Are We Just Waiting for Amazon and Walmart?
When the history of the COVID-19 pandemic is written, our hearts will be heavy for the loss of life, the economic devastation for so many, and the dramatic mental health impact thrust upon people across the world as their lives were turned upside down in unimaginable ways. However, with the benefit of time and perspective, we may look back and recognize this moment as the great digital transformation of almost everything.
March 18, 2021
When the history of the COVID-19 pandemic is written, our hearts will be heavy for the loss of life, the economic devastation for so many, and the dramatic mental health impact thrust upon people across the world as their lives were turned upside down in unimaginable ways. However, with the benefit of time and perspective, we may look back and recognize this moment as the great digital transformation of almost everything. And, in what may be most surprising, it may also have taught us lessons about leadership . . . how quickly important objectives can be accomplished if we are not constrained by our own self-imposed limitations and just how resilient we really are.
The year of the Coronavirus is a textbook case on the importance of leadership — both by its negligent absence and reassuring presence — and our resilience in the face of almost unimaginable loss. Within a matter of weeks, the Coronavirus had grabbed most of the world in its grip; almost overnight the routine and consistent schedules of home, office and school were shaken from their foundations. The speed of the crisis overwhelmed the calendar and imposed a new disorder on our collective and individual experiences. And, the speed and spread of the virus drove the rate of change in a way never before seen. With little leadership from Washington, we had to find ways to adapt.
The good news: we’ve seen resilience and speed of adaptation. Virtually every area of our economy is moving to digital and quickly. And our infrastructure bore the weight of the change . . . ATT and Verizon, for example, saw volumes of traffic in excess of Mother’s Day (the largest calling day of the year) become the new normal and average broadband consumption per household rose 40% and is still rising. Existing services managed the new way we had to do business and communicate (Zoom), the new way we shop (Amazon, Shopify), the new way in which we buy things (using much less cash and more currency) but perhaps most important, our health and care, all rose to the occasion. Even overwhelmed hospitals still managed to function and deliver world-class care, although many came precariously close to the breaking point.
And perhaps most impressive, in barely a year, multiple effective vaccines were developed to eradicate a novel virus that we had not seen or understood how it was spread.
We also learned a second valuable lesson from the pandemic: that we are all one in health . . . we can’t be healthy if those who work with and for us are not . . . hence the term “essential workers,” informing a new understanding of community and population health. Again, who would have thought that a pandemic might actually bring us closer? We learned to appreciate each other. Some shared a quote with me . . . “This is not the year to get everything you want but rather to appreciate everything you have “ . . . and I would add, everyone.
So it is that in the toughest of circumstances, our infrastructure, our services, and our spirit all withstood the test. Even our democracy was tested and came out, I believe, stronger than ever before. More people than ever voted and while it wasn’t pretty, sometimes innovation is messy. We taught an entire generation that democracy is important and so is voting.
The pandemic gave us a glimpse of what our future could look like, and it’s pretty exciting. As Marianne Williamson said, “Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us.”
I don’t think there is any doubt that the “new normal” will include more digital communication, shopping, and new ways of working effectively. But the real question is whether healthcare will learn from what we saw could be or rapidly return to what was? Do we have the leadership in the healthcare ecosystem today to buck the existing misguided economic incentives and create a new kind of consumer driven, high value, health and care system or do we have to wait for Amazon and Walmart to do it for us?
For many years now, we have known that better ways of providing care existed, whether information, access, or simply convenience. Yet, the status quo has consistency won out against change. The soaring use of telemedicine, the rediscovery of the home as a safe environment for wellness and healing, and the rising call for expanded mental health services are just a few of the industry shifts accelerated by the impact of COVID-19. COVID also shined a bright light on the issues of healthcare inequality, accessibility and utilization, and, at least for now, created an urgency to address these problems once and for all. People think of personal healthcare access and outcomes in radically different ways today than prior to the pandemic.
Therein lies the opportunity. It’s foolhardy to imagine that consumers will be satisfied to return to the offerings of a pre-pandemic healthcare system when the COVID-19 crisis ends.
However, today, while a few of the most innovative leaders in our traditional healthcare ecosystem – which I define as including health systems (providers and hospitals), payers, pharmacy benefit managers, and pharma – are moving aggressively to redefine their worlds and ours, most are getting ready to settle back into the old ways of doing business. I say “doing business” because few of these entities are truly focused on providing care as their number one priority. Satisfying their patients, customers or the individuals in need has fallen off the priority list. I was recently at a meeting where the decision to shutter Haven – an interesting experiment by three of the country’s most innovative businesses to redefine the healthcare experience for their employees in terms of quality and cost – was heralded as an “I told you so” moment. The conclusion was that healthcare is too complex to change, especially for “outsiders.”
I see it differently. Haven should have been a wake-up call for the industry. When three of the world’s most respected companies concluded that the key participants in the healthcare industry are no longer aligned with their own employee and business well-being, that’s a watershed moment. When you read the headlines from this week – “Amazon looks to expand employee telehealth service, adding 21 states” – traditional industry participants would have to be misguided to not be moving rapidly to rethink their approaches to the way they do business today. But with few exceptions, they are not.
When we consider how the future of healthcare in the United States will be defined, I believe it will largely be the responsibility of employers to move the system forward. But in fact, that’s always been the way.
How We Got Here
Half the total population of the country receives employer-sponsored health insurance, also called a self-insured group plan. From manufacturing to education to hospitality, the largest single band of the self-insured group spectrum is America’s employers. It’s always been an odd match. Why should an employer who makes widgets be in the business of managing healthcare benefits? The truth is employer sponsor health plans were sparked by wartime legislation, really more of an unexpected birth than the planned offspring of a social contract.The Stabilization Act of 1942 was created by Congress to limit employers’ freedom to raise wages in a time of crippling labor shortages. Denied the ability to compete for workers through higher pay, employers began offering health insurance as an incentive for recruitment, and suddenly — with a speed we would recognize in 2021 — a revolution took hold and employers were in the middle of providing healthcare for their employees. Congratulations, General Motors, you’re the proud parent of an annual check-up and more. Almost 80 years later, that responsibility became the largest single expense for the company and their retirees.
However, while the employer-sponsored system is currently relied upon by 158 million Americans, it’s a messy union, perhaps inevitable given its unintended birth. Employers have done a remarkable job providing healthcare for the U.S. workforce, especially in light of its fundamentally peripheral nature to their core business. But as my years at Livongo made clear to me, the greatest challenge to improving the health and care experience for both employer and employee isn’t clinical, it’s managerial. In the larger sense, the situation is analogous to our current COVID-19 vaccine puzzle: today, after an amazing performance by the science and research community, vaccines for the virus exist – it’s the logistics of access and delivery which are the greater threat to individual health. In the U.S., our system for delivering care, provided by the best physicians and nurses in the world at some of the best hospitals in the world, is too confusing, complex, and costly.
Ask almost anyone: not only is healthcare is more confusing, complex, and costly for employees and their families, it’s one of employers’ most expensive line items. No one is happy, not the people who use the system . . . and not the employers who pay for it . . .
Confusing . . . when people are confronted with simple questions, more complex situations or ongoing chronic conditions, most are completely confused about the highest quality approach, where to get the best information or guidance, whether to trust it and where to get the care. It’s just hard. Most turn to Google, which is now conflated with ads and info-ads that can’t be trusted, or they simply ask a friend. It’s not really a great way to make life-changing decisions in the information age. That’s especially true when we know that there is a direct connection between people’s health literacy and their overall health and wellbeing.
Complex . . . with the advent of more technology, more medications, more procedures, and more software, sometimes even the physicians and nurses don’t quite understand the options – and they do this every day (or some do) – so we go to specialists, but they are not connected with other aspects of care. Managing chronic conditions requires a completely different approach, as we learned from our success at Livongo . . . a combination of empowering people with real-time information, usable data science that made it easier for them to stay healthy, and access to supplies and medical professionals on their terms. That formula led to measurably better outcomes at lower costs . . . so we know we can do it.
Costly . . . data from theKaiser Family Foundation reported the average annual premium for employer-sponsored health insurance as $7,188 for an individual and $20,576 for a family of four in 2019, marking a 54% increase over the previous 10 years. Average total healthcare spending per employee, including premiums and out-of-pocket expenses, is projected to rise 5.3% in 2021 to just over $15,500, according to a2020 survey by the Business Group on Health, though the impact of COVID-19 may drive it even higher. The survey also reported that large employers will cover nearly 70% of costs, with employees funding 30%. Yet, despite the escalating investment from employers, employees too often underutilize their benefits, frustrated by obstacles to navigation and awareness.One study concludes that only 12% of adults possess the health literacy skills needed to navigate the complexities of our healthcare system.
Houston, we have a problem . . . and we all know it. As mentioned earlier, the frustration came to a head when three of the country’s most admired companies, Berkshire Hathaway, JPMorgan, and Amazon, concluded that payers, pharmacy benefit managers, and even health systems were no longer aligned with the employer’s own objectives of higher quality care for their employees at lower, or at least, manageable costs. Every increase in fees for employers was a positive for payers, PBMs, and health systems. Given compressed margins and an increasingly competitive business environment – which is only going to be exacerbated by COVID and the impending economic hardships – healthcare costs could no longer be ignored. So, the three companies organized Haven as their answer. Why it didn’t succeed is the subject of another article but the good news is there was a lot learned from the venture and there is a viable answer.
First, we have all of the pieces we need . . . unlike the pandemic, we don’t have to invent anything new . . . but even if we did, we’ve now come to understand that if the problem is severe enough, with the right investment and the right leadership . . . we can move at exceptional speed to solve important problems. Our healthcare system is at a breaking point and we need action now.
As William Gibson wrote, “The future is already here, it’s just not evenly distributed.” Our challenge is not about the technology, the information or the tools. Rather, it’s about a new business model that aligns the purchasers/users of the service (that’s all of us, our families, and our employers) with the providers. Great software removes friction – what use to be called the middleman – and connects the people who pay for and use the service directly with the provider. Think about Uber (which connects you directly with the driver), AirBnB (which connects you with the owner of the home), and every other great and scalable software model today . . . they all provide three things:
Access to Quality and Value
They also are consumer-directed, which means the user is both in charge and has a financial stake in the decision.
This kind of model is almost never introduced by existing players in the industry because their profits depend on an imbalance in information, guidance they benefit from, and limiting access. In contrast, you no longer need a travel agent because Travelocity has provided unbiased information, trusted guidance, and access for you, 24 hours a day.
And that is exactly where health and care are headed . . . driven by both self-insured employers and all of us . . . the health consumers . . . the people who want to be back in control of our health and care again and who are demanding a higher quality, more affordable system.
Without change, the employer-sponsored health plan environment post-COVID-19 is at risk of collapsing under the weight of ballooning costs, thepent-up demand for surgery and other medical services idled during the pandemic, along with greater expectations for information, guidance, and access to and about care. Having experienced the quality and convenience of digital care, we’ll see real dissatisfaction if it’s not provided. Employers have also run out of patience and time. I’ve heard it said over and over again, “We’ve given the industry 20 years to solve the problem and all we can be assured of is higher costs and inconsistent quality. It’s time for a new solution.”
The Innovator’s Dilemma
Haven was a wake-up call largely ignored by the industry. If three of your largest customers told you they needed to go into your business because what you were doing was not satisfactory, would you continue to do business as usual? As an industry, we must create new models that put people first, that regain their trust, that deliver high quality, high value health and care for everyone, and put people back in charge of their care and the cost of their care. We have to trust people enough to know that they understand what’s best for their care, but we also have to equip them with the tools they need to make the best decisions . . . that’s the role of the industry today.
The healthcare industry will have to decide whether it continues to double down on the old centralized models, building more and bigger systems and hospitals, buying up physician practices to raise prices, and sticking to old and profitable business models, or whether it will embrace the change and deliver the care people want, the convenience they demand, and do so at a cost that we, each of us and the companies we are employed by, the real ‘payers,’ can afford.
My prediction: within five years we will have the health and care system we want and deserve, driven by consumers like the rest of our digital economy. And we will look back and realize that the system we imagined . . . 24x7 access to better and safer care that meets us on our terms . . . all went to scale during the time of COVID-19.
All the pieces for success exist today, we just haven’t put them together in the right way for consumers or self-insured employers. From the darkness of the pandemic a light of opportunity has emerged to transform healthcare. The historic moment is here. Will our industry create the future of healthcare or do we wait and hope that Walmart or Amazon will come to the rescue?
Sometimes real leadership and imagination can only happen when a crisis shakes us apart from our old world . . . and that turns out to be the best thing that ever happened . . . even for our health.