The news that Haven, the joint health-care venture between Amazon (AMZN), Berkshire Hathaway (BRK-A, BRK-B) and JPMorgan (JPM), will disband next month came as no surprise to many health care experts.
The venture that formed in January 2018 sent health stocks plummeting in anticipation of a large-scale cost savings strategy—largely led by a belief in Amazon’s potential to disrupt yet another industry. But the dissolution proves what some naysayers said from the start: There isn’t enough scope for employers, no matter how large, to pressure the system.
Michael Neidorff, Centene CEO, told Yahoo Finance he was never worried about the joint venture, in large part because even with the massive number of employees the three companies had.
“That’s not really enough to get the law of large numbers working,” he said.
But he believes disruption to the industry is necessary.
“We have 25 million lives we are covering, one out of every 15 Americans. They didn’t have the systems and they didn’t have the critical mass that you can develop the network and contracting with,” Neidorff said of the trio.
In large part, the lack of disruption to the health industry is due to a lack of wiggle room. The system is just too complex, experts said.
“Hospitals in the U.S. get paid a lot of money because of market power, the employer-based health insurance model, consumer demand for broad choice of providers, and a fragmented system,” said Loren Adler, associate director at the USC-Brookings Schaeffer Initiative for Health Policy.
Another issue experts noted is that Haven never had any visible impact, even if the companies claim to have gained insight that can be applied over a longer term.
The failure of Haven is “not so much because employers or insurers had never tried to control costs. It was always unclear what new value-add Haven brought to the table,” Adler told Yahoo Finance.
Larry Levitt, executive vice president for health policy at Kaiser Family Foundation, said Haven is just the latest casualty in a field of attempts to take on health care costs.
“Health care providers and insurers have significant market leverage, and that’s difficult to overcome in trying to control costs,” Levitt told Yahoo Finance.
Insurers have offered plans with narrower sets of options for health care services and providers to help bring down costs, but for the largest employers that results in unattractive health care benefits for employee retention, Levitt said.
“These were three very powerful companies that seemed to have common goals of addressing health care costs, but these companies had their own individual ambitions and bureaucracies that Haven wasn’t able to break through,” he said.
Adler also pointed to the fact that even if the benefit to the bottom line is an incentive, employee retention and the tax credits employers get for the benefits serve to maintain the status quo.
“It doesn’t surprise me that (Haven) failed,” Adler said.
Dr. Howard Forman, a health policy expert at Yale University, told Yahoo Finance he initially had a lot of faith in the idea that large employers like the three that formed Haven had the incentive — with so much money at stake — to be able to impact change. But he also had doubts when Dr. Atul Gawande, a celebrated speaker and health policy thinker, was appointed CEO, in large part because Gawande was not known as a manager, and a white paper he submitted as a potential solution to the cost issue was never published.
“I’m losing faith that the employers can fill this void right now,” Forman said, pointing to government entities and innovation in the government space as likely having more impact.
“Even though they do not control the vast majority of (health care) dollars, they do control the vast majority of profit,” Forman said, noting the most profitable patients for health systems are the ones covered by commercial insurers.
Medicare and Medicaid are typically lower reimbursement, often covering less than the cost of services. For this reason, commercial insurers are seen as the bridge to the gap of revenue, and then some. Employer-sponsored insurance remains the largest chunk of coverage in the country.
But the federal government, both as a payor via Medicare and as the largest employer in the country, could move the needle, Forman said.
I'm still ever hopeful about large and influential employers getting more engaged in addressing health care costs. But, as the failure of the Amazon-Berkshire-JPMorgan effort illustrates, political engagement may be more successful than trying to disrupt the health care system. https://t.co/2tMLgpXOWI
— Larry Levitt (@larry_levitt) January 4, 2021
Haven’s news comes amid the coronavirus pandemic, pressure from the Trump administration for greater transparency, and a new Congress and new executive administration.
“Trump certainly deserves credit for breaking the logjam” on pricing, KFF’s Levitt said, but it will be up to the incoming Biden administration, which as been in touch with Gawande, to prompt further change.
How hospital pricing transparency could impact the health sector remains to be seen. On one hand, some say it will exert pressure as transparency does in any other sector, while others say it could further confuse consumers.
“At the end of the day, what really matters is what is the insurer paying and what is the person’s copay and deductible,” said Michael Maron, CEO of Holy Name Medical Center in New Jersey.
Which is why experts say health care is still in dire need of reform, but when and how so is still a question — even as the pandemic has served as a catalyst for addressing change.
“We all know the health care system needs to be transformed,” Maron said. “The question is from where and how, and how painful is it going to be?”