They have their CEO. Now what?
Everyone wants to know what Dr. Atul Gawande plans to do now that he has been named Chief Executive Officer of the Amazon, Berkshire Hathaway, and JP Morgan (ABJ) partnership to create a new healthcare delivery model.
Since it’s the number one question I get asked nowadays, I thought I would provide an updated answer on my perspective.
Amazon is the 800-pound gorilla.
The others will follow Amazon’s lead as it has the infrastructure to scale direct-to-consumer as well as on the retail and wholesale side. When reviewing Amazon’s recent history, you’ll find many clues as to the preferred business tactics it employs that will transfer easily to healthcare.
Let’s take a look at a few of those clues:
- Amazon has the supply chain in place and has redefined how consumers acquire goods and services in multiple industries, starting with books and expanding to, well, whatever you need. Before you say, “But healthcare is different,” buying books, clothing, electronics, and niche products used to be different as well. Then came Amazon.
- Amazon has a successful track record of eliminating waste and middlemen throughout the supply chain. This problem is especially out of control in the healthcare delivery space. There are multiple middle-men at every step of the way.
- Amazon has the buying power to stop old tricks and gaming by industry juggernauts. We’ve already seen it work around blocking attempts from Big Pharma when Amazon successfully acquired PillPack.
- Amazon will identify the largest areas of wasteful spending on healthcare for employers and employees. Three likely targets for reducing wasteful spending will be:
- Chronic disease management
- Over-utilization of primary care
Let’s break these points down.
Reducing the cost of drugs for both corporations and employees is an obvious starting point and Amazon is already making strides. Although industry incumbents will undoubtedly resist and throw up roadblocks every chance they get, if anyone can work through these treacherous waters it’s a team of Jeff Bezos and Warren Buffet. Amazon has the supply chain, retail outlets, and delivery team in place as it is so they are well prepared for this transition.
The old saying goes that ten percent of your employees account for ninety percent of your healthcare spending. In healthcare there is evidence that an even smaller percentage of employees may account for more than ninety percent of spending. With that in mind, in recent years a number of companies emerged that provide turn-key services to employers to assist in managing employees with chronic diseases like diabetes. Although these programs usually begin as voluntary programs for employees, insurers and companies are getting more creative in how they increase premiums for those with chronic disease who choose to ignore tools, resources, and opportunities to live a healthier lifestyle.
Finally, this is a topic for a longer debate but the fragmentation of the primary care delivery model leads to significant over-utilization. Let’s cite some examples:
- Employees using the Hospital Emergency Room as their primary doctor when they are ill.
- Employees using an Urgent Care Facility as their primary doctor when they are ill.
- Tele-Health: Although telehealth was intended to reduce over-utilization of primary care in the emergency room, urgent care, and even in a doctor’s office; to date, there is no evidence that this is happening. In fact, it appears that employer plans that include telehealth offerings may actually be increasing member utilization in many cases.
- 24-hour call lines: The same issues exist with call lines that exist with telehealth – mostly to due to perceived liability. While patients reach out to a call line with the hope of avoiding a protracted visit to the doctor, they are almost inevitably told they need to go to the hospital or doctor.
- Some of the common issues faced at the ER include: Extremely high cost; often no proactive communication with the patients personal doctor; liability concerns that lead to excessive over-utilization of testing, procedures, and unnecessary specialist referrals.
A growing group of employers are proving that emerging models such as Direct Primary Care (employers contracting with one physician group that provides a call line, telehealth services, and walk-in appointments) can reverse this trend of over-utilization and create more appropriate levels of care being chosen by employees. Amazon is likely to push the envelope on aligning these incentives. In fact, a few organizations have combined two of these three key over-spending areas (pharmaceutical spending and primary care over-utilization) into a hybrid Direct Primary Care model that also includes pharmacy benefit management. I have seen great results from Transcend Onsite Care in California and Diamond Physicians in Texas.
Finally, Amazon also has one other wildcard product and service that can be a critical tool in improving patients’ self-management of their health: Alexa. In the industry, we have seen similar products introduced in recent years that were more specific to addressing the needs of a patient with memory loss – a chronic disease that requires prompting and reminders for what is often a complicated medication regimen. I am guessing that Alexa already has many of these capabilities and they will only be enhanced now that Amazon has skin in the healthcare game.
If you wanted to short version of my thoughts, well, there you have them. I believe what Amazon is doing is not as pioneering and radical as many make it out to be. I accept these concepts above to be the basic blocking and tackling we will see from Amazon in the near future, and remain excited to see what Dr. Gawande introduces after that.
“Alexa, get me an immediate doctor’s appointment at half the cost I am used to paying, and have the medication delivered to my house by tomorrow at twenty percent of the cost I previously paid.”
If anyone can make this happen, it’s Alexa. The least you could do is say please when speaking to her.
Original article link is available here.