Haven Healthcare: Successful Sandbox or Disruption Disaster?

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Last week, word came out that Haven, the disruptive healthcare collaboration between Amazon, Berkshire Hathaway and JP Morgan Chase, was not going to disrupt anything.

Three years after its inception, the project was shutting down. Despite everything else going on in healthcare, the announcement made pretty big headlines, just as it had when it was launched.

Why was this such major news? Perhaps the first question we should really be asking this: Is Haven actually a failed project? And beyond that, what lessons should those of us in healthcare take from its short lifespan?

We wanted answers from a few keen observers. So, over the course of a couple of days, we talked with several of our industry friends to get their takes:

What follows are their thoughts on why Haven attracted so much attention and how the failed experiment might shape our industry’s perception of and approach to innovation.

Where did Haven fit in?

Just what was Haven?

Dr. Lisa Bielamowicz took at stab at answering.  “When you put Haven in the context of other employer coalitions that have aimed to change healthcare – like Pacific Business Group on Health – that were even larger in terms of lives covered, they’ve made very incremental improvements.”

The difference, she said, was “the A, in the ABC.” Amazon makes headlines. So people were apparently interested in Haven because of Amazon. Marcus Whitney agreed, adding that JP Morgan Case was the financing mechanism and Berkshire Hathaway – as a conglomerate of companies – served the role of a large employer who could add lives covered to the mix.

Notice that neither answered the question, What was Haven? While Whitney and Bielamowicz did note Haven’s stated plans to reduce costs and change the way employees interact with employer-sponsored healthcare, they really didn’t have much to say about where the project fit into things.

And that’s because, if you get down to it, Haven never told us where it fit within healthcare as a whole. The project team held its cards close to the vest, even as they did their part to gin up interest and headlines. Bielamowicz suggested that we be careful not to point too many fingers at Haven. “There’s a lot of buzz that healthcare is hard, and therefore it was tough for them to come in and disrupt a traditional industry,” she said. “But I also think it’s a lesson to those of us in consulting and those of us in the media: We started a lot of the buzz and set really high expectations for Haven.”

So, if the expectations were too high, how big of a deal was the project’s closure?

Said Bielamowicz: “They had a high bar to meet from the beginning and they were troubled by a very broad and unclear mandate. They had a hard time getting a good operating team in place. Coupled with high expectations, it seems like a bigger blow for the industry than it probably is.”

She went on to call it “an experiment worth watching and worth betting on,” but not something the industry should have expected to be so transformative.

A shocking demise?

We asked our four experts if they were surprised by Haven’s closure. Dr. David Pate was not.

“If you’re committed to transformation, you have to be clear about what that means,” he said. “They weren’t.” Pate added that employee benefits education – part of the publicly available mandate for Haven – is valuable, but not transformative. And historically it hasn’t been particularly successful.

Dr. Bryan Vartebedian, for one, wasn’t so sure. “It’s hard to say whether it was a surprise because we didn’t know much about what Haven was setting out to do to begin with,” he said. “We know that they were trying to provide high quality care at a reasonable cost, but of course that’s the objective of every American employer.”

For her part, and with tongue planted firmly in cheek, Bielamowicz wondered if fine dining was to blame.

“There is a chance that the idea of Haven came from Jamie Dimon, Jeff Bezos and Warren Buffet sharing a great bottle of Pinot at Davos or Aspen and thinking, ‘Wow, we can come in and fix healthcare and destroy the tapeworm.’ But maybe there wasn’t quite as much forethought and grounding,” she concluded.

Whitney said he wasn’t surprised, but not for all the reasons one might expect. “It seems like that was the likely outcome given the difficulty of what they were trying to do,” he said. “And I don’t mean, ‘fixing healthcare.’ I mean the operational difficulty of taking a consortium of large employers and creating a joint venture – three different businesses, three different cultures.”

What did they learn?

But look, the people at Amazon, Berkshire Hathaway and JP Morgan Chase are very smart folks. Maybe Haven wasn’t built the right way or with the right expectations. But it’s safe to assume that in three years, they learned a lot. In fact, if we cut through the headlines this was a sandbox project, which by definition means that they were looking to learn.

So, what did they learn? Despite the relative lack of information coming from within the organization, Whitney pointed out that there are some indications, especially from Dimon at last week’s JP Morgan conference.

“He said they learned a lot about how difficult healthcare is,” Whitney said. “My general feeling about outsiders who are coming in to work in healthcare is that the only way to learn is to put shots on goal and get some of the hard lessons out of the way.” Perceived failures, Whitney explained, are necessary steps in the process.

Other things they likely picked up on over the course of three years, according to Whitney:

  • Healthcare is very localized. Different jurisdictions have different challenges. National initiatives are therefore very difficult.
  • Overcoming the efficiency challenges in healthcare is tough because the entrenched players are very entrenched. It’s a big task to untangle them from the current care delivery model.
  • Prioritization is a must. Some areas that can be attacked quickly; others are a long play.

What else? Our experts consistently referenced the hiring of Dr. Atul Gawande as CEO. That news was met with plenty of raised eyebrows at the time and has been pointed to as a contributing factor to Haven’s downfall or a symptom of the lack of forethought and grounding.  Said Pate: “If the initiative was to revamp primary care, as an academic surgeon Gawande would probably be towards the end of the list. Perfect for the board, maybe not for CEO.” Vartabedian echoed the thought, saying that as much respect as he (and the industry at large) has for Gawande’s thinking and work, “I’m not sure that the decision for a celebrity CEO over someone with more operational experience couldn’t have ultimately contributed to its demise.” Whitney also noted the need for an “incredible operator” who “really knows the nuts and bolts so they can find each opportunity for efficiency.”

Put it all together and the lesson is that yes, vision and energy is good. But healthcare is an odd beast and you have to be able to execute really, really well.

Pate said that he believes Haven learned that there’s a difference between value and cost. Haven, as far as he could tell, was focused on reducing cost. Sure, there are ways to reduce costs, but look at Walmart as a counter example. “Walmart,” he said “has done far more to disrupt healthcare. They’re doing it in a really smart way because they’re focusing on maximizing the value of services more than emphasizing the costs.”

What did we learn?

What about lessons for the rest of healthcare? First, we shouldn’t be thinking it’s impossible to disrupt healthcare. “I’ve seen lots of commentary that’s been pretty basic saying, ‘See? It’s not that easy to disrupt healthcare.’” Whitney said. “That seems completely misguided to me. Joint ventures are very difficult, and when you’re doing it in the year of a global pandemic and everything else, closure is a likely outcome.”

Pate echoed Whitney’s thoughts, saying, “The wrong conclusion here is that healthcare can’t be transformed. From what we know, it’s far more likely that this was the wrong approach to doing it. Healthcare can be transformed. And it will be.”

Of course, he went on, that won’t stop people from drawing that conclusion. Some traditional providers will respond with business as usual. Look at the stock market’s response to Haven’s demise – healthcare stocks were up, just as they dropped when Haven was announced.

Instead, the inevitable transformation will take time, patience and getting individual building blocks in place. “We need to give things time to breathe, and we need to judge them not by the buzz but by the solidness of the ideas and the team that they are putting together and the ability to connect different parts of the problem or an organization to be able to affect change,” Bielamowicz said. Whitney called it, “The swift incremental process that over the span of five years that becomes massive disruption.”

Structural and financial barriers likely contributed as well, said Vartabedian. This is a more thoughtful, specific dive into the “Healthcare is hard.” argument. “High quality care at a reasonable cost is really a tall order. In the American healthcare system we are paid by doing things and not by containing costs. Until reimbursement is aligned with outcomes, initiatives like Haven, will always be a tall order,” he said.

Vartabedian also noted that, as big as the employee base of the three companies was, the roughly 1.5 million lives covered may not have been enough to impress anyone in contract negotiations. Plus (consistent with Whitney’s “local healthcare” comment), the employees were spread over different markets which probably made payer negotiations even harder.

Where do we turn next?

Well… If Haven didn’t quite get it right, who can we look to in this moment?

Whitney predicted that United Health Group/Optum is in the pole position. “They’ve got decades of true-blue healthcare experience, and they’ve been ahead of the curve understanding where it was going,” he added. “With the exception of a true consumer front door, Optum has all the components that you would want.”

On the other hand, Amazon, Walmart and CVS are prime examples of companies with incredibly strong consumer front doors, so they have a leg up from that side of things.

Whitney also mentioned HCA because of the company’s cash position, ability to consistently evolve and modernize and make moves through consolidation and acquisitions. “They don’t have the total platform that UNH has and they don’t have a great consumer front door, but they’re solid at the core and will continue to be valuable,” he said.

What to do with the rubble?

What will happen with the pieces of Haven? Our experts were actually more focused on Amazon’s next moves. After talking about the “A in ABC,” Bielamowicz went on to explain that most of the activity from the project appeared to be coming from Amazon, anyway. And they also had the vast majority of the employees within the three-company consortium.

“It became apparent pretty quickly that most of the exciting things that Amazon was doing in healthcare were being done in Amazon and being kept vocally separate from the work being done in Haven,” she observed.

She and Whitney agreed that Amazon will continue to drive forward on its own, possibly with less-formal collaborations with JP Morgan Chase and Berkshire Hathaway. If anything, the breakup will let Amazon move more quickly, unencumbered by partners.

Bielamowicz cited Amazon’s acquisition of PillPack as a sign that they’re looking to do what they do best – “busting middlemen and smoothing the supply chain.” Vartabedian noted Amazon’s partnership with Crossover, which provides primary and preventive care to Amazon employees. That relationship, he said, seems to be going well. Finally, Whitney pointed out that Amazon’s customer insight and user experience expertise – the things that made this project a hot topic in the first place – aren’t going anywhere. Amazon is solid on payments, tracking data and connecting behavior to health (like looking at purchase behavior and using it to assess social determinants).

What next?

Where do we as an industry go from here? Whitney said, “I’m not sure that the disruption that people were talking about is going to look the way people thought it would look. It’s still happening, and it’s happening now. I think it looks like Amazon, Optum and Walmart, but the existing players are still very valuable.” The question will be what the balance is between those different types of players, in particular as we continue the inexorable move towards value.

“Five years ago, value-based care was a joke,” Whitney said. “It’s not a joke anymore. Even with COVID-19, people see there’s something that can impact volume and don’t want to be as dependent on volume anymore.”

Ultimately, then, maybe the transformation isn’t explosive the way Haven-related headlines would have us believe. Instead, perhaps it’s a steady application of the lessons from Haven and countless other “failures” past and present that will turn the ship.

“We’re getting smarter shots on goal,” said Whitney.

David Shifrin
dshifrin@jarrardinc.com