Paul Darling co-wrote this blog post with Pratap Khedkar.shutterstock_698402497-311245-edited

This is the second post in a two-part series on the recently announced Berkshire Hathaway/Amazon/JPMorgan Chase healthcare venture. 

The U.S. healthcare system is broken. Most healthcare stakeholders now are willing to admit that, and many are actively trying to fix it—or at least starting to talk about what it would take to do so. Many of the recent consolidations and vertical integrations are the involved parties’ attempts at solving for links in the healthcare chain that they previously had no access to, or influence over. Now three giants from corporate America are looking to wade deeper into healthcare delivery to see if they can make some fixes for their employees—and for themselves.

In our last post, we discussed what the recently announced joint healthcare venture between Berkshire Hathaway, Amazon and JPMorgan Chase might be trying to accomplish—namely, reining in costs, improving the quality of care and ultimately improving employees’ productivity—but we think that the collaboration could have a much bigger impact on the U.S. healthcare system in general. “BerkshAmazMorgan” just might be a new healthcare model in the making, one that leverages consumer data to deliver real change on the employee health and wellness front while remaking the way that healthcare is paid for, and what it costs.

Heading Off Healthcare Costs Before They Hit

Many large employers already are playing the role of payers. JPMorgan and Amazon both are self-insured, and Berkshire Hathaway’s portfolio includes one of the U.S.’s largest reinsurance companies. JPMorgan Chairman and CEO Jamie Dimon has implied that he’s hoping that the new healthcare collaboration will help the financial services firm spend less on its employees’ healthcare. That’s an obvious goal for all involved parties here, and it could be an attainable one given the three organizations’ purchasing power and negotiating prowess.

It’s even more attainable if the trio focuses on leveraging employees’ behavioral data in an attempt to head off healthcare needs before they happen. The best way to lower healthcare costs is to avoid them altogether, or to diminish the severity of the condition needing treatment. With the right predictive capability, these companies could preserve patients’ health by encouraging—and rewarding—healthier behaviors.

Amazon, with its access to reams of consumer data and analytics firepower, could be piloting a new healthcare solution focused on preventive care, with Warren Buffett and co. underwriting the risk. Consumer data could give Amazon the power not only to predict health events, but also to modify patient behaviors. And Amazon could make for a heck of a beta test. The e-retailer reportedly has more than 540,000 employees, so it’s a decent-sized health plan unto itself.

While Amazon’s data is by no means perfect, it’s getting better by the day, and by the acquisition. For example, Whole Foods brings a directly relevant data set to the equation, and future health-related partnerships could help paint an even more complete picture. Research has shown that social determinants of health—consumers’ social and environmental conditions, coupled with their own behaviors—account for the lion’s share (roughly 60%) of consumers’ health and well-being, while their hereditary history accounts for 30% and their clinical history accounts for 10%. By extrapolating on consumers’ purchases, Amazon can get a pretty good sense of their lifestyles and maybe in some cases their exercise habits. Adding Whole Foods data to the mix could broaden Amazon’s view to include some consumers’ eating habits, and even their purchase of dietary supplements and homeopathic remedies. It isn’t perfect, of course, but they’re in a better and better position to predict what’s going to happen with some consumers’ health.

Focusing on Amazon’s own employee base first wouldn’t make for the perfect preventive-care-focused pilot because some variables aren’t indicative of what you’d find in the general marketplace. For example, if the company’s employee base is relatively young and likely healthy, they’re probably dealing with fewer chronic conditions, which tend to ramp up as patients age. They also aren’t handling Medicare or Medicaid. That said, maybe this is a first step to say, “Let’s solve the problem where there isn’t much of a problem, but we’ll figure out the kinks.” It’s an early experience team, of sorts, and you don’t form an early experience team to handle your toughest account. Or do you? Two recent additions to Amazon’s payroll could indicate otherwise: Physician Martin Levine has experience treating complex, elderly patients, a large and challenging demographic in need of disruption, and Taha Kass-Hout, the FDA’s former chief health informatics officer, brings a background in health information technologies and digital health. In fact, as Amazon Vice President Babak Parviz recently revealed at a healthcare marketing event, “Something ... we’ve been building for some period of time and we deeply care about ... relates to what happens to older people.”

By creating a behavior modification methodology for their employees, BerkshAmazMorgan can incentivize patients to play a more active role in wellness, form healthy habits, and make changes that reduce chronic care issues, emergency department overuse and ultimately costs. But another unique variable is Amazon’s ability to motivate healthier behaviors in its employees in ways that providers and payers haven’t been able to.

A parallel can be drawn to the auto insurance industry, which has long used a carrot-and-stick approach to “reward” drivers with clean driving records and to “punish” those who’ve been in an accident or received a speeding ticket. And with new technologies that help insurers tap real-time behind-the-wheel data, the industry is on the cusp of solving one of the today’s deadliest issues on the road: texting while driving. Could BerkshAmazMorgan similarly collect data on an employee’s food and beverage purchases at Whole Foods and the number of daily steps from her fitness tracker, and then draw a direct correlation to recent weight gain or high cholesterol?

The healthcare system currently doesn’t have many ways to incentivize consumers to practice healthful behaviors (though UnitedHealthcare is dabbling with financial incentives for meeting daily step goals). Avoiding the costs associated with U.S. healthcare is a motivator unto itself, of course, but patients actually are punished for missing wellness visits in many practices. Meanwhile, an employer can manipulate, push and incentivize patients in 100 different ways. Employees will play by the rules partly because their employer said so, and partly because their employer is signing their checks. You don’t listen to your doctor or your payer, but you do listen to your employer.

This data-driven, preventive-care-focused model and employee engagement methodology could be an attractive proposition for many large employers, especially those already playing the role of the payer.

Managing Costs Throughout the System

Beyond building a replicable (and potentially sellable) model, there are a couple other scenarios here. First, BerkshAmazMorgan could leverage their current relationships with healthcare plans to create mutually beneficial collaborations founded on the data-driven, preventive-care-focused model. The trio of companies isn’t likely to pull their employees out of their existing healthcare plans/management services. This likely isn’t a zero-sum game because BerkshAmazMorgan wouldn’t want to manage everything from scratch. Instead, they’ll try to work together with their insurance companies to save money.

Second, BerkshAmazMorgan could supplant the PBM’s role—at least partially. Together, the three organizations have roughly 1 million employees in the U.S., so this new venture would have a certain amount of leverage to negotiate new contracts. The companies could create a precedent by making a deal with the drug companies for the 10 brands that account for their largest drug spending. Maybe they’ll do it just to show it can be done. Basically, it’d be a shot across the bow for the established players.

Of course, this is all conjecture at this point. The only thing that we can say with certainty is that BerkshAmazMorgan will disrupt the healthcare ecosystem. Its very presence already is creating waves. Whatever the trio does next, vertical integration will continue, cross-industry collaborations will increase, and data will be at the heart of it all.


BLOG POST: What's 'BerkshAmazMorgan' Really Capable of?

BLOG POST: Blurred Lines: Can Providers Become Drug Manufacturers?

BLOG POST: The CVS/Aetna Effect: How Pharma Can Prepare for Change


Topics: Pratap Khedkar, healthcare, vertical integration, healthcare ecosystem, Paul Darling, Amazon, pharmaceutical ads, data and analytics, data strategy, BerkshAmazMorgan, behavior modification, preventive care, healthcare model, employee health and wellness