Introducing the real amazon prime health. Ready?
I just finished reading a few more op-eds on how Google, Walmart, Facebook, Comcast and the yet-to-be-named Amazon-Berkshire Hathaway-JPMorgan Chase (ABC) not-for-profit are going to fix healthcare. Unfortunately, most new entrants will likely give way to an industry perfectly designed to yield the same current results — questionable outcomes, gross inefficiencies and perverse, out-of-control consumer pricing. The C-suites of all these companies openly admit how difficult and complex the task will be, and few are envisioning board meetings ending with everyone high-fiving and chanting “we got this.”
Whether new entrants succeed or not is irrelevant. Either way, they’re positively pushing the incumbents, challenging the status quo, placing the industry under a microscope and, more importantly, pressure testing a system to see if it has any chance of becoming a true consumer market.
From what I’ve read, those predicting how a company like Amazon will disrupt healthcare all seem to be pointing to the obvious like leveraging their tremendous buying power to negotiate better
pricing and having Alexa remind us to take our medications or order our next PillPack. Simple tactics and technology alone will not fix the complexities and fundamental issues of our current healthcare system, for which “sick care” is a more accurate description.
At the risk of sounding like I’ve loaded the silver bullet, I think most predictions are missing the real power that Amazon could exert to extend our individual health spans, improve population health, reduce pricing, deliver consistent quality and, as Warren Buffet has famously stated, ultimately kill “the tapeworm of the U.S. Economy.”
Could these business giants reduce current inefficiencies by 30‑50% and over-diagnosis and over-treatment within their employee populations? Absolutely. It’s low-hanging fruit. Many large employers have already paved the way toward reducing their annual healthcare spend by taking an active part in implementing “novel” or alternative delivery models like direct primary care (DPC), on-site clinics, telehealth, specialty carve-outs, direct contracting, incentivizing physician and employee behavior, and by demanding financial transparency. All these, by the way, aren’t really novel —they’ve been around for over 20 years and are once again being recycled as innovative with hope that maybe they’ll work this time around.
Regardless, these courageous large employers are outliers. To most employers, sponsored coverage is a nuisance. Some people, like Dan Munro, author of “Casino Healthcare” and Forbes contributor, might argue that employer-sponsored insurance is the reason for the majority of what’s wrong with the U.S. health system. And as much as employers complain about the high cost of employee healthcare, they do get a tax write-off at the end of the year. Maybe it’s enough to make them feel a little better about 5+ percent annual cost increases. Unfortunately, most are not equipped with the knowledge or resources to take greater control of their healthcare spend even when healthcare costs are one of the highest expenses on their balance sheet. The new CEO of the ABC healthcare company, Dr. Atul Gawande, will likely face many of the same challenges as he first focuses on creating greater value for ABC employees.
Outside of their own employees, will ABC and other new entrants inspire external innovation, disrupt the status quo, drive down healthcare prices and improve people’s health spans? No, unless they all create or greatly influence a near-complete system redesign by turning the existing healthcare food chain on its head and, more importantly, help change the collective human behavior that feeds it. The reason being that the current healthcare system has been designed to get the exact results it gets, namely:
- Hospitals make their own pricing, like an unregulated utility.
- Physicians make more money by over treating and increasing utilization.
- Insurance companies benefit from high cost, as it results in greater profit.
- Brokers benefit from higher cost, as it increases their income.
- Pharmaceutical companies enjoy no limitations on price or profit.
- Employees have no interest or influence in purchasing decisions.
Healthcare consultants are well aware of the system’s shortfalls, as are most healthcare CEOs and administrators, but often conflicted about making fundamental changes.
To get different results, the fundamentals of the system must change. And changing the fundamentals isn’t popular because it will result in many stakeholders losing money or, if they’re smart, cannibalizing their own business before someone else does. If any company can force change, reinvent a business model, and overhaul an inefficient and ineffective market, it’s a new entrant like ABC. Much of what happens moving forward and the speed at which change occurs will depend largely on courage, passion, trust, creativity, empathy, persistence, patience and the permission to fail.
The Healthcare Food Chain
Let’s review how the healthcare food chain is designed today (reference Figure 1). Currently insurers are at the top, then large healthcare systems, physicians and, at the VERY bottom, employers and individual consumers. The closer to the top, the larger the influence in decision making relative to what services get delivered and paid and take the lion’s share of profits. Stakeholders on the two lower tiers are stuck paying for poor quality and questionable value.
How many other industries or markets relegate the individual consumer to the least influential part of a purchase?
Think about how upside down it is and who SHOULD have market power and influence. There are approximately 300 million U.S. consumers, one million doctors, 5,000 hospitals and 25 commercial health insurers, with only a handful controlling the majority market share (sans the largest payer, Centers for Medicare and Medicaid Services (CMS)). There are more consumers than doctors, more doctors than healthcare systems and more healthcare systems than insurers. In a true market-based system, consumers would be influencing the products and services delivered and the price they’re willing to pay. For instance in India, open-heart surgery performed at institutions equal in clinical outcomes (and in some instances better) to their U.S. peers costs about $2,000. In the U.S. the same procedure averages $150,000.
Conceptually, employers, individual consumers and physicians could work together and turn the current food chain upside down, but it’s a Herculean effort that most are too afraid or unwilling to try. They feel the boat is just too damn big to turn and have become accustomed to the “healthcare normal” of it being an expensive, disjointed, poor experience. I find it fascinating that many physicians are happy to get 110% of what Medicare pays. Some might say that’s analogous to being happy with making 10% over minimum wage.
The Blame Game
It’s convenient to point a finger and demonize CEOs of insurance companies, hospital systems, large physician groups and big pharma for out-of-control price increases. Let’s not forget, they’re just doing what they’re hired to do — create maximum profit and shareholder value. The CEO of United Healthcare has received compensation of over $270 million over the last six years. However, the root cause of the systemic problems in medical care is not the high compensation of United’s CEO, it’s actually closer to you and me. We’ve individually and collectively decided that we’re powerless to change things and just put up with current reality. Psychologist Martin Seligman calls this phenomenon “learned helplessness” where we’re conditioned to accept pain and discomfort to the point of believing it’s so inescapable and out of our control that we stop trying even when given an option to avoid the pain.
Ask any hospital CEO or CFO what their biggest priority is and they’ll tell you (if they’re totally honest) “filling beds” or the new-top-of-mind term, “control patient leakage” (losing an opportunity to treat a consumer). Again, don’t lose sight of the fact that hospitals, physicians and everyone in the “medical industrial complex” only make money when people are ill. To this end, our healthcare system has been brilliantly designed and adjusted to extract about $4 million out of every millennial’s life span. Treating illness pays well. Preventing illness, historically, hasn’t paid anything.
What we have is a system that capitalizes on individuals not willing or able to make better lifestyle choices, change behavior, understand the basis of what they’re paying for and agree on how healthcare value is defined.
Are insurers, hospitals, physicians and big pharma “working within the system” to the financial detriment of employers, employees, individual consumers and the economy? But how much is our individual behavior to blame?
The Root Cause
In Ray Dalio’s video, “How the Economic Machine Works,” he emphasizes that economics are driven by one key factor — human behavior. Not unlike the economy, our health and wellness is greatly influenced by behavior. It’s the single most important factor in our lives — more so than our genetic makeup.
The root cause of our healthcare (sick care) problem is not only our acceptance of the system’s dysfunctional design and pricing, but equally the greater impact of our individual lifestyle and behavior choices. Aside from an occasional random cell mutation, our overall health is largely dependent upon lifestyle and what goes into our mouths and lungs. Social determinants play a significant part and represent a huge opportunity that’s finally getting the attention it deserves by CMS and startups alike.
Are non-transparent pricing, 30-50% waste, over-treatment, upside-down incentives and lack of trust feeding this economic tapeworm? Absolutely. Is individual behavior cited as the root cause of most illness and reduction of life spans? Not so much.
Is Population Health Improving Financial Health?
With the cost of healthcare reaching an all-time high of over $28,000 per year for a family of four, maybe we’re getting closer to a proverbial tipping point. If your employer is picking up 60 percent of the bill, it’s still expensive. If you’re an independent or member of the gig economy, it’s a choice between paying a mortgage on a $500,000 house in Austin, Texas, or paying healthcare premiums.
On the delivery side of healthcare, other onerous trends and statistics are accelerating the battle for market share, mergers and acquisitions and collaborative partnerships between providers, payers and technology companies.
And although the party line is that consolidation will lead to decreased costs, greater efficiencies and better outcomes, it remains to be seen if it comes to fruition and if decreased costs and increased efficiencies will result in lower healthcare premiums, improved outcomes and better experiences for consumers, or if providers and payers will just continue to maintain growing profit margins.
Managing and improving the health of large patient cohorts or populations of people is a really difficult task to do effectively. Many providers believe they can do it internally without external expertise, advice or technology. Managing the health of populations is a collaborative undertaking, and going it alone imparts more risk and probability of failure. With a few exceptions, value-based care programs that have been totally provider sponsored have not produced great results.
The work of more than 70 population health and AI companies all on a mission to improve care and reduce costs are moving the needle in the right direction. Cerner’s recent $266 million investment in Essence Health and Lumeris is a perfect example of complementary partnerships that could make a big impact, strengthen providers’ control in the food chain, make healthcare more frictionless, improve efficiency, and become a hallmark for population health and value.
However, healthcare and prevention is a behavior-change business. You can install the latest technology, evidence-based protocols, processes and methodologies, but if you can’t change the behaviors of consumers and providers, and incentivize those involved in the healthcare ecosystem, nothing will change. What’s more, if the fundamental design of the system stays the same, one cannot and should not expect different results.
Innovative startups, mid-market companies and new entrants like Google and Apple have their work cut out for them even though they understand human behavior better than most. But if any new entrant can help change our health-related behavior and redesign a system to produce better outcomes with better economics, I’m leaning toward ABC. However, the metrics by which we measure population health success must be radically different than they are today.
Behavior and Lifestyle Change
It’s really hard. It’s why we try the latest diet, re-join the gym every January and stop going in March and regress to consume over 66 pounds of sugar each year, smoke, overindulge in alcohol, sleep poorly, avoid vacation, and work in stressful jobs we hate.
The bottom line — we need help to change our behavior patterns.
Although Amazon is often demonized for its unending appetite for cannibalizing just about every industry, Facebook for selling detailed consumer data with the result of manipulating political views, and Google for knowing more about us than we do, they all have a fantastic opportunity to help us change the course of chronic illness and the behaviors that cause it – IF, and it’s a big IF, they commit to protecting our personal data, securing our trust and leveraging the data they currently have to help us lead a healthier lifestyle with a vision of extending our health span.
One of the reasons why the CEOs of major insurance companies, pharmaceutical companies and large healthcare systems are concerned with new entrants like ABC is because they can provide something that insurers and providers struggle with — the trust of consumers. According to a recent Harris Poll, only 7% of Americans trust their health insurance company.
The winners of Healthcare 3.0 (or 4.0) will be those delivering the best experience, lowest price and highest trust (great outcomes should be a given).
Incumbents should realize, if they haven’t already, that with a few additional simple pieces of personal data, trust (our opting in), security, frictionless experiences and a different profit motive, endeavors like ABC have an opportunity to redefine the meaning of healthcare value and change consumer behavior. And if they’re successful changing consumer behavior, they can turn the current healthcare food chain upside down so it more closely resembles a true market-based system.
Now before you say, “I’m not providing any more personal information to any company — look what happened with Facebook and Cambridge Analytica,” have you closed your Facebook account? Have you noticed smartphone and social media addictions waning?
Social media and the smartphone we carry are the new addictions, and they’re going to be very difficult, like most behaviors, to change. At the same time, both could be the keys to improving population health in a very personalized way.
The word addiction carries a negative connotation, but it doesn’t have to. The phrase “addicted to good health” may sound oxymoronic but it could become part of a business model with a unique value proposition.
Silicon Valley insider Jaron Lanier believes that social networks have become “behavior modification empires” dividing people through manipulation and surreptitious intent.
Instead of social networks and data brokers vacuuming up consumer information to divide, there’s an opportunity to create “healthy behavior modification engines” for the common good with complete transparency. I can think of plenty of ways that Amazon and others can monetize addiction to good health.
At this point, it’s remains unclear and too soon to predict what Dr. Gawande’s initial business strategy and approach might be as he first leads his new company to provide improved healthcare value to the employees of ABC. And although it may be cloudier as to what external value propositions ABC might offer the external health consumer, one thing is clear — the data that ABC already has is far more valuable than their ability to negotiate better pricing or implement novel alternative delivery models.
Introducing ABC Prime Health
Regardless of recent data scandals, if Cambridge Analytica could be as successful with micro-targeting individuals in the same household to sway their behavior to vote or behave in a desired way, imagine what Amazon could do with what it knows about us for the good of improving individual health.
The Amazon “know me” and “trust me” factors are pretty amazing when you think about it. If you opted in to letting an Amazon delivery driver open the front door of your home or leave a package in the trunk of you car, then it’s pretty safe to say you trust them. If you didn’t, that fact that Amazon felt confident enough to offer the option speaks volumes about their internal perception of customer trust.
If you shop on Amazon, it already knows your name, gender, address, location, credit card number, creditworthiness, reading preferences, approximate weight (if you buy clothes), education level, purchase and search history, and personality type (if you leave reviews). From these data points Amazon could infer a tremendous amount about your lifestyle, income level, personality and health. If you shop at Whole Foods, Amazon could curate data on what you eat and how much you spend on various types of food. With the recent acquisition of PillPack, Amazon will be able to determine your chronic health issues by the medications you take, and even apply an overall health-risk rating. If you’re a Medicare or Medicaid beneficiary that’s having trouble getting to and from doctor appointments, Amazon could leverage their Flex driver program and offer a non-emergent medical transport (NEMT) service.
Google, Apple, Microsoft and a host of healthcare providers and payers have tried to get people to enter health data into a personal health record (PHR) only to eventually shutter efforts. Apple is trying again and has entered into an agreement with 40+ hospital systems.
It’s been a challenge to get consumer adoption and continual use of PHRs. It remains to be seen whether Apple’s Open API and integration with provider electronic medical records (EMRs) will be successful this time around. The problem is people just aren’t interested in taking the time to enter their health data. The ROI just isn’t strong enough, especially if you’re healthy. They want someone else to do it for them.
With the data Amazon already has, all that’s missing, clinically, would require a consumer to write a short history of surgical procedures, ailments currently bothering them, and family health history. Amazon’s use of artificial intelligence (AI), machine learning and natural language processing will take all that is written and codify it automatically to create a nearly complete personalized health profile.
As an Amazon (or ABC) subscriber, all you have to do is opt in to the Prime Health Platform and get suggestions on how you could improve your health based on the data aggregated as part of your personalized health profile and continued purchasing habits. Not much different than how Amazon currently suggests books or products you might like. Tie in Alexa, a smartwatch and phone, and other IoT devices like Bluetooth blood pressure cuffs, glucometers, a weight scale and pill box, and Alexa could provide reminders, alert and coach you when your goals are missed, and congratulate you when you’re on target. Based on your health challenges or other interests, Prime Health could make referrals to physicians, health organizations or insurers with the best experiences, outcomes and prices. And there’s no better time to reinforce a behavior or nudge someone to act than right at the moment of a purchase decision when you have their undivided attention. Further reinforcement could occur through daily “nudges” to help you change your habits and behaviors. I could go on and on ideating with much more advanced capabilities, but you get the idea….
What’s more, ABC’s revenue could come from subscriptions to the Prime Health Platform and associated purchases made from personalized recommendations.
The big unknown for the likes of ABC is whether their healthcare vision and mission includes redesigning our healthcare system with new fundamentals and leveraging their knowledge, know-how, technology and expertise in consumer behavior to produce better health outcomes, redefining healthcare value and turning the healthcare food chain upside down.
I anticipate ABC stacking the deck by forming partnerships and acquiring population health companies, status-quo-busting providers, human-centered design firms, digital health innovators, AI and semantic inference technologists and novel social media health platforms. The collective knowledge, behavior change know-how, methods, processes, data and new success metrics could lead to the disruption that everyone so often talks about. Disruption, regardless of its pace, must include drastic reductions in consumer pricing and lateral changes in market expectations, value propositions, consumer and provider behavior, self-care and personal responsibility.
It’s safe to say ABC has the resources, time and expertise to disrupt or reshape a market. And although it’s getting difficult to discern what Amazon is as a company, what is clear is that it’s a disruption machine. It remains to be seen whether Dr. Gawande will drive disruption in an aggressive manner or in a more tempered way that seeds a vision of improving the health of the U.S. population, changes the fundamental economics and redefines how value is defined. It takes a great deal of courage to change the world in a meaningful way. Personally, I can think of no better mission for Dr. Gawande and everyone involved in healthcare transformation than to increase our individual and collective health spans and, simultaneously, kill the “tapeworm of the U.S. economy.”
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