The recent announcement that Berkshire Hathaway, Amazon and JPMorgan have joined forces to pare down healthcare costs has sent ripple effects across the healthcare space. The announcement on Tuesday sent stocks tumbling due to the uncertainty of what influence these companies will have on a deeply complex, unruly and wasteful healthcare system.
Said Berkshire Hathaway Chair and CEO Warren Buffett: “The ballooning costs of health care act as a hungry tapeworm on the American economy, our group does not come to this problem with answers.”
“But we also do not accept it as inevitable.”
Mr. Buffet is correct on all counts of course. But where these three companies are willing to go to fix this massive problem is really the question. The Wall Street Journal astutely pointed this out: “There were almost no details available about what the company would do or how it would use technology to disrupt and simplify the complicated fabric of American health care.”
They also quoted an unnamed source as saying: “the joint venture is not currently expected to be a new health insurance company or a hospital or a pharmaceutical company, but a company that can bring technology tools to bear on making health care more transparent, affordable and simple.”
So as opposed to Henry Ford, who got so fed up with this exact problem 100+ years ago that he built an altogether new type of hospital, we are not hearing any new ideas from these three companies.
Healthcare accounts for almost a fifth of our economy, but standing on the sidelines urging new and established tech companies to disrupt the market is about as strategic as throwing socks at the wall and hoping they will stick.
In fact, aside from controlling costs, there is little of standard business economics that applies in this space. Healthcare economics is not about selling widgets and M&As do not control costs via economies of scale. Rather it is about nurturing and growing community wealth and health by looking at every variable in an environment and understanding how it affects the health of your community.
This includes chemical pollution of our water supply, greenhouse gases, particulate air pollution, personal bankruptcy, the quality of food in the food chain, prenatal care, early childhood education and a litany of other variables that are not purchased at the corner pharmacy or from a medical device manufacturer.
To be sure, looking inward to reduce waste in the system is a great place to start. By some estimates, this will remove $600-$800 billion of cost. That still leaves us with an annual bill of about $2.5 trillion dollars. But this approach will not change the soaring rates of diabetes, heart disease, obesity, mental illness, Alzheimer’s and other diseases that account for such a large portion of healthcare dollars.
If these three titans of business really want to transform healthcare, then they need to use their economic heft and bully pulpit to evolve the discussion from controlling costs to one of maximizing value and improving health.
They will need to make a nation see that almost everything within our environment affects our health and contributes to the rising costs of taking care of an increasingly unhealthy population.
Changing that dialogue doesn’t require them to start a new company or throw money at the problem, but it will require courage and perseverance in order to tame a deeply complex, unruly and wasteful healthcare system.