PWeR News

Sign up today for the latest PWeR development announcement!

Amazon, Berkshire and JP Morgan Chase

By: | Tags: , , , , , | Comments: 0 | February 6th, 2018

I am writing this blog from the San Francisco International (SFO) Airport, after spending a few days visiting investors in technology, venture capital, and private equity firms from Silicon Valley – known for technology innovation (more on what I learned from my visit in future installments).

Nearly the minute I landed, news hit that three behemoths of industry, and with legendary leadership as Bezos, Diamond and Buffet, were effectively joining forces to change healthcare first for their employees, and some hope potentially for America.

For the last three days, it has been in every conversation with friends that I have here, as well as friends across four continents.

All of you know my passion for healthcare and my continuous efforts driven towards transformation, particularly in technology.  My friends have assumed I would be excited and hopeful.  Unfortunately, I am sorry to say that nothing I’ve read has given me reason to think anything will change.  I think it will likely prove to be another in a long list of companies and alliances by Fortune 500 companies, over the last 25 years, getting together more in principal than action to change healthcare.

What is really hard to understand is that 85% of all healthcare requires a doctor (MD, DO or NP), and that it is local 90% of the time.  Former Speaker of the United States House of Representatives, Tip O’Neill is most closely associated with the phrase, “All politics is local.”  I can confirm, that in that context, all healthcare is hyper-local.

Generally, each community is based around a hospital and their medical staff.  Every hospital eco-system is different, even in the same community or city.  To this day, I remember most major cities in Florida’s 37 counties I have done business by the hospitals and/or hospital systems in each city.  Whether for profit, non-profit, independent or part of the state or national delivery system they are ALL different.

I am a big supporter of telemedicine, however I don’t believe that telemedicine can be your sole sourced primary care provider, and in most cases, not your only source of specialists, no matter how many devices we have at home.  The doctors are aware of the value and limitations in distant care, in no small part their medical and legal exposure.

Therefore, let’s look at some of the assumptions that the optimists are making.

Do 1,000,000 or even 2,000,000 employees spread out over 50 states really have negotiating power?  No, they really don’t in direct-to-provider relationships.  Managed Care companies have networks of doctors with negotiated rates for all services.  Humana, a company I have had the opportunity to work with a few times, has 56,000 employees, 500,000 medical providers under contract, 4,000 network hospitals, and 14 million members.  Humana is the fourth largest health insurer in the country.  The biggest two are UnitedHealthcare with 70,000,000 members and Anthem with 40,000,000 members.

The power that health insurers have is real, so is their experience.  This is not to say that companies with a high concentration of employees in a local market cannot and do not have a chance to do better than insurers.  If you told me that these companies were going to partner in Seattle, and they have 50,000 total employees there, they could have something.  However, though they have concentrations, they are small nationwide when you compare to insurers.

Could more join the group?  Sure, bring in Walmart and you bring more value.  You will still need to contract with providers, credential those providers, and “administer” the supervision of care.

I don’t see these companies in fact making better deals with providers nationwide, with hospitals nationwide or even medical devices nationwide.  I think there is a better chance at getting reduced drug prices.  However, two things will have to happen, first Amazon will have to become or acquire a Pharmacy Benefit Manager (PBM), and second materially restrict their current drug formulary to restrict the number of drugs to negotiate better prices.  Nearly all top 10 health insurers will still have better rates, as they will have more volume.

I also don’t see these companies negotiating better rates for drug laboratory services; the same goes for hospitals.  Having helped build three small delivery systems, and a new provider network in Florida consisting of less than 7,000 providers, I can attest how hard it is to negotiate with individual providers.  Negotiating good rates with hospitals is even harder, unless you want to pay three times the Medicare rates, or 80% of “billed charges.”  To me, this is not a deal and in most cases, all major health insures have better rates.  People negotiating from the hospital side will discount more for exclusivity and or large volume.

In one of the articles I read, it talked about success with “preference pricing.”  That is not only a real opportunity, but also even harder to achieve.

We recently wrote about value of transparent pricing for medical services and products.  A new platform is about to hit the market that could be a catalyst for change.  Yes, employers can and should use all the tools when they have local clout with the number of employees.  That is apparently what companies like Boeing in Washington State do.  As noted above, major employers can and do have power to negotiate in a local environment where they have 10,000 or more employees in a range of only one or two health systems.

Medicare sets a good example and I have built Medicare delivery networks in those 37 counties mentioned above.  Medicare requires from managed care companies seeking to expand to new markets, that they submit a long and detailed report (see link below) that demonstrates that every person can access nearly all providers within a maximum travel time and distance.  Additionally, that they demonstrate a minimum number of providers based on community size and density to qualify as Medicare delivery system.  There are some exceptions for highly specialized providers.  With that said, if this sets minimum delivery standard, though private insurance is different, it at least sets a framework.  If JP Morgan wants to provide access to all their employees, they are going to have to provide a network that covers all the states, counties and cities where they have employees.  This will NOT be easy, fast, or cheap.  Also, this is the reason why most large employers use a private, large company plan with a large provider network (owned or leased) to manage their own self-insured plan.

As a huge proponent and evangelist of healthcare technology, I strongly believe that technology can and will soon play a major role in both providing lower cost and better quality.  I stated much of this in my presentation at the IoT conference in January (2018).

http://pwer.com/2018/01/26/iot-health-conference-walt-disney-world-florida/

These three huge companies can promote more and better use of telemedicine, as large employers can impact insurers, employees and even innovators, to use comprehensive IoT devices more frequently.  What they will also need is a better and more consumer centric personal wellness record (PWR).  The EHRs of the last 50 years have not really had the impact on healthcare that other technology has had in other industries transformed by innovation.  The model must change.

The combination of IoT, telemedicine, new PWR plus innovative consumer access to price transparency will break the cycle of higher cost that the American healthcare system has been on since 1965.  For that, I remain optimistic.

-Noel J. Guillama, President

https://www.cnbc.com/2018/01/30/amazon-berkshire-hathaway-and-jpmorgan-chase-to-partner-on-us-employee-health-care.html

https://www.nytimes.com/2018/02/02/opinion/healthcare-berkshire-amazon-chase.html

https://www.cnbc.com/2018/01/30/cramer-bezos-amazon-prime-could-upend-the-health-care-system.html

https://www.cms.gov/Medicare/Medicare-Advantage/MedicareAdvantageApps/Downloads/MA_Network_Adequacy_Criteria_Guidance_Document_1-10-17.pdf

You must be logged in to post a comment.