Amazon Wants to Disrupt Healthcare – What Does it Mean, and How Can Other Employers Band Together?

Photo: Leah Puttkammer / Getty Images

Earlier this week, three corporate giants - Amazon, Berkshire Hathaway and JPMorgan Chase – announced that they were banding together in an attempt to fix some of what is wrong with healthcare. Although this move is ostensibly focused on providing better quality and/or lower the cost care to the employees of just these companies, the stock markets reacted predictably. Amazon is getting into healthcare! What does it all mean? Healthcare stocks took a tumble.

The truth is that we don’t know much yet about the intentions of this new partnership – in fact, they may not have a clear vision yet, either. Most of the predictions have to do with Amazon leveraging its technological prowess in a field where it is sorely lacking. I’ve been talking for years to groups about the coming “Amazon-ification” of healthcare – employee benefits are certainly ripe for an infusion of technology and consumerism.

What is less likely is that these three companies – large and prominent as they are – can significantly move the needle on healthcare delivery or cost. Over the years, many other large, prominent companies have made bold proclamations about plans to dive in and “solve” the issue of skyrocketing healthcare costs. But few have moved the needle at all – healthcare is a massively complicated sector, and because it deals with actual life-or-death situations, the regulatory environment that must be navigated is hugely complex.

Whether this joint venture succeeds or fails, employers do have a few options for banding together to attack healthcare costs. One area is captive insurance companies. In these arrangements, multiple self-funded health plan sponsors band together to form their own insurance company to provide stop-loss to the members. This collaboration drives innovation and accountability among members, and can lead to efficiencies when you trim profits otherwise paid to a reinsurer.

Another way to collaborate is pharmacy coalition pricing. Prescription drug costs are typically the fastest-growing element of any health plan’s expenditures. The pharmacy claims that flow through your health plan run through a pharmacy benefit manager (PBM), who provides technology to instantly adjudicate claims at point of sale (i.e., while you’re at the counter at Walgreens), and even more importantly, provides access to discounts on the drugs being prescribed. Most health plans contract directly with a PBM to provide these services (or do so via their third party administrator). Recently, we’ve seen an increase in availability of coalitions, where employers can access even deeper discounts with the PBM by joining together with a group of other employers.

Last idea for today – and this is the one that really gets me excited – is shared primary care clinics. With enough critical mass in one geographic area, a few employers can band together and open their own health clinic that serves just their employees. I love this idea for a couple reasons. First, we’ve marginalized primary care in this country – primary care physicians are arguably underpaid, and inarguably overtaxed. They need to see so many patients a day that they generally no longer have the bandwidth to create deeper relationships with their patients. This in spite of the fact that primary care is the most cost-efficient way to deliver most routine care, and general agreement that having a single physician who understands the complexities of patient’s health is ideal. Shared clinics allow these relationships to develop. Second, these efficiencies lead to cost savings to the plan sponsors. Patients get better care, and profits built into the system (at the provider group level and insurance company level) are avoided.

Interested in learning more about these types of collaboration? Give us a shout at bayoubenefits@gmail.com