In early 2018, Amazon, Berkshire Hathaway, and JPMorgan Chase joined forces to create Haven Healthcare with the goal of transforming the American healthcare industry. The venture enjoyed significant press coverage and lofty expectations. Haven’s stated primary goals were to improve healthcare services and lower costs for employees at each of the three companies. Additional goals were to make primary care easier to access, prescription drugs more affordable, and insurance benefits easier to understand. However, the Haven joint venture disbanded less than three years after its highly anticipated launch.
Leveraging Data, Not Volume
One of the key initiatives – negotiating both sides of the payer-provider partnership – was based on volume alone. Working with millions of claims for payer clients and seeing the hard-core data, Aver knows the solution to transforming healthcare goes much deeper than volume negotiations. Payers and providers must leverage their data, take a holistic view of the member population, and then identify the key breakdowns and/or opportunities. Sounds basic, but as evidenced by the failed venture, it’s not simple. Leveraging a true value-based care strategy would have been a better approach, starting by looking for inefficiencies, outlier costs, and process improvement, and then driving the best solutions that ultimately address both total cost and quality of care.
One of the contributing challenges was the perverse incentivized structure of the fee-for-service (FFS) reimbursement model. This volume-based model has been deeply embedded in the American healthcare system for many decades. However, FFS has known the ever-increasing drawbacks and flaws, and Haven’s intention to disrupt its infrastructure was a misfired attempt. Over the past decade, alternatives to FFS have gained a lot of traction and, as our most recent series covering the history and future of CMS (Centers for Medicare & Medicaid Services) shows, these alternative payment models (APMs) are getting full government support. Moreover, the goals and incentives outlined in existing and upcoming value-based programs are clear and distinct, including how to deliver better care at lower cost and targeting FFS shortcomings directly. Alignment with some of the value-based directives could have resulted in incremental success for Haven. Lastly, due to FFS being deeply embedded in the current healthcare reimbursement model, incremental success is a more sustainable option than full disruption of the status quo.
The COVID-19 pandemic has presented numerous challenges to American businesses, some of them seemingly insurmountable. Healthcare providers have been forced to expend the majority of their time and resources on managing the crisis and have subsequently taken large financial hits due to a steep reduction in elective and non-urgent procedures. Haven’s shortcomings were magnified in this uncertain environment, and they were unable to affect lasting change.
Working with Marketing Leaders, Not Independent of Them
Despite the size and influence of Haven’s three constituent companies, the joint venture was unable to exert the power necessary to negotiate lower prices from healthcare providers. In order to obtain the necessary leverage to reduce healthcare costs in a market, Haven would likely have needed a majority of the market’s healthcare-eligible employees. Unfortunately, the employees of Haven’s constituent companies were dispersed across the country and could not be centralized into a single market-dominating asset. Each of the three founding companies attempted to execute Haven’s mission statement independently with their own employees, rather than as a consolidated effort across the founding companies, thus negating the purpose of a joint venture. Their efforts were also hampered by the continued consolidation of health systems in the U.S over the last two decades. These two factors severely hindered Haven in efforts to accomplish its goals.
Improving the American healthcare system is a complex problem, and many who have tried remain entrenched in their philosophies. Despite the admirable ambition of providing a large conglomerate of U.S. employees with simple, high-quality care at a reasonable cost, Haven was unable to overcome the entrenched complexity and zero-sum game model of the American healthcare business model. True change begins with a complete view, real understanding, and unifying solutions that remove the cost-quality opposition of the healthcare system. Leveraged correctly, value-based care is the strategy that significantly begins to create the change everyone wants.