Despite high-hopes and much fanfare, the collaboration failed to transform healthcare and lower healthcare costs for everyday Americans as many anticipated it would
Another anticipated “disruptor” to today’s healthcare market is closing its doors. Three years ago, in 2018, Amazon (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK.A), and JPMorgan Chase (NYSE:JPM) announced a joint venture to enter into the healthcare market and use their combined market leverage to secure lower-cost healthcare for their 1.2 million employees. At that time, healthcare business experts suggested Haven Healthcare (Haven), as the non-profit joint venture was named, might become a transformative healthcare model other companies could follow.
But that was not to be. In January, the companies announced Haven would close its doors in February. Why did it fail to accomplish its goals? And how will its demise affect the healthcare benefits provided to the thousands of people employed at these companies? The answers to these questions should be of interest to pathologists and medical laboratory managers who want to position their clinical labs as high-quality, added-value contributors to patient care.
One Expert’s Opinion on Demise of Haven Healthcare
In an article he penned for Harvard Business Review, titled, “Why Haven Healthcare Failed,” John S. Toussaint MD, an internist, former healthcare CEO, and founder and Executive Chairman of Catalysis, a non-profit healthcare educational institute, outlined three major reasons for Haven’s closing:
Insufficient Market Power: According to Toussaint, the three companies simply did not have the market power to dominate a large enough share of any local market. In addition, with a combined 1.2 million employees, the companies did not have enough employees to incentivize providers into lowering prices.
Perverse Incentives: In the current healthcare environment, US insurers and providers make huge profits from treating disease. This means there is little incentive to keep people out of hospitals or accept the risks associated with fixed-price capitation.
Poor Timing: The COVID-19 pandemic forced providers to focus on and manage the crisis, which, in turn, caused them to postpone or even cancel elective and non-emergency medical procedures, resulting in financial hits and the unwillingness to take on the uncertainty associated with new, possibly dubious arrangements.
Why Is It Hard to Disrupt Healthcare?
Jeff Becker, Principal Analyst, Healthcare, CB Insights, told Quartz, “Haven is yet another cautionary tale to outsiders [who] hope to disrupt the industry that their ambition is likely unrealistic and that solving key industry problems proves to be far more difficult than most anticipate.”
Other experts point to a vague plan, an overly ambitious strategy, difficulty retaining top talent, a lack of visible progress, and the divergence of interests between the three companies as potential reasons for Haven’s demise, Quartz reported.
“Haven’s decision to cease operations proves just how hard it is to disrupt the healthcare system in America,” Robert Andrews, JD (above), a former US Congressman for the state of New Jersey, and CEO of Health Transformation Alliance, told Forbes. “Even three of the largest and most influential employers in the country found the challenge a very steep one. We share with Haven’s founders the conviction that employer sponsorship is key.” (Photo copyright: United States House of Representatives.)
Did Haven Healthcare Demonstrate Any Innovation?
It is unclear what the collaboration accomplished or what exactly led to its demise, but it does seem that some positive developments were created through the venture.
According to Forbes, Haven Healthcare stated on its now-defunct website, “In the past three years, Haven explored a wide range of healthcare solutions, as well as piloted new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable. Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase and Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of their own employee populations.”
At least one of the three partners may have anticipated Haven’s closure and taken proactive steps. In January of 2020, Dark Daily reported that Amazon Care launched a pilot program which offers virtual primary care to its Seattle employees, and features both telehealth and in-home care services, including clinical laboratory testing.
At that time, we noted the similarities with Haven Healthcare.
And in “Amazon Building Labs to Do COVID-19 Testing,” Dark Daily’s sister publication The Dark Report covered how, as a result of the COVID-19 pandemic, Amazon built and now operates multiple clinical laboratories for testing its employees.
Amazon has a history of entering an industry and successfully disrupting it. Its willingness to build lab testing facilities to do its own COVID-19 testing may be the first step in a multi-year strategy to enter the clinical laboratory industry and disrupt it by offering better quality lab testing services at a cheaper price.
Thus, it is likely these medical laboratories will continue to deliver clinical testing even after the pandemic has officially ended and will compete with local independent clinical laboratories.
Experts say Amazon could be planning a roll-out of healthcare services to its Prime members and others
Clinical laboratory leaders will want to note that the Telehealth and home healthcare industries have expanded with the launch of Amazon Care, a virtual medical clinic and home care services program from global retailer Amazon.com, Inc. (NASDAQ:AMZN).
Amazon is piloting Amazon Care as a benefit for its 53,000
Seattle-area employees and their families, according to published reports. Could
this indicate the world’s largest online retailer is moving into the primary
care space? If so, clinical laboratory leaders will want to follow this
development closely, because the program will need clinical laboratory support.
Amazon has successfully disrupted multiple industries in its
corporate life and some experts speculate Amazon may be using its own employees
to design a new medical delivery model for national roll-out.
The S&P report goes on to state, “In as little as five years, the Seattle-based e-commerce company could interlink its system of capabilities and assets to launch various healthcare products, insurance plans, virtual care services, and digital health monitoring to a broader population. The rollout would be part of a larger plan by Amazon to deliver convenient, cost-effective access to care and medications across the U.S., likely tied to Amazon’s Prime membership program, according to experts.”
Modern Healthcare reported that Amazon Care services include telemedicine and home visits to employees enrolled in an Amazon health insurance plan.
Experts contacted by S&P Global Market Intelligence
suggest Amazon:
Plans a “suite of customized health plans and
services for businesses and consumers;”
May offer health services to its five million
seller business and more than 100 million Amazon Prime members; and
Sees healthcare as a growing market and wants
greater involvement in it.
How Amazon Care Works
Amazon Care offers online, virtual care through a
downloadable mobile device application (app) as well as in-person home care for
certain medical needs, such as:
Colds, allergies, infections, and minor injury;
Preventative consults, vaccines, and lab tests;
Sexual health services; and
General health inquiries.
Becker’s Hospital Review reported that once a participant downloads the Amazon Care app to a smartphone or tablet and signs up for the program, he or she can:
Communicate with healthcare providers via text
or video;
Plan personal visits if needed;
Set payment methods in their user profile; and
Receive a “potential diagnosis” and treatment
plan.
The graphic above is taken from the S&P Global Market Intelligence report, which states, “Amazon is one of several tech firms vying for a share of the healthcare market where national spending is expected to reach $6.0 trillion by 2027, up from $3.6 trillion in 2018, according to the Centers for Medicare and Medicaid Services.” (Graphic copyright: S&P Global Market Intelligence.)
“The service eliminates travel and wait time, connecting employees and their family members to a physician or nurse practitioner through live chat or voice,” an Amazon spokesperson told CNBC, “with the option for in-person follow-up services from a registered nurse ranging from immunizations to instant strep throat detection.”
The “mobile health nurse” may also collect clinical laboratory
specimens, the Verge
reported.
Amazon has partnered with Oasis Medical Group, a family primary care practice in Seattle, to provide healthcare services for Amazon Care patients.
Paving the Way to Amazon Care
The Healthcare Financial Management Association (HFMA) compares Amazon’s piloting of Amazon Care to similar healthcare projects that studied population health by first involving employee health plans.
HFMA’s analysis noted that Amazon Care is similar to Haven, a patient advocate organization based in Boston and New York that was created in 2018 by Amazon, JPMorgan Chase, and Berkshire Hathaway to lower healthcare costs and improve outcomes for participating companies.
Tech Crunch reported that in 2018 Amazon also purchased PillPack for nearly $1 billion and integrated its prescription delivery services into Amazon Care.
More recently, Amazon acquired Health Navigator and plans to bring those offerings to Amazon Care as well, CNBC reported. Founded in 2014, Health Navigator provides caregivers with symptom-checking tools that enable remote diagnoses.
Should Telemedicine Firms Be Nervous?
Dark Daily recently reported on Doctor on Demand’s launch of its own virtual healthcare telehealth platform called Synapse. The e-briefing also covered Doctor on Demand’s partnership with Humana (NYSE:HUM) to provide virtual primary care services to the insurer’s health plan members, including online doctor visits at no charge and standard medical laboratory tests for a $5 copayment.
So, should telemedicine firms be concerned about Amazon competing in their marketplace? Business Insider predicts Amazon will need time to beef up its medical resources to serve people online and in-person through Amazon Care.
But that’s the point of Amazon’s pilot, isn’t it? What comes
from it will be interesting to watch.
“Meanwhile, telemedicine firms can ink strategic
partnerships and strengthen their existing payer relationships to safeguard
against Amazon’s surge into the space,” Business Insider advised.
It remains to be seen how medical laboratory testing and reports
would fit into an expanded Amazon Care health network. Or, how clinical laboratories
will get “in-network” with Amazon Care, as it grows to serve customers beyond
Amazon’s employees.
As Dark Daily recently advised, medical laboratory leaders will want to ensure their lab’s inclusion in virtual care networks, which someday may include Amazon Care.
By negotiating directly with healthcare systems employers garner cost savings, while creating opportunities for clinical laboratories willing to be flexible about claims and reimbursement
It’s a healthcare trend called “direct contracting” and it is the latest method that self-insuring employers are using to better manage the cost of their health benefits plan, while maintaining access and quality for their employees. The interesting thing about direct contracting is that it might be a strategy that could work for innovative regional clinical laboratories to negotiate a place for themselves in that employer’s provider network.
Healthcare costs continue to skyrocket in the United States, and in response, many large companies are providing healthcare services to their employees by working directly with health networks and other organizations, instead of using third-party administrators (TPAs) of insurance plans to create healthcare benefits packages for their employees.
This can provide clinical laboratories and anatomic pathology groups with opportunities to create revenue and further outreach into their communities. Astute lab leaders may want to consider meeting with the decision-makers at large companies in their areas and develop strategies for working together directly. Human resources managers may be interested in the benefits of working directly with medical laboratories.
Employers Already Engaged with Health Networks for Provider Services
Self-insuring is not a new concept. In a direct contracting relationship, the employer skips the TPA in hopes of achieving cost savings. Sometimes the direct contract is for specific services that employees need most often, or they can be designed to cover the entire spectrum of services available to employees.
Cisco has negotiated a direct healthcare agreement with Stanford Health System. Stanford operates a clinic at the Cisco campus, so that the primary care doctor is a member of the community within the company.
“I’m in their space. I’m actually where they work. I’m a bit of a village doc,” Larry Kwan, MD (above), a doctor of internal medicine with Stanford Health Care, told Reuters about his role in the Stanford clinic at the Cisco campus. About 1,000 Cisco employees are enrolled in the Stanford plan. Katelyn Johnson, Integrated Health Manager at Cisco Systems, says it’s a program that requires a more active approach from companies than traditional health benefits plans. (Photo copyrights: Stanford Health Care.)
Boeing, too, has explored direct contracting in a program where the company negotiated directly with hospitals in four different states. The direct contracts have resulted in cost savings and cover some 15,000 employees plus their families. Some of those cost savings have come from things like getting doctors to prescribe generic drugs.
Intel also has a similar program, covering around 38,000 employees and their families. They have found success in managing chronic conditions like diabetes. Technology, such as video-conferencing, also has helped lower costs and improve retention.
Even health networks are getting into the game. One recent example is the Healthcare Transformation Consortium (HTC), a six-hospital healthcare systems in New Jersey that formed to self-insure and provide direct healthcare coverage for their employees.
Companies may gain some cost savings from directly negotiating, but there are gains for the health systems as well. In a deal with Whole Foods in 2016, Adventist Health System gained a new set of skills that they plan to use in negotiating similar deals with other employers.
“We have a little bit more flexibility as a health system to design around what Whole Foods defines as quality, or what Whole Foods defines as patient satisfaction, which is sometimes different than the traditional definitions,” Arby Nahapetian, MD, regional chief medical officer and SVP at Adventist-Southern California told Modern Healthcare.
Signs Point to Trend Continuing
The Healthcare Transformation Consortium in New Jersey, along with the joint agreement between Amazon, JP Morgan Chase, and Berkshire Hathaway, are examples of what the future is likely to hold. The more these kinds of collaborations and direct contracts result in both cost savings and patient satisfaction, the more companies will likely consider direct healthcare contracts.
Hospital-based and independent laboratories may want to consider meeting with the larger employers in their service regions and explain to the HR benefits managers how better utilization of selected lab tests could improve patient outcomes and contribute to better managing costs.
After all, employers tell health insurance companies what they want to cover with their health benefits plans. So, educating the employers’ HR teams about the true value of clinical laboratory tests could be a winning strategy for labs willing to take the time to do this.
Plans by large-scale employers to self-insure brings into question how clinical laboratories would submit claims and get reimbursed from inside and outside of a corporate provider/payer network
Clinical laboratories and anatomic pathology groups serving the nation’s hospitals and health systems may get increased network access to patients due to new developments in the health insurance marketplace. In recent months, both large corporate players and a number of smaller hospital systems have decided to form their own health insurance companies.
For example, six New Jersey hospital health systems announced they have taken steps to self-insure their employees by forming the Healthcare Transformation Consortium (HTC). This follows a similar joint agreement by Amazon, Berkshire Hathaway, and JPMorgan Chase to self-insure their employees as well. Inhouse medical laboratories and anatomic pathology groups that service these entities will likely find themselves part of new private provider/payer networks, which will impact how and when they get reimbursed for their services.
Both groups hope to slow skyrocketing healthcare costs, improve outcomes, and avoid having to navigate the increasingly complex insurance industry. Between the two groups, nearly one million employees will be insured directly by their companies.
Another reason these two events could be good news for the hospitals, doctor’s groups, and medical laboratories involved is they will no longer have to deal with narrow networks and mandates required of health plans subject to the federal Employee Retirement Income Security Act (ERISA) of 1974. This also may include regulations in the Health Insurance Portability and Accountability Act (HIPAA), which amended ERISA in 1996.
Local clinical laboratories will likely automatically become part of the combined provider group as well, which is good. But will they have to alter how they submit claims and get reimbursed for services rendered to a private corporate payment system?
Goals of Corporate Healthcare
In a press release, Amazon, JPMorgan Chase, and Berkshire Hathaway stated they are “partnering on ways to address healthcare for their US employees, with the aim of improving employee satisfaction and reducing costs.” A not-uncommon healthcare goal, these days.
One of the few concrete details in the release stated, “The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”
The six N.J. healthcare providers in the HTC include:
Together, they employ approximately 50,000 individuals who all will be enrolled in a single health plan, scheduled to go live January 1, 2019.
Kevin Slavin (above), President and CEO of St. Joseph’s Health in Syracuse, N.Y., told HealthLeaders Media. “Each of us have had our different strategies to reduce costs and improve care for our beneficiaries, but now we have six systems that can share those ideas and harness power together.” He added that they expect to see immediate cost savings per enrollee for hospital, outpatient, and medical laboratory services. (Photo copyright: St. Joseph’s Healthcare System.)
Stocks Fall in Response to Announcements
On the day that Amazon (NASDAQ:AMZN), JPMorgan Chase (NYSE:JPM), and Berkshire Hathaway (NYSE:BRK.A, BRK.B) made their announcement, UnitedHealth Group (NYSE:UNH), Anthem (NYSE:ANTM), and other healthcare companies saw their stocks fall. This demonstrates how disruptive such partnerships and coalitions can be in the healthcare marketplace, the New York Times reported.
They can be disruptive in more immediate ways, as well. For example, companies may use collected patient data to devise wellness programs they then offer their employees for free—even going as far as providing a financial incentive to participate. A healthier employee workforce means lower healthcare costs, but also less revenue to surrounding hospitals, physician’s practices, and medical laboratories.
What’s good for one group is not so good for the other, even though people are getting healthier in the long run.
And, to be fair, removing a million people from health insurance plans surely will negatively impact those companies’ finances, as well. The six HTC entities spend approximately $250 million annually for health benefits.
Kevin Joyce, VP of Insurance Networks at Atlantic Health System, a six-hospital health system in Morristown, N.J., told Healthcare Finance that, because the organizations involved in the HTC are healthcare providers themselves, the consortium has a particularly intimate knowledge of the issues causing the ever-rising cost of care.
“This is one of the ways to try to bend the cost curve,” he noted. “I honestly believe with the rise in high-deductible plans, trying to make healthcare more affordable should be the mission of both payer and provider. What makes us different from Amazon is that we as competitors came together to do this. This should have a ripple effect across all of our membership.”
Kevin Lenahan, CPA, Senior Vice President, Chief Financial and Administrative Officer, at Atlantic Health System agrees, adding, “It’s like-minded organizations that came together. We know each other. We all felt that we have a responsibility to improve quality, help transparency.”
Huge Obstacles on All Sides
In a CNBC interview covered by Inc. Magazine, Berkshire Hathaway CEO Warren Buffett emphasized that the obstacles such coalitions face are enormous.
“You talk about something that has $3.3 trillion in revenues presently going to people, and most people that are on the receiving end of the $3.3 trillion are happy with things.” He added, “If it was easy, it’d have been done.”
Nevertheless, both coalitions hope to serve as models for others. “By working closely with like-minded organizations, we can share best practices, learn from one another, and lead the transition from fee-for-service to value-based care, using our own benefit plans as proving grounds,” Joyce told Healthcare Finance.
As the trend to self-insure employees gains steam across corporate America, it will be interesting to see how the inhouse medical laboratories, and independent clinical laboratories and pathology groups that service these entities, are affected by the change.
