Affordable, quality health care. For everyone.

To The Point

The Private Sector Takes on Health Care

Doctor-at-a-private-health-clinic-prescribing-medications

Amazon, Berkshire Hathaway, J.P. Morgan Chase, Walmart, CVS, and others are putting big dollars behind the private sector’s latest run at taming our costly, inefficient health care system. Will they succeed?

The private sector has tried its hand at health care before, and the results have been disappointing. The managed care revolution of the 1990s, pushed by employers and insurers, clamped down on health care prices and slowed the growth in costs for a brief period, until consumers and providers beat it back. Health costs then exploded. Over the last decade, dramatic increases in deductibles and copays in employer-sponsored plans have helped keep premiums in check, but that effort seems to be running out of steam as the burden on employees becomes unsustainable.

Will this time be different? Maybe. These actors are in no way wedded to the status quo. They mostly come from outside the health care system and bring new perspectives and resources: unheard-of cash reserves, extraordinary IT sophistication, a long time horizon, and skepticism of traditional assumptions about how health care should work.

The most celebrated example is Haven, a new nonprofit joint venture created by Amazon, Berkshire Hathaway, and J.P. Morgan Chase. The goal is to remake the way the employees of these three enormous and wealthy enterprises get their health care. In the process, it aims to create innovations that improve quality, reduce cost, and can be spread throughout the health system. Led by surgeon and author Atul Gawande, Haven’s program is still shrouded in mystery, but expectations are high. Haven can afford to try, fail, and try again in pursuit of disruptive reform.

Other examples are also emerging. Walmart is experimenting with primary care clinics. CVS, the pharmacy chain that is also a pharmaceutical benefits manager, has now entered the health insurance business, promising to develop “health hubs” at its ubiquitous retail outlets focused on improving care for complex patients, who account for the bulk of health care costs. Venture capital has entered the Medicare Advantage space with plenty of money and ambition. Will radically redesigned health systems run by CVS, Walmart, or previously unknown entrepreneurs — unusual life forms to those of us who have been around health care for a while — soon replace Ascension, Sutter, HCA, and Kaiser Permanente?

Perhaps. There is great appeal to having captains of capitalism take our swollen health care system by the neck and wring some sense into it. For advocates of markets and skeptics of government, an activated and innovative private sector would seem precisely the cure for a health system that has been paralyzed by governmental interference. Expectations are fueled by new entrants’ track records of transforming other hidebound sectors. With health services consuming almost 18 percent of GDP, and costs eating into employee wages, America’s businesses seem driven finally to act.

There is reason for caution, however. For the most part, it remains unclear what these new initiatives will do or how they will change the behavior of, or treatment for, seriously ill people — a small percentage of the population that drives most of the costs. The power and resistance of established health care stakeholders are enormous, and their work is technically complex, varied, and constantly evolving with medical science. Reputational risks of unsuccessful delivery system efforts, especially ones that jeopardize patients’ health, are daunting. The cherished private sector mantra — “fail early and often” — may lose its appeal when lives are on the line, or if failure means the closing of a local hospital and the loss of jobs.

Above all, there is concern that the new private-sector efforts will add to the fragmentation and complexity of our health care system. For the sickest among us, health care is already an almost unnavigable thicket of uncoordinated and confusing services. Adding new options — whether health hubs, websites, or some other new venue — that stand alongside existing services without replacing or simplifying them could face significant consumer resistance. If these new ventures depend on investment returns from cherry-picking profitable services for wealthy and well-insured individuals for short-term gain, the resulting disappointment and frustration could add momentum to proponents of government regulation as the solution to cost and quality problems.

In the short term, however, private-sector efforts have lots of running room and the opportunity to make a difference. Given the current political environment, there seems little chance that they will be supplanted soon by comprehensive public-sector reform, like “Medicare for All.” If this generation of players can keep in mind that health care is more complicated than other sectors, then perhaps Americans’ willingness to experiment with radically new models of health care provision — unequaled elsewhere in the industrialized world — will mean improved health care for all.

Publication Details

Publication Date: July 18, 2019
Citation:

David Blumenthal, M.D., and Robert Galvin, M.D., "The Private Sector Takes on Health Care," To the Point (blog), Commonwealth Fund, July 18, 2019. https://doi.org/10.26099/czxe-6a50

Experts

David Blumenthal, M.D.
President, The Commonwealth Fund
Robert Galvin
Chief Executive Officer, Equity Healthcare