The Launch of Haven Healthcare
We have all heard the growing chorus that the American healthcare system is broken. While that is true in many ways for healthcare purchasers and users, what if it is not true for others. What if the current system has more accurately evolved (intentionally or unintentionally) to mainly provide shareholder value and ROI. It would not be reasonable to say it is broken from this perspective because it has returned so much shareholder ROI over the past dozen years – more than any other industry in the world. It would seem the healthcare system might be working exactly as it is intended to work, from a shareholder’s perspective anyway. It is just not working for the rest of us who still believe it ought to be designed for caring for communities and keeping them healthy.
On January 30, 2018, an extraordinary event happened. A press release announced that three of the nation’s best-known names in billionaires and companies –– Jeff Bezos of Amazon, Jamie Dimon of JPMorgan Chase, and Warren Buffett of Berkshire Hathaway –– had teamed up to tackle the problem of healthcare through an independent company, free from profit-making incentives and constraints.
“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 biggest questions left unanswered – WHICH SOLUTIONS AND HOW?
Shortly after launching Haven Healthcare, the company’s website outlined several areas to improve within the current health system, including navigating the deliberately complex system, difficulty accessing care, and affordability of medical treatments and prescription drugs.
Healthcare is currently an unhealthy 18% of our entire GDP and rising.
With two financial titans AND the founder of Amazon (the largest disruptor of retail in history) involved, the announcement that Bezos, Buffet, and Dimon were taking on the American healthcare system came as a complete shock to the entire business world. Speaking as the founder of Redirect Health, I was intrigued and excited by the involvement of Jeff Bezos. However, there were some red flags. I saw two major obstacles hidden in the complex reality that I doubted the three would navigate well enough.
JP Morgan provides financial services for 83% of healthcare companies with a revenue of $4 billion or more.
Could Dimon really disrupt the healthcare industry when they are his customers?
Just the statement of the intent of the new venture and these three titans shook the financial markets. Healthcare stocks plunged the next few days, wiping tens of billions of dollars off the value of established healthcare providers. While all three CEOs have fiduciary to shareholders, Dimon and Buffett had blowback potential much different than Bezos. Bezos and Amazon have much less concern for the effects of attacking the system of the industry representing much more than its share of the stock market value. It might even help Amazon stock if investors bounce away from the disrupted insurance, hospital, and drug stocks.
The other problem? Healthcare brokers, consultants, and other HR-related administration of healthcare benefits appeared to be missing from the equation. Their power and control in the relationships that make the insurance benefits decisions seemed to have been overlooked.
Haven’s purpose was noble. And it was self-serving in a very noble American-capitalistic way. Every employer offering health benefit packages would love to decrease the cost to their company while giving employees better care and more affordable options. The financial reality and the sheer complexity of the American healthcare system could deter even the most innovative companies working to lower costs and create meaningful access for many. So, if Bezos, Buffett, and Dimon could tame the tapeworm that is the American healthcare system, that would be one for the history books.
Sadly, just three short years later –– it appears that the Haven Healthcare disruptor startup may have failed.
Or have they?
“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.” – Haven website statement.
With Haven Healthcare ceasing independent operations at the end of February 2021, it is a great time to reflect on the many things they got right, some things they got wrong, and where they –– and others –– can go in the future. And with COVID-19 upending everything we used to think was normal, this might just be the time for a system reset. Or even a system redesign – but this time for the benefit of the Purchasers and Users of America’s healthcare.
Haven Healthcare Disruption Startup Goals: In Their Own Words
Jeff Bezos, Founder and CEO
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
Problems Identified: Complexity, impact on the economy/GDP, better outcomes
Primary Solution: Simplicity
Jamie Dimon, Chairman and CEO
“Our people want transparency, knowledge and control when it comes to managing their healthcare. The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”
Problems Identified: Transparency, knowledge, control, and scale
Primary Solution: Transparency
Warren Buffett, Chairman and CEO
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
Problems Identified: Rising costs, patient satisfaction, better outcomes
Primary Solution: Affordability
Haven Healthcare: The Knowledge Gap
Simplicity. Transparency. Affordability. Check, check, check. Now they needed the right leader at the helm. The announcement of Dr. Atul Gawande as CEO was impressive. Surgeon at Brigham and Women’s Hospital in Boston, professor at Harvard Medical School, writer, public health researcher, and founder of Lifebox, a nonprofit organization that aims to make surgery safer globally. For me, the choice was the second red flag. Why?
Dr. Gawande brought a deep resume and impeccable credentials to the table, there is no doubt. Haven had the right idea – but in my opinion, they chose a leader from the wrong specialty. The Haven venture began at the perfect point by identifying the problems: make it simpler, more transparent and do not let big healthcare companies’ profit incentives unduly get in the way. In fact, they nailed it. But when the healthcare system is the patient on the table, the challenge is beyond the skill of even the most brilliant surgeon and the team of exceptionally smart and equally skilled businesspeople and entrepreneurs.
However, to really change healthcare would require something much different. Paramount is the understanding of the nuances of the interface connecting employees’ day-to-day ecosystems with the complex system of medicine and healthcare. Ignoring or being oblivious to this would be a game stopper for me. I would bet heavily against its success. Dr. Gawande could not have had the experience he needed because he lacked first-hand experience with the broker and the primary care communities and industries.
Don Berwick is a pioneer in espousing that lowering per capita costs through waste and administration reduction was the duty of a well-functioning healthcare system. It requires “systems thinkers. No lone individual can achieve the Triple Aim. Even just better care for individuals — with the burdens of chronic illness and the enormous technologies we can bring to bear in healthcare — demands extraordinary, unprecedented levels of cooperative work. The Triple Aim makes it clear that we’re a team and we’ve got to act like one.”
The brokers are the interface between the employers (the Purchasers) and the complex insurance system. And primary care is the interface between the employees’ families (the Users) and the complex healthcare system. Primary care is about 3% of our national healthcare cost. But it can control who gets the rest and how much is NOT spent if we let it.
Understanding this, I would have sought a leader who, from experience, truly understood the finer distinctions of the dynamically ever-changing aspects of these complex systems.
Dr. Gawande stepped down from the role of CEO of Haven Healthcare in May of 2020 to focus on the pandemic, taking the title of Chairman while the search for a new CEO was undertaken. In the fall of 2020, Dr. Gawande served as Pandemic Advisor to the Biden-Harris Transition Team, now the Biden-Harris Administration. On January 4, 2021, Haven Healthcare announced that it would cease independent operations at the end of February. I suspect Dr. Gawande is a masterful systems thinker, but he could not have understood the finer distinctions of the broker and primary care interfaces with the Purchaser and User ecosystems well enough.
Although there were reports of various problems during Haven’s three-year run, in my opinion, they really had a chance. And I would not count them out yet. With the launch of Amazon Pharmacy in November 2020, it seems Bezos might not have given up on healthcare completely, and if anyone knows how to engineer complex systems, build them, and then manage them, it’s him. Bezos is one of the best equipped to do it. Whether he wants to do this while Mars is within his reach is the best question in my opinion. I believe he could do it if he wanted.
Primary care can identify, manage, and mitigate risk factors for serious health problems before they become chronic and expensive conditions – obesity, heart disease and stroke, diabetes, etc. Appropriately and thoughtfully organized and funded primary care can assure people get the right care, with the right urgency, in the right facilities, for the right price. If simplicity and true affordability is the goal, so everyone in the company has meaningful access to healthcare, then elimination of unnecessary activity and spending is critical. Most all agree now that cost reduction per capita is really the biggest issue in healthcare, so it is critical to reverse-engineer the system to remove the key drivers of high healthcare costs and incentivize the right things for all the system participants.
The problem? Decreasing hospitalization costs by enhancing primary care will trigger pushback by traditional hospital companies. And the insurance companies that pay hospitals and drug manufactures need the risk of the high costs they negotiate and pay to justify their rising prices (their revenue) every year. Applying effort and expense to lowering per capita costs goes directly against existing financial interests and shareholder obligations. Amazon’s incentives are not without reproach either. Economies of scale can reduce some costs, sure, but buying more pills in bulk does not address the core issue of widespread public health problems driving chronic disease and the need for hospitalization. The goal should be fewer pills because healthier people do not need them. So basically, we are right back at square one. Or are we?
Where Does Healthcare Go from Here?
“Haven worked best as an incubator of ideas, a place to pilot, test and learn — and a way to share best practices across our companies.”
-JPMorgan chief Jamie Dimon
From the primary care perspective and as the founder of Redirect Health, I found the most intriguing portion of Haven’s final message on its website before ceasing operations to be the following statement:
“Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of their own employee populations.”
They can do. The question as I see it is whether any of them are willing to persevere through the “Innovator’s Dilemma”, described by Clay Christensen. The status quo of their companies and of the greater stock market ecosystem they thrive in has a powerful immune system. It would take a lot of guts. But so would venturing to Mars.
Healthcare IS doable.
We did it with Redirect Health a dozen years ago by scrapping the existing insurance model and rebuilding the system around our company and our people first, so we could provide a better solution for our team:
- NO Premiums
- NO Copays
- NO Deductibles
- NO KIDDING
Our system worked so well for us (the original Purchaser and User of this system) that our friends wanted it for their businesses. Then they talked so much, causing thousands of companies and their employees to want it in every state.
We see a day very soon when any company in America can have their health plan working so well, so inexpensively, that they will want to provide it to all their employees and their families for free. They will not do this because they are just nice companies, but rather because of the free-market advantages it gives them when they redirect wasteful spending back to their people.
Jeff Bezos, let’s talk?
Want to learn more about the Redirect Health care model? Visit us at www.RedirectHealth.com