Large Employers and Healthcare Consolidation

Bruce Feinberg, DO: Mark, you brought up this issue about the fact that the largest employers are going to be a catalyst that’s going to push this forward and that to some extent we’re the catalyst. And yet a group of those largest employers have already aligned despite these mergers to say that they want to take over, that they want more control. Everybody is pretty familiar now with the Berkshire Hathaway, Amazon, JPMorgan Chase announcement and the recent hire of Atul Gawande to be the CEO of this enterprise. There’s very little clarity on exactly what it is and what his mission is other than to improve quality and cost of care for those who are employed by those companies, which represent millions of people either directly or indirectly.

You offered the premise that employers are promoting these kinds of mergers, and there’s a lot of talk around the patient’s centricity and consumerism that they represent, yet we’ve got 3 of the most sophisticated and largest employers who are saying, “This is not what we’re talking about. It’s something else.” What’s the something else?

Mark S. Soberman, MD, MBA, FACS: I think we’re already seeing a bit of the something else. Look at the carve-outs we’ve seen. For example, large employers like Lowes and Home Depot sending their patients to the Cleveland Clinic for heart surgery. You see some of the contracts with MD Anderson for specialty cancer care. We’re now starting to see the wave, the first crest of the wave, of direct provider—employer contracting and looking at what happened in Detroit. There’s a question ultimately of, “What is the relevance of the payer going to be?” I think that there’s so much potential for things to be upended here, and I think the employers are starting to get very creative in asking, “How are we going to create value for our employees? How are we going to maintain or lower our costs or maintain the rate of rise at a reasonable level?” And then there’s the whole concept of the employer-provided primary care clinics and all the other things that are happening, some of which are new, some of which have actually been done for years at certain organizations. I think they’re just starting to think about how we can do better because we can’t afford not to.

Bruce Feinberg, DO: Employees have been pretty silent for the past couple of decades. Very few companies—Pitney Bowes, Belling—can probably be counted on your hand that are really very actively engaged, really managing healthcare for their employees. For the rest, it has been to let the third-party vendor take care of it. Is anyone more cynical that employers are not going to step up to that degree? The fact is the percent of the workforce that is now self-employed continues to grow and grow, and it is a considerable percent now. Let’s take it back then to specifics. Do you see anything specifically coming out of the Berkshire Hathaway, Amazon, and JPMorgan Chase announcement?

Mark S. Soberman, MD, MBA, FACS: I’m personally not so sure that I do. I think Atul Gawande is a brilliant guy, and I love what he’s written. I love the way he approaches healthcare, but to me, the jury’s out.

Michael Kolodziej, MD: What we don’t know is what they want to be when they grow up. They could be one of 2 broad things. They could be a really efficient, effective, forward-thinking, and self-insured plan sponsor with a million covered lives. In which case, buying PillPack allows them to negotiate better prices on pharmacy drugs. Just for a simple mathematical perspective, if you save 10% by more efficient contracting for a million beneficiaries, that’s going to drop a couple of million to your bottom line.

Bruce Feinberg, DO: You’re going to put the PillPack acquisition by Amazon as it related to this umbrella enterprise of 3 companies rather than Amazon’s pure pursuit to be in over-the-counter drug distribution?

Michael Kolodziej, MD: It’s possible. All I’m saying is that it’s possible. It could be that these guys are just going to say, “OK, our chronically ill members are located in these geographic areas near our centers of excellence with whom we will negotiate contracts. We will be these providers, and we will save our 3 organizations with a million covered lives so many dollars.” To me, that is boring, boring. I don’t give a hoot if they do that. In fact, they don’t need any more money in those 3 companies. They have plenty.

It’s more interesting—and again, this is cloak-and-dagger stuff; we haven’t heard anything about what they really want to be—if they start thinking about alternative delivery models, about how they impact social determinants of health for their covered lives. In looking at a heat map of where their members are and what the diseases are, the medical conditions those members have in those areas, there’s some really cool stuff they could do. But I haven’t the foggiest idea what they want to be when they grow up.

I don’t know whether Amazon does a lot of stuff that doesn’t result in their making some money somehow. It has got to be at least a little bit of the former, but I’m hoping there will be more of the latter. Atul Gawande is a smart guy, and on the one hand, he really has no chops in this game, right? He’s never worked in this space. On the other hand, he’s an innovative thinker, and God knows, we could use some innovative thinking.

Dana Macher: I think that is a point well taken, that this is disruptive. Amazon by nature is an innovative thinker, and I think that, as you said, this is more of a pilot. I think that we will see some really interesting stuff come out of it.

Bruce Feinberg, DO: If you think about the pieces, you’ve got the innovation of Amazon, you’ve got the capital from Chase, and you’ve got some of the smartest investing for acquisitions coming out of Berkshire Hathaway. If you were to create the next-generation healthcare company, you can start to think about how you’ve got the pieces you need to put all that off and assemble it. It’ll be interesting to see what comes out of it.

Dana Macher: Especially regarding what we said earlier about the focus on the consumer, and that is, I think, what you will see coming out of this.