Amazon has their new CEO. Now what?

Aug. 9, 2018

Everyone wants to know what Dr. Atul Gawande plans to do now that he has been named Chief Executive Officer of the Amazon, Berkshire Hathaway, and JP Morgan (ABJ) partnership to create a new healthcare delivery model.

Amazon is the 800-pound gorilla. The others will follow Amazon’s lead as it has the infrastructure to scale direct-to-consumer as well as on the retail and wholesale side. When reviewing Amazon’s recent history, you’ll find many clues as to the preferred business tactics it employs that will transfer easily to healthcare.

Let’s take a look at a few of those clues:

  • Amazon has the supply chain in place and has redefined how consumers acquire goods and services in multiple industries, starting with books and expanding to, well, whatever you need. Before you say, “But healthcare is different,” buying books, clothing, electronics, and niche products used to be different as well. Then came Amazon.
  • Amazon has a successful track record of eliminating waste and middlemen throughout the supply chain. This problem is especially out of control in the healthcare delivery space. There are multiple middle-men at every step of the way.
  • Amazon has the buying power to stop old tricks and gaming by industry juggernauts. We’ve already seen it work around blocking attempts from Big Pharma when Amazon successfully acquired PillPack.

Amazon will identify the largest areas of wasteful spending on healthcare for employers and employees. Three likely targets for reducing wasteful spending will be:

  • Pharmaceuticals
  • Chronic disease management
  • Over-utilization of primary care

Let’s break these points down.

Reducing the cost of drugs for both corporations and employees is an obvious starting point and Amazon is already making strides. Although industry incumbents will undoubtedly resist and throw up roadblocks every chance they get, if anyone can work through these treacherous waters it’s a team of Jeff Bezos and Warren Buffet. Amazon has the supply chain, retail outlets, and delivery team in place as it is so they are well prepared for this transition.

The old saying goes that ten percent of your employees account for 90% of your healthcare spending. In healthcare there is evidence that an even smaller percentage of employees may account for more than 90% of spending.

With that in mind, in recent years a number of companies emerged that provide turn-key services to employers to assist in managing employees with chronic diseases like diabetes. Although these programs usually begin as voluntary programs for employees, insurers and companies are getting more creative in how they increase premiums for those with chronic disease who choose to ignore tools, resources, and opportunities to live a healthier lifestyle.

Finally, this is a topic for a longer debate but the fragmentation of the primary care delivery model leads to significant over-utilization. Let’s cite some examples:

Tele-Health: Although telehealth was intended to reduce over-utilization of primary care in the emergency room, urgent care, and even in a doctor’s office; to date, there is no evidence that this is happening. In fact, it appears that employer plans that include telehealth offerings may actually be increasing member utilization in many cases.

24-hour call lines: The same issues exist with call lines that exist with telehealth—mostly to due to perceived liability. While patients reach out to a call line with the hope of avoiding a protracted visit to the doctor, they are almost inevitably told they need to go to the hospital or doctor.

Forbes has the full article

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