February 21, 2018 at 5:00 am ET
The momentous news that supply chain expert Amazon is teaming up with Berkshire Hathaway and JPMorgan to create their own “independent healthcare company” for their employees has serious potential to change the landscape of our health care system – but only if it works. And that’s a big if. Understanding and overcoming the obstacles within the health care industry will an immense challenging, yet, working with the players within the health care chain may yield more success than trying to go at it alone.
While the health care system is undoubtedly inefficient, one of the flaws in the Amazon/Berkshire Hathaway/JPMorgan announcement is that it implies that the issues stem from only a few players within the health care supply chain. That simply isn’t the case.
Don’t get me wrong: The current landscape of the U.S. health care system isn’t sustainable.
It’s no secret that Americans are feeling the squeeze of increasing health care costs, ranging from insurance premiums to prescription drugs. But let’s look at it from the inside from the insurer’s perspective, who is stuck in the middle between providing high-quality care at a low-quality cost.
Advances in medicine have led to more expensive treatment options that all consumers want and expect access to. Add to this picture the fact the Americans are living longer and consuming more health care bandwidth and pharmaceuticals than ever before. The health care industry is facing a conundrum of increasing costs through technological advances in medical treatment and longer lives of their patients.
So how can Amazon and crew “save” us for this health care conundrum? While details have not been released by the Amazon/Berkshire Hathaway/JPMorgan super-group, realistically this “independent healthcare company” does not plan on replacing doctors and hospitals, or drug manufactures. However, it’s likely that they are looking to eliminate the private insurer, pharmacy benefit manager, and even the pharmacy (after all, Amazon spent the last quarter of 2017 obtaining pharmaceutical distribution licenses in a number of states).
The reality is, the health care supply chain is far more complex than many assume and there are many more variables at play that all influence the end-user health care outcome.
But Amazon/Berkshire Hathaway/JPMorgan could do more good working with these industry players. Think of their contribution as a consulting project on steroids, where the end goal is to actually solve health care issues by capitalizing on what each company is good at.
A great place to start is in the middle of supply chain where Amazon/Berkshire Hathaway/JPMorgan can form a relationship with private insurers. Let’s just imagine how this would play out for a moment: Amazon/Berkshire Hathaway/JPMorgan are not experts in health care’s state-by-state regulation but do you know who is – the private insurance companies. Rather than replacing them, capitalize on their strengths: namely the industry expertise, massive negotiating power, and breadth and depth across the US, not to mention their understanding of the political regulation.
But the Amazon super crew still has much to contribute to the insurance side. For example, imagine a world where all of the health care data can be utilized to better predict individual conditions and outcomes. Amazon is the king of analytics. Do you recall on their website the area where “customers who bought X also bought Y”? Now imagine that at a data secure level: “Patients who were treated for X are likely to submit a claim for Y.” That would be a huge help with processing claims, catching fraudulent claims, even anticipating conditions to better plan financially.
With this higher, more accurate level of prediction, the financial landscape and customer experience of the insurer can greatly improve. Combine that with the financial expertise of Berkshire Hathaway and JPMorgan, and now we’ll really start to see some improvements.
If these companies really are so concerned about the U.S. health care system, they should look to collaborate, beginning with the private insurers. Rather than go it alone, the Amazon/Berkshire Hathaway/JPMorgan team can make a bigger impact on the American health care system and help expand access to quality care for more people if they combine their expertise with the enormous assets of the industry.
Kathleen Iacocca is an assistant professor of management and operations at the Villanova University School of Business and an expert in health care policy and health care supply chain.
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