Haven: Innovation was not Enough
Sometimes the best plans just don’t work out. Even with the greatest innovation and technological solutions, leadership and execution are essential to success. The following paper was written by Gabrielle Dell’Aquilo, one of our Digital Business Fellows at the Institute, and 2022 MBA candidate. It’s an interesting story of three powerhouses pooling their expertise to find digital-powered solutions to an age-old problem.
In 2018, Haven – the joint venture formed by Amazon, Berkshire-Hathaway, and JPMorgan Chase – promised to disrupt the healthcare industry through providing low-cost and high-quality healthcare to their roughly 1 million U.S. employees. But in early 2021, the company announced it would cease operations. How did this joint venture between giants that sent insurance company stocks tumbling turn into yet another tech-driven failure?
From the beginning, Warren E. Buffett of Berkshire Hathaway, Jeff Bezos of Amazon and Jamie Dimon of JPMorgan Chase, agreed that the complexity of the U.S. healthcare system would be a challenge, but the “ballooning” healthcare costs and potential to impact millions moved the companies forward. Through the three companies’ combined resources, data, and expertise, Haven was expected to be an exciting and much needed shakeup of the industry. Tom Murphy of the Associated press noted “benefits experts expected any plans developed by Haven to become widely adopted by other companies if they proved effective in controlling costs.” The venture sought out to use the companies’ expertise in transformational technology to simplify care but kept details internal throughout much of Haven’s life.
While Haven’s goals were exciting, FierceHealthcare noted that “experts say there were red flags from the start that the nonprofit venture would struggle to make any meaningful changes in the healthcare industry.” Between high executive turnover, a part-time CEO (from 2018 to May, 2020 Atul Gawande served as CEO while he kept his positions at Brigham and Women’s and Harvard Medical School), lack of public communication throughout its three years of operation, and an absence of strategic clarity, Haven started to raise questions about its viability from experts. Furthermore, as Omar Manejwala, M.D., chief medical officer at DarioHealth notes, the joint venture was set up as an independent nonprofit organization which are typically “not fast and disruptive… Ironically, it’s the for-profit entity that has ended up cracking the industry and innovating, which is Amazon Care.” In the end, “as large as these parent organizations are, they still don’t possess the economies of scale to tip the balance when it comes to healthcare,” says Lyndean Brick, president and CEO of healthcare consulting firm Advis.
The organizational obstacles Haven faced would have been challenging for any company, let alone a company that sought out to fix some of healthcare’s biggest problems. But what can be learned from the failure of Haven?
1. The importance of matching goals with market power
While these Fortune 100 companies had substantial resources, expertise, and a combined 1.2 million employees, Haven still did not have the market power to negotiate lowers prices from providers. Providers typically don’t reduce prices unless an employer group has more than 50% of the local market. The company should have understood the powerful forces within the healthcare industry to determine their goals, relative to how much power Haven had.
2. Perverse incentives within healthcare make it challenging to reorient the industry
As John S. Toussaint describes, “the U.S. health system is focused on treating sickness rather than preventing illness in the first place. Unless we replace volume-based, fee-for-service reimbursement with a capitation model that pays providers a fixed amount per member per month and is tied to health outcomes, hospital leaders will still have no incentive to keep people out of hospitals unless their health system also is a health insurer,” which is a shift in the industry that is becoming more common. Perhaps Haven would be more appropriate if the value-based care model was more mature.
3. Timing is everything
The company might have already been on its way down by the time the COVID-19 pandemic hit, but with the industry’s focus shifted to the pandemic, it isn’t surprising that Haven wasn’t able to shake up an industry that was actively being disrupted.
4. There is a “Goldilocks problem” in healthcare reform
Some companies create small pilots that don’t move the needle much, while others (Haven) try to boil the ocean. What system reformers in other industries have learned, and what appears to be true in healthcare, is that the space between small and large solutions – the Goldilocks space – is where real, meaningful reform is happening. This can be seen in the shift to accountable care organizations (ACOs), which are groups of doctors, hospitals, and other providers who come together voluntarily to get coordinated, high quality care to patients. ACOs are certainly making an impact, but the impact is sometimes subtle and takes time and patience.
5. The importance of orienting an organization to clear, united goals
Many people familiar with the internal operations of Haven noted that the organization faced competing priorities from the three parent companies. For example, while Amazon Care was already underway before Haven existed, the nonprofit sought out to pilot a program that was very similar. Additionally, sources say Amazon became increasingly reluctant to make commitments and was unhappy with Haven’s speed of generating ideas. Further, each company’s employees had different needs, which made it challenging for the joint venture to develop a unified strategy.
Brooke Thurston, a Spokesperson for Haven said “moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations.” Haven was an opportunity to incubate new ideas and test pilots, but as an Amazon spokesperson said “now that we’re ready to implement, we realize that doing so independently makes the most sense.”
A statement from Haven: “In the past three years, Haven explored a wide range of healthcare solutions, as well as piloted new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable.