Dear primary care doctor, Jeff Bezos is about to devour your lunch.
All of it. And then he’ll eat the table, the plates, the napkins and the utensils too, so you’ll never have lunch ever again. Oh yeah, and they’ll also finally disrupt and fix health care once and for all, because enough is enough already. Mr. Bezos, it seems, got together with two of his innovator buddies, Warren Buffet from Berkshire Hathaway and Jamie Dimon from J.P. Morgan, and they are fixing up to serve us some freshly yummy and healthy concoction.
Let’s call it Ambergan for now.
This is big. This is huge. It comes from outside the sclerotic “industry”.
And it’s all about technology. The founders are no doubt well versed in the latest disruption theories and Ambergan will be a classic Christensen stealth destroyer of existing markets. When the greatest investor that ever-lived combines forces with the greatest banker in recent memory and the premier markets slayer of all times, who happens to be the richest man on earth, all to bring good things to life (sorry GE), nothing but goodness will certainly ensue.
Everybody inside and outside the legacy health care industry is going to write volumes about this magnificent new venture in the coming days and months, so I will leave the big picture to my betters. But since our soon to be dead industry has been busy lately bloviating about the importance of good old fashioned, relationship based primary care, perhaps it would be useful to understand that Ambergan is likely to take the entire primary care thing off the table and stash it safely in the bottomless cash vaults of its founders. It’s not personal, dear doctor. It’s business. Ambergan will be your primary care platform and you may even like it.
I am not sure what Mr. Buffet is contributing to this venture, other than cash and the warm bodies of his employees to pilot the venture. As to Mr. Dimon, he could probably run a modern analytics-based, risk-assuming health management entity, a.k.a. insurance company, while blindfolded and with both hands tied behind his back, so he may be useful in the short term.
Let’s face it though, the most interesting actor here is Mr. Bezos and his Amazon Platform of Everything. Whatever else happens, it is probably safe to assume that within the next ten to twenty years, most people will be getting much expanded primary care services directly, and almost exclusively, from Amazon.
Amazon is a transactional platform, where people buy and sell things that Amazon does not make, and often does not even stock. With its more recent forays into TV, movies and music, Amazon also has some experience selling, mostly subscription based, services to consumers.
As strange as it may sound though, most Amazon profits come from a very different source. Amazon Web Services (AWS), a computing platform (cloud) service, mostly for businesses and governments is a modest part of Amazon revenues, but a huge contributor to its profits. This lay of the Amazon land practically begs for a little cross pollination, and health care may very well be the ideal vehicle for that.
Cloud services like AWS are essentially eliminating inhouse professionals and expertise in maintaining the basic infrastructure of computing, outsourcing it all to Amazon. Rings a bell? You can almost see the Amazon ads for its primary care services, telling hospitals that they should concentrate on their core business, which is cutting people open and stitching them back together, and leave routine care to Amazon’s primary care platform, expanding or shrinking just in time to match organization demands, with guaranteed uptimes of 99.99999%, and so forth. And you can almost see the direct to consumer ads too, can’t you? Sure you can. You know you can.
A few days ago, before the Ambergan announcement sent the health care markets into a tailspin, Amazon hired a top doctor from one of those trendy primary care corporations that like to misrepresent themselves as Direct Primary Care (DPC).
People speculated that Mr. Bezos, who previously invested in another failed DPC organization, may be ready to try his own hand at fake DPC for his own employees.
Meh… It didn’t sound right to me, because with or without Ambergan, the Amazon stars were already aligning towards a massive thrust into health care, from the bottom up, as any good disruptor usually does.
A few weeks ago, Amazon offered us an opportunity to invite Jeff Bezos into our bedroom. No, he won’t interfere with anything. You won’t even know he’s there. He’ll just sit quietly beside your bed and watch you sleep, until you ask for something, if you do, and if you don’t, that’s fine too. It’s called Echo Spot and other than being unusually cute, the camera/microphone device that looks a little like an old-fashioned alarm clock, is just another extension of the Alexa line of surveillance/service products that run your home and your life, which is precisely what an ideal primary care doctor is supposed to do, i.e. keep you healthy, where health is defined as “a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity”.
You will subscribe to Ambergan Health. You will be monitored by Alexa in your home and maybe a future tiny Echo will let Alexa go outside with you. Perhaps they’ll throw Apple a crumb here to keep an eye on you when you leave your home, although it’s becoming increasingly unclear why you should. When you feel sick, you will summon a doctor on your Echo screen, and eventually he will appear preemptively before you get inconvenienced by any symptoms. You will be examined, diagnosed, treated and monitored in your home. And this should take care of most needs of most people most of the time. Not only is this a good start, but it’s a foundational step, and a perfect place to practice, because you can’t cater to complex needs if you have no idea how to care for simple needs.
Will there be room for marginal plays in drug pricing and maybe devices or exclusive contracting with delivery systems, as most experts (who drove health care into the ground) seem to think? Maybe, but negotiating lower prices for bulk purchasing is neither unique nor disruptive. It does sound like Ambergan will begin by deploying its services to its own employees, but make no mistake, this cannot be about creating yet another middling scheme for self-insured employers. If that’s all Ambergan is, there will be no innovation and no disruption. This must be about the entire health care market. This must be about doing to health care what Amazon did to retail. Amazon didn’t kill retail by restricting consumer choice to idiotic narrow networks of starving suppliers. That’s the Walmart model. Amazon decimated retail in precisely the opposite way. This is a business venture gunning for large market shares, and yes, I know it’s not seeking profits right now, but the entire Amazon retail bonanza started without profit and it remains mostly so to this day.
If you’re a primary care doctor, soon you will be able to have your own little storefront on Amazon, instead of or in addition to some strip mall or non-descript medical building. You will have to provide specifications for your services and cash will be king. Remember those new interstate licensing compacts? That will help here and so are the ever more relaxed telehealth rules and regulations. How about the recent rise in burned out doctors and cash practices? It’s almost like this was meant to be.
For the initial enterprise offering, substitute doctor farm for server farm and you get the AWS of medicine. For the end result, add another layer to the AWS, and substitute each doctor in the farm for say, detergent or movie, and you get the grand idea. Since everybody is shopping for substitutable services, this is the perfect insertion of the high-volume retail model into the high-profit AWS model.
Ambergan need not buy clinics, employ doctors or contract with systems, although it might start out that way. It just needs to get as many doctors as possible on the Amazon Health platform and have them compete, while people review and rate them into oblivion or success. The Amazon platform IS the network, and there will be terms, conditions, stars and promotions. There certainly are many legacy obstacles to overcome, and perhaps that is why Amazon couldn’t or wouldn’t go it alone. Throwing highly regulated markets wide open requires two strong lobbying arms, and a federal government willing to play fast and loose. The stars are indeed perfectly aligned for the first true disruption of our health care since 1965.
Margalit Gur-Arie was COO at GenesysMD (Purkinje), an HIT company focusing on web based EHR/PMS and billing services for physicians. Prior to GenesysMD, Margalit was Director of Product Management at Essence/Purkinje and HIT Consultant for SSM Healthcare, a large non-profit hospital organization. She shares her thoughts about HIT topics and issues at her blog, On Healthcare Technology.
I have distant memories of the HMO-Gatekeeper era that came to an end around 1997-98. There was never a clear explanation for its abrupt disappearance. Having served for two years as a medical director of one small variant, it seemed that eventually the families of the C-Suite folks drew increasingly weary of the restrictive character of networks and referral authorization processes. I refer to the medical centers (especially University based), the insurance companies themselves, and the primary physicians who received no training processes for managing the fringe cost issues, viz., “Just Say No” is not helpful advice for most people, especially in a time of entitlement. If the Ambergan folks offer various plans with various benefits (difficult to do given the variety of State insurance regulations involved) to accommodate the various ways (principally three) most people access their healthcare, the actuarial issues will be very complex.
As Margalit implies, maybe something new will occur and everything will drift off to the horizon under a large rainbow. As I occasionally acknowledged during my office practice, miracles happen but just not very often. I would quote the risk of being hit by lightening. Of course, the risk of dying from a lightning strike has become less and less frequent over the last 30 years. The changing risk of fruitful change in our nation’s healthcare has similarly continued to dissipate. I anticipate no reversal in the near future. There is no discussion of why. The root cause of root causes continues to “plague” the Paradigm Paralysis strangling our nation’s HEALTH and its citizen longevity.
Right away we know–without any details–that there will not be “many buyers and many sellers”….the sine qua non of a true marketplace where prices equal marginal costs and prices are taken and the customer gets the most value.
There is, rather, going to be monopsony purchasing and monopoly selling. This has to be true unless these firms disintegrate into nihilism.
So it is a no brainer that this will not work.
Well, let’s think about it this way:
These 3 firms have over a million insureds between them. They could offer them an option that gives people a fixed sum, say $1,500, per year for routine care, coupled with a low cost, low deductible plan that does not cover said routine care. Obviously mostly young and healthy would subscribe, which is fine for a pilot type thing.
At the same time, they would open the Amazon platform to primary care doctors to sell services to these employees and whoever else is interested. The employees would be restricted to shopping on Amazon (a credits system or EBT style card).
My guess would be that lots of DPC and even currently non-DPC practices would sign up to offer services on this platform. It could create a thriving marketplace given time and the combined entity certainly has the lobbying muscle to remove regulatory obstacles, if any.
Amazon could slowly integrate its tech into this platform to allow ancillary services marketplaces to take shape alongside, and create a decent information and communications platform to tie everything together (labs, drugs, devices, supplies…).
Will it be cheaper? Maybe a little bit. Will it be better? Doubt it. Will it be more convenient? Absolutely. Will it break existing paradigms? Oh, yeah. Will it have unpredictable consequences? Sure as hell.
Will Amazon make a ton of money in the process? Resounding yes. It can happen……
Margalit, even though these three companies probably cover 2.0-2.5 million lives including spouses and other family members, their workforces are very different. J.P. Morgan Chase has lots of highly compensated people who prefer comprehensive coverage with a broad provider network. Amazon has loads of relatively low paid warehouse workers who would probably prefer a skimpier insurance plan coupled with higher wages. Berkshire Hathaway has over 60 operating subsidiaries each with the freedom to come up with its own health insurance offerings that best meet the needs of their employees which can vary considerably from one subsidiary to another.
I’m highly skeptical that this effort will make much progress in reducing healthcare costs. As I’m sure you know, most healthcare costs are attributable to the management of chronic disease including mental illness, along with surgical procedures, cancer treatment, alcohol and drug abuse treatment, end of life care and the like.
Snazzy new technology that might appeal mainly to younger and healthier patients who don’t consume much healthcare in the first place is unlikely to move the cost needle. These three companies aren’t likely to make much headway on lowering drug costs either. Drug wholesaling is a very low margin business, roundly 3% of revenue pretax. For PBM’s, average EBITDA per script is in the $5-$6 range and they have vastly greater buying power than three companies with one million employees will have. Health insurer pretax margins are in the mid-single digits as well and that’s for the for-profit firms. The non-profit Blues have lower margins.
The prevailing attitude among drug manufacturers in dealing with wholesalers, PBM’s and the large drug retail chains is that if the doctors prescribe the drug, you have to carry it and the price is the price. Volume based rebates are offered and paid to move market share which is generally done through favorable formulary placement. They’re not paid just for the fun of it.
Barry, I don’t know that direct approaches to cut costs can work without straight up single payer. They tried to reduce utilization (ration, deny care, reeducation, straight lies, etc.) and all that was accomplished is higher prices to make up for less volume. They tried narrowing networks to pressure the delivery system and that is now peculating through the courts because people hate lack of choice and because they overdid the skimping thing.
I think elections have consequences and we have the “free markets” party now in power. It seems fair to me to give them a chance and see where it goes. There is no way we can continue tinkering at the edges with the current model. Either the private markets can come up with something drastically different or we’ll have to move to some variant of the European models.
Of all the tech companies, Amazon is perhaps the best positioned to take a stab at the problem, so let them try. Why not?
Margalit, I have no issue with them trying their experiment. I just don’t think it will work which is why I think the relatively sharp declines in health insurance, drug retail, drug wholesale and pharmaceutical stocks on the news was unjustified and overdone. Just my opinion, of course.
I’m more optimistic than most regarding long term healthcare cost growth trends for reasons that have nothing to do with the healthcare market and everything to do with personal behavior. To wit, smoking rates are now half or less of what they were in the 1960’s. Many more people have executed living wills and advance directives and are choosing hospice care at the end of life rather than the full court press. There is a growing secular trend toward less soda consumption in favor of bottled water and toward healthier snacks rather than unhealthy snacks. American obesity rates have probably crested. On the technology side, driverless cars, robots, and other devices may allow frail people to live independently longer than before shrinking the need for skilled nursing and assisted living facilities. As the economist Herb Stein told us, a trend that can’t continue will stop.
Margalit, You know that when you have big firms buying or selling anything, that they can charge and pay whatever they want. Monopolies and monopsonies have what is called market power–the ability to affect prices. And, if they get into financial trouble, they will. Why do you think they would do this?…Out of Christian mercy or altruism? They are trying to reduce labor costs. Period. Where and when has a gigantic complex industry ever been taken over and given such therapy? Do you think their shareholders want them to expend such effort without profit? If any subdivision of these three firms gets into financial trouble, what do you think the shareholders will say to management…esecially if they sense a non-profit distraction into this new-fangled health care firm?
I see no charity intent here and I don’t think this should be a straight play just to reduce labor costs in the short term. It would be very disappointing if that’s all it was.
Either Amazon makes a killing or it’s not happening. They’ll shut it down if it’s hemorrhaging cash with no tangible benefits (in the tech world you don’t necessarily have to have net profits). I also don’t see a monopoly. Amazon is just a marketplace. It’s like renting a stall at the market. One can argue (and I did in the past) that platforms like this one are inherently evil because of the level of control they get to exert on activities. These things should be regulated as public utilities once they hit critical mass, like Facebook and Google did. Amazon has ways to go before it gets to that point (except in the book publishing sector where it’s already too big), but it does have enough heft to run a meaningful experiment right now. We as a society can decide what to do with it later. I would certainly not leave it to Mr. Bezos.
Based on what I’m seeing in the news though, I seriously doubt that what I am envisioning here is the intent of this little venture. It’s hard and risky to think big in health care and most people are not very brave…. 🙂
I have discovered indirectly that one strategy underlying the Ambergan effort is to offer enhanced office based data entry devices to order all medications through Amazon for mail delivery bypassing the other PBMs and the neighborhood pharmacies, especially CVS. This could be tied to a new Primary Healthcare EHR as noted below funded by AMAZON and their cloud systems. The current EHR systems are pretty entrenched and its nearly impossible to add another data entry system for the Primary Healthcare processes, even if only for medications.
Maybe the healthcare enterprises would get their EHR needs met with no cost from AMAZON. Seems like anything might be possible. Since we really don’t understand fully the excessive level of our nation’s ‘health spending,’ its likely that simultaneous vertical and horizontal integration anticipated by Ambergan may not do anything to change the cost and quality of our nation’s healthcare other than increase the stock-market capitalization of AMAZON and Berkshire Hathaway. I think its time for the AAMC folks rethink their collective connection to our nation’s current strategy for healthcare reform, as in, it has no hope for success.
That’s an interesting piece of information. I assume they will have to provide their own technology, not just EHR, to anybody touching its system in any form or fashion. But if that’s all they do, you are right, nothing will change….
I wonder, does anyone really believe that Ambergan could “fine tune” the current realms of knowledge underlying our nation’s healthcare sufficiently to solve its cost and quality problems? I realize that the effort is intended to benefit the employees of the investor institutions. Their is no substantial evidence that the current strategy for healthcare reform will solve the fundamental cost and quality problems of our nation’s healthcare.
“I realize that the effort is intended to benefit the employees of the investor institutions”
This has NOTHING to do with benefitting employees. It’s about cutting out the insurers, severely limiting access to medical care, using access to employee medical records to get rid of the high consumers, and then pocketing all the cash.
They could do that….. Don’t most “self-insured” employers already do that?
You go, girl!
I saw a tweet the other day that Communism is a system where everybody buys everything from a single state-sponsored entity, and fully-mature Capitalism is where everybody gets everything from Amazon.
…. and then the state nationalizes the platform and turns it into a utility…. all roads lead to hell.