans mainly just focus on negotiating lower unit cost. Their efforts to improve population health and quality have not been all that effective. What we need is a new model where the employer, employee and provider align around both cost and quality. The right information has to be inserted into decision making right as it happens. The health plans can either facilitate that or they will eventually have to get out of the way because someone else will do it. And all of this has to be packaged in a way that the benefits manager or employer can see the value they are getting. Moreover, the employee (the consumer or patient) should be able to interact with the system much more conveniently, with transparency to both cost and quality. I think this calls for a different type of organization. A hybrid between provider networks, population health companies and health plans. Facilitated by vastly improved technology platforms.

Tim Dunn, VP Director of Strategy

POV from an ‘English-guy-who-lives-in-Canada’

Amazon’s general business model is wading into sectors that are riven with middle-men, waste, poor logistics, consumer dissatisfaction and weak use of data; then simplifying them, expediting process, and aggressively attacking end-provider margins. It can be argued that US Health fits this description better than any other sector there is. With NPS ratings hanging in the low teens for most plans, and both consumers and employers seeing this invariably as a least-worst-plan decision, it’s ripe for disruption on every front.

The US has poorer health outcomes per dollar spent than almost any other developed nation, and vast cohorts of provider and health plan middle-management should now view themselves as being in Amazon’s crosshairs as the main reason for this. While the combined muscle of the three players involved in the new venture probably supplies the first genuine threat to the Plans’ business model, what they may be more worried about is Amazon’s other skills:

  • Behavior change has always been key. Amazon has made subscription and repeat purchase a core strength and have de-frictioned the process in every sector they enter
  • Audience – with a vast addressable base of 90m paying subscribers already (increasing by ~50% YOY!) they have a huge and incented base to offer to. While the employer space has challenges, there is very likely a way to carry across the consumer side benefit into it.
  • Brand – With an NPS over 4x that of the average Plan, it’s fair to say that an Amazon-branded and delivered plan would see the consumer market signing up in droves, even if initially the care offering is relatively similar. With that kind of leverage as a payer, Amazon could quickly start to turn the screw on providers to get to ‘start doing things the Amazon way,’ both in terms of customer experience, and of course in terms of cost.

Marv Perel, VP, Business Development

When the ACA was started, I believed the changing healthcare landscape would create a more fertile ground for hospital-sponsored health plans (Provider Sponsored Health Plans PSHP). The hospital and its providers own the “quality” and “availability” of healthcare. If they could only get their act together on controlling costs. The Integrated Delivery Network would be a competitive threat to the insurance plans.  There are a few successful IDN’s but it took them 10 years to get there, such as Kaiser and UPMC. When UPMC entered the insurance business, Highmark BCBS had to go and buy a hospital – Allegheny Health to stay in business. Highmark is losing many health plan members.  UPMC continues to grow entering over 30 counties in PA. They won the best Medicare Advantage Plan in PA in USNews reporting. But, since 2010, only four out of 42 PSHP’s are profitable, two plans are up for sale and five have gone out of business. Given the uncertainty of ACA, the elimination of the individual mandate, reduced insurance subsidies and cuts in Medicaid, the chances of success for a PSHP are not very high and the future doesn’t look great.

I think that there is little chance Amazon, JPMorgan and Berkshire can organize, co-lead, agree on funding allocation, and develop a viable product in sufficient time. They have too many biases, no distribution channel, and the difficulty of penetrating the dominant group market with all of the state DOI regulations is too overwhelming. They have zero vertical capability or organizational experience, just a few execs who are hell bent on innovation but can’t manage it. What I mean about the distribution channel is the negotiated agreements with all the providers. It’s extremely complex.

What is changing is the consumer involvement in health. 60% of Americans do not have a Primary Care Physician (PCP).  In the future, we can expect to see healthcare become a consumer product — not an insurance product. Bertolini stated that his vision is to have a Aetna doctor office in each of the 10K CVS stores and become the “genius bar” of healthcare. Google it. It’s only a matter of time before Walgreens or Walmart buy Humana, Cigna or Molina.

The consumer will demand a fast, flawless digital experience in health. Whoever delivers this first will capture market share. On our end, this  puts Isobar in the prime position of bringing its experience for both digital marketing and IT to Health. Health execs want to hear how we can help them keep their members/patients and grow their members/patients. The pressure is on everyone. UHG is buying physician practices and has their own PBM to become the US largest healthcare one stop shop conglomerate. CVS and Amazon have a different idea. The poor doc who is the PCP is the key because quality, availability and cost begin with him and no one is talking to him.

However, I cheer Amazon, Berkshire and JPMorgan on and hopefully will not have to listen the deafening sound of crickets if nothing comes of it. At least they’re trying!

While it may be months, or years, until we see this continue to play out, it definitely has us thinking.  Check back to see what we think as the story develops.