Three Giants’ Envision Using Technology to Cut Costs & Replace Insurers / Drug-benefit Carriers
Amazon.com Inc, Berkshire Hathaway Inc. and JPMorgan Chase are involved in a big, big new concept. They are planning a revolutionary health care approach that could shake up form a single company to reduce their workers’ health costs. This news sets off alarms about potential competitive pressure and changes for the status quo systems.
The companies said the venture would be “free from profit-making incentives and constraints” and would develop technological solutions to provide simplified, high-quality health care for their hundreds of thousands of U.S. workers (employees first), but they offered few other details. One spokesperson said that the present ballooning costs of the ACA is not working; the goal is to stall the rise in health costs while concurrently enhancing patient satisfaction and outcomes.
Plans are still evolving; nothing has been decided beyond forming a company and discussions of possibly taking over administration of employees’ pharmacy benefits and health-insurance benefits from the companies’ current insurers and PBMs.
Roughly 151 million non-elderly people in the U.S. are covered by health insurance from an employer, according to the Henry J. Kaiser Family Foundation.
Other concepts focus on the industry’s middlemen intermediaries (PBMs, insurance administrators, wholesale distributors and pharmacies), saying that past efforts to address health costs didn’t work well. They are considering heightened focus on helping the current vendors work better, not replacing them.
This announcement sent alarm through the insurance industry as it is viewed as a potential threat to existing companies. The health-care industry isn’t sure what or how this process would affect the status quo.
Amazon has entertained entry into the pharmacy-services industry and has already added health-care supply options to its business-to-business marketplace offering.
Together, Amazon, Berkshire and JPMorgan have more than one million employees (not all in the U.S.). This initiative is “undefined, but the resources of the three companies are enormous and could sway the insurance landscape.
Longtime friends, Warren Buffett (Berkshire Chairman & CEO), James Dimon (JPMorgan CEO) and Jeff Bezos (Amazon CEO) have been talking about this idea formally and informally for a long time. The plan came together in December under the code name Project Lincoln.
The three CEOs decided to go public with the plans before the concept was fully fleshed out. Formalizing entity plans are currently underway. Project Lincoln aims to have a CEO in place by the end of 2018. One aim is for the initiative to create a health-care data warehouse. The companies hope the entire health-care project could at a minimum save them hundreds of millions of dollars and, if successful, be a blueprint for others large entitles with large employee blocks.
Over the longer term the effort would likely evaluate new types of agreements with health-care providers, such as flat fees for episodes of care, and using technology to provide more tracking and care outside traditional health-care settings such as hospitals. Project Lincoln will likely prod health-care providers to employ digital health tools that enable them to share data with other providers and with patients.
While the three companies currently use well known insurers, they collectively agree that the old insurance model is “not sustainable.” Large pharmacies such as CVS welcome the opportunity to work with all market participants towards the goal of better health outcomes and lower costs. The industry looks forward to hearing more about this new initiative designed to improve health care for everyone while finding innovative solutions for making healthcare work better.
The fractured nature of the U.S. health-care system makes it difficult for even the most significant companies to implement large-scale change. Often, they have large groups of employees in only a few health-care markets, limiting their ability to encourage local providers to change their ways.
Solving health care in America means solving health care in cities across America. It’s a big challenge to change the entrenched stakeholders and systems that are in place.
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