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 \u2013 known for technology innovation (more on what I learned from my visit in future installments).<\/p>\n
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.<\/p>\n
For the last three days, it has been in every conversation with friends that I have here, as well as friends across four continents.<\/p>\n
All of you know my passion for healthcare and my continuous efforts driven towards transformation, particularly in technology. \u00a0My friends have assumed I would be excited and hopeful.\u00a0 Unfortunately, I am sorry to say that nothing I\u2019ve read has given me reason to think anything will change. \u00a0I 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.<\/p>\n
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. \u00a0Former Speaker of the United States House of Representatives, Tip O’Neill is most closely associated with the phrase, \u201cAll politics is local.\u201d \u00a0I can confirm, that in that context, all healthcare is hyper-local.<\/p>\n
Generally, each community is based around a hospital and their medical staff. \u00a0Every hospital eco-system is different, even in the same community or city. \u00a0To this day, I remember most major cities in Florida\u2019s 37 counties I have done business by the hospitals and\/or hospital systems in each city.\u00a0 Whether for profit, non-profit, independent or part of the state or national delivery system they are ALL different.<\/p>\n
I am a big supporter of telemedicine, however I don\u2019t 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. \u00a0The doctors are aware of the value and limitations in distant care, in no small part their medical and legal exposure.<\/p>\n
Therefore, let\u2019s look at some of the assumptions that the optimists are making.<\/p>\n
Do 1,000,000 or even 2,000,000 employees spread out over 50 states really have negotiating power? \u00a0No, they really don\u2019t in direct-to-provider relationships. \u00a0Managed Care companies have networks of doctors with negotiated rates for all services. \u00a0Humana, 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. \u00a0Humana is the fourth largest health insurer in the country. \u00a0The biggest two are UnitedHealthcare with 70,000,000 members and Anthem with 40,000,000 members.<\/p>\n
The power that health insurers have is real, so is their experience. \u00a0This 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. \u00a0If you told me that these companies were going to partner in Seattle, and they have 50,000 total employees there, they could have something. \u00a0However, though they have concentrations, they are small nationwide when you compare to insurers.<\/p>\n
Could more join the group? \u00a0Sure, bring in Walmart and you bring more value. \u00a0You will still need to contract with providers, credential those providers, and \u201cadminister\u201d the supervision of care.<\/p>\n
I don\u2019t see these companies in fact making better deals with providers nationwide, with hospitals nationwide or even medical devices nationwide. \u00a0I think there is a better chance at getting reduced drug prices.\u00a0 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. \u00a0Nearly all top 10 health insurers will still have better rates, as they will have more volume.<\/p>\n
I also don\u2019t see these companies negotiating better rates for drug laboratory services; the same goes for hospitals. \u00a0Having 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. \u00a0Negotiating good rates with hospitals is even harder, unless you want to pay three times the Medicare rates, or 80% of \u201cbilled charges.\u201d\u00a0 To me, this is not a deal and in most cases, all major health insures have better rates. \u00a0People negotiating from the hospital side will discount more for exclusivity and or large volume.<\/p>\n
In one of the articles I read, it talked about success with \u201cpreference pricing.\u201d\u00a0 That is not only a real opportunity, but also even harder to achieve.<\/p>\n
We recently wrote about value of transparent pricing for medical services and products. \u00a0A new platform is about to hit the market that could be a catalyst for change. \u00a0Yes, employers can and should use all the tools when they have local clout with the number of employees. \u00a0That is apparently what companies like Boeing in Washington State do. \u00a0As 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.<\/p>\n
Medicare sets a good example and I have built Medicare delivery networks in those 37 counties mentioned above. \u00a0Medicare 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.\u00a0 Additionally, that they demonstrate a minimum number of providers based on community size and density to qualify as Medicare delivery system. \u00a0There are some exceptions for highly specialized providers. \u00a0With that said, if this sets minimum delivery standard, though private insurance is different, it at least sets a framework.\u00a0 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. \u00a0This will NOT be easy, fast, or cheap. \u00a0Also, 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.<\/p>\n
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. \u00a0I stated much of this in my presentation at the IoT conference in January (2018).<\/p>\n
http:\/\/803.557.mywebsitetransfer.com\/2018\/01\/26\/iot-health-conference-walt-disney-world-florida\/<\/a><\/p>\n 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. \u00a0What they will also need is a better and more consumer centric personal wellness record (PWR). \u00a0The 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. \u00a0The model must change.<\/p>\n 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. \u00a0For that, I remain optimistic.<\/p>\n -Noel J. Guillama, President<\/p>\n https:\/\/www.cnbc.com\/2018\/01\/30\/amazon-berkshire-hathaway-and-jpmorgan-chase-to-partner-on-us-employee-health-care.html<\/a><\/p>\n https:\/\/www.nytimes.com\/2018\/02\/02\/opinion\/healthcare-berkshire-amazon-chase.html<\/a><\/p>\n