If recent market activity is any indication, healthcare is ripe for innovation and disruption to help drive improved access, better outcomes, and lower cost / greater affordability (the long-stated “Triple Aim” in healthcare). The recent Amazon, Berkshire Hathaway, and JPMorgan announcement is the most recent in a growing list of vertical integrations, capabilities expansions and transformational moves that are reshaping U.S. healthcare:
- CVS signed an agreement to acquire Aetna, creating a “healthcare hub” through the combination of an insurer and a PBM and retail pharmacy;
- UnitedHealth Group is significantly expanding its care delivery footprint through its acquisition of DaVita Medical Group;
- Humana is bringing care delivery into the home through its pending investment in Kindred at Home;
- Express Scripts acquired eviCore, creating a “patient” benefit management company capable of managing both medical and pharmacy benefits; and
- Cigna acquired Brighter, a digital health platform with member facing navigation tools to help members find high quality, high affordability healthcare
While it’s easy to categorize the Amazon, Berkshire Hathaway, and JPMorgan announcement as just one more example of industry consolidation, this new consortium has signaled its intent to mix things up and try new solutions to solve old problems. This bold vision has obviously triggered a series of industry reactions: evaluation of the potential ramifications of the newly formed company, discussion about the long-term implications of the consortium, and lower share prices for some of the most well-known companies in healthcare. Upon reflection, we have identified three forces that will likely inform the strategy for this new “healthcare change agent”:
- The Strategy is Still Unknown. The announcement was intentionally vague and gives the consortium plenty of leeway to mold the strategy as it continues to navigate the large and tremendously complex healthcare ecosystem. Industry experts have shared a range of ideas from launching managed care and pharmacy benefit offerings to focusing on early-stage digital health solutions. Regardless of the ultimate strategy, these three prominent organizations and their leaders are aligning to attack the “hungry tapeworm” in our American economy. The strategy may take several forms but it will focus on reducing costs, while concurrently enhancing patient satisfaction and outcomes.
- We Have Seen This Before. Healthcare is an industry with a deep history of partnerships between industry players, especially collaboration driven by large employers. Groups like the Employee Health Innovation Roundtable and the Pacific Business Group on Health are catalysts for employers to help drive innovation in healthcare. The Health Transformation Alliance (HTA) was formed with 20 founding members consisting of large employers, including JPMorgan and Berkshire Hathaway’s BNSF Railway. The purpose of the HTA is to reduce the cost of healthcare for employer partners by amassing greater volume of employer lives to generate enhanced purchasing power and leverage with the industry’s service providers – principles that will likely parallel the new consortium.
- The Industry Wants, and Needs, to Partner. Despite potential competitive tensions, many industry veterans have publicly welcomed the new market entrant and look forward to exploring potential partnership opportunities to drive innovation that can attack the escalating costs of healthcare. Collective alignment on creating new solutions to deliver more efficient healthcare appears to be trumping, at least on the surface, initial fears of losing share to a new market entrant. While Amazon, Berkshire Hathaway, and JPMorgan have incredible resources and talent, solving the challenges of healthcare alone will not be easy. The stated plan is to leverage their collective resources, but the journey into healthcare could be long and expensive without partnering with existing, best-of-breed organizations that bring experience and capabilities aligned with the consortium’s mission. Warren Buffett’s comment, “Our group does not come to this problem with answers” could be a potential signal of the group’s willingness to partner.
While there is still much to learn about this new consortium, TripleTree believes there are three key market categories where we anticipate collaboration with Amazon, Berkshire Hathaway, and JPMorgan:
Insurance and Pharmacy
Large Managed Care Organizations (MCOs) and Pharmacy Benefit Managers (PBMs) possess the scale to bend the cost curve and ability to drive market-wide innovation. Entrenched players are already serving Amazon, Berkshire, and JPMorgan today and are ready to expand their partnerships to help drive transformation. Cigna and Express Scripts have both expressed their interest to partner with the three companies. Cigna CEO David Cordani told CNBC, “We see more opportunity than not” with the consortium. Express Scripts noted its eagerness to partner in a statement, “The announcement by Amazon, JPMorgan & Chase company, and Berkshire Hathaway is clear recognition that the healthcare system needs to continue to create and deliver meaningful value to payers and patients…We look forward to hearing more about this new initiative and how we can work together to improve health care for everyone.”
Jamie Dimon underscored the importance of empowering the consumer: “Our people want transparency, knowledge, and control when it comes to managing their healthcare.” Enter the digital health ecosystem, which possesses an ability to demystify the complexities of the healthcare system in the eyes of the consumer. These vendors are able and willing partners that can provide what Mr. Dimon is searching for - solutions that enable consumers to make informed decisions about the cost, quality and location of their healthcare.
The benefit management ecosystem is rich with enterprise vendors focused on bending the medical expense cost curve on behalf of MCOs and at-risk employers. These vendors’ efforts to direct beneficiaries to the highest quality, most affordable care has been effective as at-risk entities continue to outsource these capabilities. eviCore CEO, John Arlotta, noted last fall, “The greatest opportunity to improve healthcare is by reducing wasteful spend and overutilization while delivering quality outcomes.” Benefit management vendors have expertise in providing solutions at scale and can be meaningful partners to the consortium in driving down cost and improving quality.
TripleTree is optimistic about the opportunities and partnerships to come triggered by the Amazon, Berkshire Hathaway, and JPMorgan consortium. While the partnership and its mission are similar to previous industry partnerships, this particular group will bring a different recipe to the healthcare industry, and we are excited to see what flavor it brings to the market.
Let us know what you think.