Let’s start with the numbers: JP Morgan + Berkshire Hathaway + Amazon = Approximately 1,300,000 employees (this number can fluctuate by as much as 10% based on seasonal employees). There are approximately 325,000,000 people in the United States of America. Approximately 90% of Americans have some form of healthcare insurance. That equates to approximately 292,000,000 covered people.
The Three (as I will refer to them going forward) represent less than 1% of the insured U.S. population. Even with their billions of dollars in revenue, even with the high regard that The Three are held in, they simply do not have the power, leverage or numbers to move the system in the manner in which they are proposing.
Pitfall #1: Not taking into account people’s affinity for their doctors.
Most families have multiple doctors they utilize at different points in time. Whether it’s a family practitioner, pediatrician, Ob-Gyn, therapist or specialist such an orthopedist, people want to see their doctors. They have built relationships with these people and they have established a level of trust with them. If they are going to build an at-cost network of physicians and specialists they are going to have to get the doctors in their network to agree to salaries and create incentives to allow them to make more. I know a lot of doctors and while most will tell you that they do it because it’s their calling/passion/life goal, they all also want to be paid and not limited on what they can make. Everyone wants to make a profit and the retail model of cost plus margin will not work in this case.
Pitfall #2: Handling the care of a dispersed workforce
Geographically speaking, the network of medical professionals The Three would need to build would prevent them from being able to cover their people locally and efficiently. It might work in a place like Seattle where Amazon employees may generally live in a concentrated area but that may not overlap with the other two and their employees. Especially with JP Morgan being one of The Three. They have employees geographically dispersed all across the United States. Even if they could find one doctor in every area they have a retail branch or business office that means everyone has to see the same doctor. Also, the number and type of facilities that would need to accept their plan in a given area is huge. Hospitals, urgent care, specialist offices etc…
Pitfall #3: Weathering massive upfront losses
Many businesses initially operate under the assumption that upfront losses will lead to massive gains in the long term. In this case, if you read into the statements made when The Three announced this endeavor, they hope that other large employers will join them. The Three know going into this that they will take a fiscal beating as they roll this out. What they are betting on is the fact that small short term successes will persuade others to join them. As numbers grow, losses will decrease. It’s a study in the Amazon model. I am going to go out on a limb and state that I don’t think they understand just how much of a beating they will actually take. It will be BILLIONS of dollars over years.
Pitfall #4: Seeing healthcare as purely dollars and cents
Healthcare is not a dollars and cents game for the people who utilize it. This is people’s lives, its personal and it’s emotional. Whether it’s your yearly checkup, a child’s well visit or a mammogram after finding a lump, it is all quite personal. You can’t just boil healthcare down to profit and loss or cost verses margin. The human factor and the levels of satisfaction or dissatisfaction will ultimately decide whether The Three will be successful or not. Ignoring the emotional needs of the people upfront will spell disaster in the long run.
So what will work?
First, without embracing telemedicine, The Three are doomed. Here is what I recommend. They should conduct their own research and determine the top 25-50 illnesses or conditions that are treated by primary care physicians, pediatricians, urgent care facilities and general practitioners. Once they have this list they need to determine how much is spent annually on the diagnosis and treatment of these illnesses and conditions. Lastly, determine what technology can be used to diagnose and treat the list. This will establish their Telemedicine baseline. The baseline should account for significant percentages of the general healthcare dollars spent by people today. They have to get to the point where they can say that their telemedicine visits that are paid out at $29 per visit reduce the expenses related to this list by 60%, 75% or even 80%.
Telemedicine will also allow The Three to break the doctor/patient bond which would otherwise significantly hamper their efforts.
Here’s how it could look. As each employee is brought into their system, Amazon ships them a Telemedicine Technology box. In this box you have all of the things you need to complete a telemedicine visit that can diagnose and treat those top 25-50 illnesses and conditions. A dedicated Healthcare Kindle, a weight scale, a scope of some kind as well as other devices. Device companies like Tyto, OMRON, Livingo, Fitbit and even Apple will line up to be a part of this program. Users of this healthcare plan can only utilize telemedicine and the associated technology they have received for this list. This will allow The Three to control the cost of initial diagnosis and treatment of the most frequent reasons for healthcare facility visits. In this model, if a person is a newly diagnosed diabetic, a new box will auto-ship to them with all the supplies they need and a Telemedicine app to support it. If you have CHF, a new box with a BP Cuff, Weight scale and Pulse-Oximeter will be sent to you. If you don’t use it daily, they can drop you or charge you for your visits. They need to not only embrace the platform but the supporting technology that enables it.
If the Telemedicine Practitioner determines you need to visit a brick and mortar location for additional diagnosis and treatment they will have a local resource to send you to. Now, if The Three want to create patient center homes with salaried staff physicians and specialists, they can control access and costs. If the employee doesn’t live in an area where one of the patient center homes is accessible then The Three will wind up paying for “out of network” visits. As most plans do, they will limit their exposure by capping the amount spent on these types of visits.
As technology advances and telemedicine providers are able to do more, treat more and remotely handle more advanced medical situations, The Three’s plan will take off. In today’s healthcare environment there is much they can do with Telemedicine but this is going to be a slow climb to achieve the heights and levels of success that we have all come to expect from these companies.