For decades, corporate America has sought relief from the burden of rising healthcare costs.
Employers have formed regional and national coalitions to shine a spotlight on provider quality and safety, and to promote value-based payment. Employers have contracted directly with providers for lower costs and high quality care. Employers have designed narrow networks to limit provider participants to those that can meet stringent requirements for cost and quality.
Employers and providers can point to successes in individual projects and markets. Yet, these projects have not been able “to influence the underlying system,” said Michael Thompson, CEO of the National Alliance of Healthcare Purchaser Coalitions. Overall healthcare costs continue to be unsustainably high and growing. Premiums for employed workers have grown 55 percent and real health spending has grown 30 percent since 2007. Healthcare spending makes up 18 percent of the nation’s gross domestic product.
In general, employers’ efforts to reduce costs and improve quality have worked within the framework of the traditional healthcare system. However, lack of progress may be causing employers to rethink this approach. Recent news about efforts by Apple, Amazon, JPMorgan Chase, and Berkshire Hathaway to redesign healthcare suggests that large employers are losing faith in the ability of traditional healthcare providers to redesign healthcare themselves.
A Widening Gap
The rise of the Internet economy has widened the gap between how traditional providers and modern businesses view healthcare.
From the traditional provider perspective, healthcare is predominantly a face-to-face interaction between patients and clinicians. From the modern business perspective, healthcare should be primarily digital, like so many other experiences and transactions in today’s world.
From the traditional provider perspective, healthcare is inconvenient and expensive because of the extreme complexity of the overall system. From the modern business perspective, healthcare is inconvenient and expensive because traditional healthcare organizations make it that way through their own practices.
From the traditional provider perspective, change is incremental, requiring slow evolution of culture, structures, processes, and technology. From the modern business perspective, change is fast, furious, and continuous, and the ability to innovate separates the winners and the losers.
The catalyzing difference between the traditional provider perspective and the modern business perspective is their views of expertise.
Healthcare represents the entrenched expertise model. By virtue of training, credentialing, accreditation, and experience, healthcare professionals view themselves and their organizations as having unique expertise. This expertise makes them the obvious ones to design the healthcare experience. For years, businesses accepted this notion of expertise and worked through traditional healthcare professionals to change the system.
However, modern businesses—particularly tech companies—have a very different attitude toward expertise. Amazon’s hallmark is a willingness to enter completely new industries—from cloud services to groceries—with the confidence that it can dominate. Apple moved from designing and manufacturing computer hardware to transforming mobile interaction and music. An analyst crystalized this notion of boundaryless expertise in a comment about retail companies and mobile technology: “We believe the mobile guys are going to figure out retail before the retail guys figure out mobile.”
The ability of tech companies to master complex new industries has raised a new idea for how employers could improve healthcare: do it themselves.
The past two months featured headlines about two initiatives in which large employers seem ready to take healthcare into their own hands.
On January 30, Amazon, JPMorgan Chase, and Berkshire Hathaway announced plans to form an independent company to “address healthcare for their U.S. employees.” Although the partnership is in its early stages and the announcement is short on details, the tone is ambitious and suggests goals broader than reinventing care for the companies’ employees.
The group promises “a fresh approach” to one of “the greatest issues facing society today.” Berkshire Hathaway Chairman and CEO Warren Buffet lambasted the “ballooning costs of healthcare [that] act as a hungry tapeworm on the American economy,” expressing the companies’ shared belief that they can “check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.” Amazon CEO Jeff Bezos promises to bring “a beginner’s mind” to “reducing healthcare’s burden on the economy.”
On February 27, CNBC reported that Apple was more quietly pursuing a similar goal. Under the name AC Wellness, Apple is launching a network of primary care clinics for Apple employees and their families in and around its headquarters in Santa Clara County, California. Job listings describe the network as consisting of “multiple, stunning state-of-the-art medical centers.”
Some of the job listings call for “designers” of clinical and population health programs—a strong signal that the initiative is more than a traditional group of clinics. Apple’s use of design as a competitive differentiator is well known. The company’s success rests largely on what Apple calls a “pure product”—one that delivers a reimagined, friction-free customer experience. Apple CEO Tim Cook has spoken about the company’s interest in bringing this pure-product perspective to healthcare. Hiring “designers” to work with operations and technology staff means that Apple is looking outside the traditional expertise model to reimagine the healthcare experience.
It is too early to know what these initiatives will become or what they will achieve. None of the companies has extensive experience in healthcare. Large as they are, the companies may not have sufficient volume of employees to affect healthcare costs in a major way. The complexity of healthcare may prove to be too much even for these innovators.
The companies are open about the significant dimensions of the challenges they face. Their relative lack of experience may prove to be a benefit, freeing them to work from a blank page rather than building on a flawed foundation. The track record of these companies, and the likelihood that they will expand their healthcare footprint beyond their employees, means we should take them seriously.
The willingness of these companies to take on such a huge socioeconomic challenge shows that they question whether traditional healthcare organizations can make the changes necessary to reinvent healthcare. It’s up to America’s healthcare providers to prove them wrong.