Many industry experts are expressing doubts about the Amazon/Berkshire/JP Morgan healthcare initiative. While they have legitimate reasons to be skeptical, it is not a stretch to believe that these behemoths could nudge the markets towards accelerated change.
Large employers who self-insure their employee benefits have historically been at the forefront of adopting new innovations. Benefit plans that are today commonplace were pioneered by a handful of employers in the late 1980s, as they experimented with what we now call PPOs and POS plans. (Preferred Provider Organization and Point of Service plans). It now seems so old-fashioned that the freedom to go in or out of limited provider networks was once not possible.
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Similarly, benefit coverage and payment innovations like Health Reimbursement Accounts (HRAs), Flexible Spending Accounts (FSAs) and coverage of same-sex couples were first explored by self-funded employers. More recently, reimbursement for services such as telemedicine and remote monitoring, as well as the first steps towards capturing the social determinants of health are being pioneered by employers.
Over the past ten years, however, the federal government has, surprisingly, become the leading innovator in experimentation and payment reforms. The Federal Medicare program has moved an astonishing $90 to $100 billion annually into Accountable Care Organization and Bundled Payment contracts. To support these initiatives, the Centers for Medicare and Medicaid Services has been releasing massive data sets to participants, just as we are reaching a tipping point in the use of machine learning. Bucking the status quo of insurers who generally hoard data, Medicare has set the stage for innovation most don’t yet fully appreciate, as clever entrepreneurs mine the treasure trove of insights from this data.
Just as Medicare is empowering innovation with greater information transparency, AmBerMor, which we’ll call the newly announced business, comes along with the potential to pour gasoline on the growing flames of innovation being stoked by Medicare.
These organizations together are only the size of a regional health insurer, but they are unique in the skills they possess and the influence they wield. They can leverage their influence by aligning with existing alliances of self-funded employers, overcoming the inertia of previous attempts to harness this collective force.
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They could start by getting quick wins that dovetail on Medicare’s efforts. They could surely drive adoption of bundled payments, promoting the creation of what Harvard’s Michael Porter calls “Integrated Practice Units” to serve specific diseases or conditions. Amazon, Berkshire, and JPM each have hubs of employee geographic concentration. They could leverage that presence to expand bundled payments, in synch with Medicare’s recent announcement to expand the bundled payment program serving seniors. Savings could fund their new business. Amazon will surely be enticed to act as the “platform” for shopping, comparing and paying for comprehensive episodes of care. They are the first enterprise beyond governments who seek to take a small shaving off of every financial transaction in our economy. The $3 trillion healthcare industry must look incredibly appetizing to Amazon.
But beyond the risk of further market hegemony for Amazon, their unique position, in particular, holds exciting potential. They could usher in the common, open APIs that would drive us closer to the type of data interchange still missing in health care. For most of us, they are the cloud our businesses rely upon. Mostly, it has been a godsend for business – lowering the cost of launching and running businesses and allowing companies to focus on what they do best, instead of trying to run server farms of their own.
Amazon and JPM, in particular, each have deep machine learning teams that could help accelerate the development of decision support tools to radically change how we use computers to deliver diagnostic and treatment advice to patients. Data scientists are already developing primary care diagnostic centers that rely on computers, not doctors, to interpret the onslaught of “omics” and biometric data now available. They could also use the incredible telemedicine platforms being developed, like the one at in-Touch, that are already transforming advanced specialty care and delivering it in remote parts of the world. Why not in their employee’s living room?
Along with their compatriots, the new AmBerMor could also foster improvements in how quickly payments are made and reconciled for health care services. That would be a welcome change for health care providers. These three companies already operate in businesses where transparency is in full bloom. That type of transparency is almost entirely missing in American healthcare.
Understandably, they are hoping to make piles of money off their ability to nudge American health care towards the conveniences their tech frameworks offer in other industries. Their newly created enterprise, as the vehicle to express their vision, will, unfortunately, slow the impact they could otherwise make by simply team tackling fundamental changes that they would benefit from as individual companies. With a new corporation, they suddenly become competitors instead of collaborators, which changes the dynamic of interaction with almost every affected party. They should talk to Steve Case about his Revolution effort to understand the difficulties of transforming a hidebound industry before they fully commit to that approach.
Regardless of their entry strategy, there remain many reasons to be hopeful. These are three organizations generally held in high regard. Their integrity is proven. If they can avoid getting bogged down in company creation and instead seek early wins in how they collectively purchase health care services themselves, they will have created strong connective tissue into healthcare provider organizations. These connections and relationships could become the roots of a strong tree of innovations and new businesses.
This will be interesting to watch.
