health care DISRUPTERS like Amazon “have a strong self-interest in keeping hospital leadership on edge…”

“Rising costs, growing consumerism and heightened government scrutiny have created a cocktail of forces that leave the healthcare industry “ripe for disruption,” according to a new S&P Global Ratings report.
Amazon, which last year upended the supermarket industry with its purchase of Whole Foods Market, could seize market share from medical supplies distributors such as McKesson and Cardinal Health with its announcement this week it will expand efforts in that market and is in a pilot with a major hospital system. However, serious erosion could take time due to long-term relationships between buyers and existing distributors.
The e-commerce behemoth could spark mergers and acquisitions among healthcare companies vying to survive in an increasingly competitive and unstable environment. For example, there’s been speculation that the CVS Health-Aetna merger was prompted by Amazon’s apparent interest in entering the pharmacy business.
Tulip Lim, an S&P Global Ratings credit analyst, said in a statement that “while ripe for disruption, the industry’s complexity will govern the rate of change.”” (A)

“However, the Byzantine nature of the nation’s $3.3 trillion healthcare sector will also determine the pace of that disruption.
“Given the sheer complexity of healthcare and its importance to our economy, change doesn’t really come fast,” Shannan Murphy, director of Corporate Healthcare Sector for S&P Global, said in a conference call Thursday.
“That said, we do think that change is coming slowly but surely, and certain elements of healthcare are more or less ripe for near-term disruption,” Murphy said….
“All three companies are likely self-insured so they could try to tackle ancillary insurance services such as PBM,” said Tulip Lim, director of S&P’s corporate healthcare ratings. “This could help Amazon, especially if they wanted to get into the area of prescription drugs.”
“But it’s probably more likely that they would buy a PBM rather than build one, because operating a PBM requires certain competencies outside of the three’s core, such as formulary management,” she said.
The sectors most at risk for disruption are distributors of lab and medical supplies, but that comes with caveats.
“Even though Amazon is an e-commerce powerhouse, it might take a while before they take meaningful shares from certain rated players,” Lim said. “That’s because many of these companies cater to the acute-care market, which will be slower to buy meaningfully from Amazon.”” (B)

“How the Chase/Amazon/Hathaway partnership will take shape is still to be determined; my guess is an integrated HMO, like California’s Kaiser Permanente, for salaried employees. This is because these mega-employers no longer want to spend the exorbitant amount of money required to insure their employees in the private market and reckon they can do a better job building and financing health care with their own internal system.
Some corporations used to have a company doctor. JPMorgan Chase wants a corporate health insurance company.
But this plan does little to help people who aren’t bankers for Chase or coders for Amazon.
This is the future of American health care the Amazon/Chase/Hathaway corporate collaboration portends. Your access to service is dependent upon whether you were lucky enough to be born rich, fortunate enough to live in an urban area or skilled enough to be in demand as an employee.” (C)

“Some say that a skeptic is merely an optimist with experience.
One person who fits that bill is Alan J. Burgener, a full-time skeptic and provocateur who is one of the smartest and most insightful healthcare leaders I have encountered over several decades…
“You can color me skeptical when it comes to the prospects for transformational change in healthcare delivery in the U.S. I’m now old enough to have lived through the breathless hype associated with the introduction of Medicare’s DRG-based payment system in the mid-1980s (the first in a career-long string of developments that promised to change healthcare as we know it); the gatekeeper HMO era; the capitation/risk-based contracting era; the primary care practice acquisition frenzy; the hospital merger/acquisition era (join a big system or you won’t survive); the integrated delivery system craze (everyone should look like the utopian Geisinger or the Cleveland Clinic); the volume-based to value-based purchasing era; and the most recent push for quality, outcomes and population health as drivers of provider change.”..
“The people who get all worked up about the transformative effect of each new initiative, like the Amazon-Berkshire Hathaway-JPMorgan venture—most of whom are consultants and/or pundits—have a strong self-interest in keeping hospital leadership on edge and therefore in perceived need of the wisdom of the so-called experts. The fact is, the only things that demonstrably contribute to long-term success in healthcare organizations are the extent to which senior executives go to work every day focused on these five questions:
What can we (meaning my organization) do to improve the quality, outcomes and safety of the care we provide?
What can we do to improve the efficiency and effectiveness of clinical processes in order to lower the cost of care and be better stewards of scarce resources?
What can we do to enhance the experiences our patients and families have when they seek our services?
What can we do to improve the health and well-being of the broader community we serve, whether that be a neighborhood, city or state?
What can we do to make our organization a more stimulating and vibrant environment for everyone who works here?” (D)

“On one side is UPMC, a health system that built its brand on cutting-edge research and university-affiliated hospitals. On the other is Highmark Health, best known as one of the country’s biggest health insurers.
They could be mirror images of each other, flipped upside down. UPMC started out in the hospital business, then created its own health insurance plan and built a $20 billion-a-year enterprise. Highmark, which reported $18.2 billion in revenue last year, announced in 2011 that it would branch from insurance into hospitals….
The competitive clash has turned Pittsburgh into a testing ground for forces that are transforming health care nationally, as waves of consolidation blur traditional boundaries in the $3.3 trillion health-care system…
“I call it ‘the war,’ ” said Sue Kerr, 47, a Highmark member with a UPMC doctor who is frustrated by a transition that she says neither company has made easy. “You should consider switching providers, switching insurances — switch this, switch that. I was like, ‘We paid for this.’ ”…
From his corner office atop the U.S. Steel Tower, UPMC chief executive Jeffrey Romoff is building an empire.
“There’s nothing in health care, that we know of, that UPMC doesn’t have an entry into that marketplace,” he said, comparing UPMC to the tech giant Amazon….
“In the midst of it, it was disruptive. ‘Oh, they were at each other’s throats’ — and that’s the way it appeared,” Romoff said. “But that’s what disruption is about. And let’s be clear about this: Without disruption, change is much, much slower.” (E)

“A consortium between companies with complementary capabilities and scale has the potential to optimize the matching of supply and demand within healthcare via new mechanisms (i.e., exchanges), the facilitation of easier transactions (including faster, multichannel delivery), and new products (such as wellness and healthcare bundles). And as a consortium begins to target health spending successfully, it could move from lower to higher clinical complexity and from local to national marketplaces.
With costs continuing to rise far above the pace of inflation, employers are beginning to take direct action to deliver greater value.
Accordingly, we see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement). They are incremental innovation (testing the waters with gradual and piecemeal innovation); technology and analytics (enabling the improvement and redesign of the existing system); and radical disruption (creating new platforms, marketplaces, and ecosystems).” (F)

“Triumphant in online retail, cloud computing, organic groceries, and streaming television, Amazon founder and chief disruptor Jeff Bezos is turning his seemingly limitless ambition to health care.
Amazon, launched as an Internet bookseller nearly 24 years ago, has branched into offerings including voice-commanded speakers infused with Alexa artificial intelligence and original TV shows streamed online at its Prime subscription service.
Health care now appears ripe for Bezos, who has earned a reputation for attacking high costs and inefficiencies.
A possible step in that direction was taken last month, with Amazon announcing an alliance with billionaire Warren Buffett and JPMorgan Chase chief executive Jamie Dimon to provide a health care system for employees of the three companies.
According to the Wall Street Journal, Amazon would also like to become a supplier of medical equipment for hospitals.
“I think Bezos is methodical and thoughtful,” eMarketer senior analyst Patricia Orsini told AFP.
“He has identified a market that is ready for disruption. The healthcare system in the US is ripe for reform.”
Bezos faces the challenge of taming skyrocketing costs throughout US health care from insurance and medicine to supplies and therapy.
“Just as with every other industry Amazon has entered, Bezos is envisioning lower-priced alternatives with frictionless services that could, over time, make a lot of money for Amazon,” Orsini said.
Barclays analysts said in a recent research note on Amazon’s potential in health care, “We are never dismissive of anything disruptive that Amazon is involved in. Amazon arguable has the best technical abilities of any company we cover.” (G)

(A) Healthcare industry ‘ripe for disruption,’ S&P Global warns, by Meg Bryant,
(B) Amazon Primed to Disrupt Healthcare? Not So Fast, by John Commins,
(C) Faust: Don’t let Chase or Amazon control your health care, by Timothy Faust,
(D) Hospital Impact—A skeptic’s view of healthcare transformation, by Kent Bottles,
(E) Two visions for the future of health care are at war in Pittsburgh, by Carolyn Y. Johnson,
(F) Alexa, What’s Going on with Healthcare?, by Jay Godla, Igor Belokrinitsky, and Sundar Subramanian,
(G) After stunning growth streak, Amazon ambitions seem boundless,

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