Rush on to reinvent health care

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Retail pharmacy operators and other health care providers received a jolt last month when Amazon, Berkshire Hathaway and JPMorgan Chase unveiled plans to form a stand-alone company that will address health care for their employees in the U.S., where costs are notoriously high and patient outcomes often vary widely. While details of the venture remain sketchy — there was no word about location, the operational model or who will lead the organization on a long-term basis — the stated objective is to enhance the satisfaction of beneficiaries while at the same time reducing expenditures. It should come as no surprise that the application of technology to improve health care delivery is the initial focus.

The new company, which joins a large and growing group of organizations working to transform the nation’s health care system, stands out in two ways. First, it is free from the need to satisfy shareholders by turning a profit. Second, the organizations and people behind it have a track record of success in other major sectors or the economy. Having the imprimatur of Amazon’s Jeff Bezos, Berkshire Hathaway’s Warren Buffet and JPMorgan Chase’s Jamie Dimon immediately created great expectations for the venture and, in the short term at least, put pressure on the stock price of other health care companies.

Like most business leaders, members of the triumvirate understand that health care spending in the U.S. is on a unsustainable trajectory. “The ballooning costs of health care act as a hungry tapeworm on the American economy,” said Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.” Bezos, who has ample experience in disrupting established industries, acknowledged the high degree of difficulty involved in remaking health care, promising to bring “a beginner’s mind and a long-term orientation” to the challenge. For his part, Dimon noted, “the three of our companies have extraordinary resources” to apply to the task.

JPMorgan Chase, the nation’s largest bank; Berkshire Hath­away, a conglomerate whose businesses include insurance and reinsurance; and retail and technology powerhouse Amazon do indeed have a formidable array of assets to draw upon as they enter the health care fray. They also have some significant gaps in their arsenal, lacking experience in navigating the labyrinthine structure of the health care system — where the complex interaction of patients, providers, private-sector payers and government determines what goes on — and, more important, a history of caring directly for patients.

From one perspective, Wall Street’s immediate reaction to the initiative launched by Berkshire Hathaway, Amazon and JPMorgan Chase is understandable. The health care system is, in many important respects, broken and ripe for renewal. The U.S. spends more than double per capita than any other nation and fares worse than most other developed countries by such measures as life expectancy, infant mortality and prevalence of chronic disease. But analysts and investors need to remember that established health care players, which have helped countless patients for many decades, are already busy reimagining health care delivery.

The highest-profile example of that is CVS Health’s pending merger with Aetna. While the deal between the pharmacy innovation company and the insurer still needs to pass muster with government regulators, and much work remains to be done to determine exactly what the combined company would look like, Larry Merlo of CVS and Aetna’s Mark Bertolini aim to, in the former’s words, “combine the analytics of Aetna and CVS Health’s human touch [to] create a health care platform built around ­individuals.”

The executives envision converting many of CVS Pharmacy’s 9,700 stores into health care hubs. Serving as the front door to health care, the facilities would leverage close connections with physicians and other community-based resources to help achieve the goals of better access, higher quality and lower overall costs. As Merlo implied, the human element is central to effective health care, and the pharmacists and nurse practitioners who staff CVS’ stores are ideally positioned to assist people in the communities where they live and work.

The Amazon-Berkshire Hathaway-JPMorgan Chase venture and the CVS-Aetna merger are just the most dramatic examples of a marketplace in transition. Other pharmacy operators are developing ways to broaden and deepen their impact on health care by forging alliances with physician and hospital groups and benefits administrators. Several health systems recently joined forces to establish a nonprofit generic drug supplier. And such heavy-hitting technology companies as Apple and Google are beginning to test the health care waters. The high level of activity reflects the scope of the need and the opportunity — health care currently accounts for almost 20% of the U.S. economy. All comers should be welcome, since it’s unlikely that any single entity will find the solution to all of the myriad problems that plague the system. With gridlock in Washington, intense competition among providers is the best hope for fixing American health care.



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