By Robbie Hughes, Founder & CEO, Lumeon
Around 20 years ago, a Seattle book entrepreneur and former banker invested in a local direct primary group that offered unlimited care with a named physician for around $50 per month irrespective of age or risk profile. If you needed meds, generics were available for free and imaging such as X-ray and ultrasound was done on the spot. Insurance was not accepted.
These clinics were a hit for the local technorati at Expedia and other technology companies who would come in for their annual physicals and worried-well care. Over time, the clinics expanded and started taking on a more diverse population and the demand on their model increased. Ultimately, the model broke. That business didn’t survive, but 20 years later the bookstore has become a significant chunk of the overall economy and, in order that it continues to grow, it needs to find new markets.
With a subscription model in Amazon Prime, the acquisition of PillPack, the Schmidt-Thompson protocols and now OneMedical, is the Seattle entrepreneur’s early visionary investment in healthcare about to hit its mark?
What’s different this time?
Amazon is not trying to fix healthcare, Amazon is trying to disrupt existing industries in order to capture value for itself. Luckily in healthcare there is a lot of value to be captured. At every level, from the customer experience to reimbursement complexity and pricing challenges there is someone ready to take a cut. The way to disrupt healthcare is not necessarily about providing a better customer experience, it is about flattening the complexity to eliminate waste and handoffs which will, in turn, result in a better customer experience. Just as Amazon’s amazing customer experience comes from optimized supply chain and logistics, so the same opportunity exists in healthcare.
So – what’s the offer?
Jeff’s first bet was on the money.
Direct Primary care that eliminates the complexity of insurance is the Right Way.
To make this work with One Medical, three things need to happen:
- The footprint needs to expand, massively – virtual on it’s own is not enough. This requires cash.
- The scope of the model needs to expand to eliminate the need to engage with insurance
- Data needs to be used differently to manage population risk proactively
The key to expanding the scope is accepting that DPC isn’t everything, and that some acute care will be required. This means setting up specialist referral networks that provide elective care for a fixed fee that can be made available to employers in a predictable form at a predictable cost. This specialist care will cover a large number of procedures and some conditions but will go a very long way to reducing the cost of the premiums for the rest of the offering.
The second piece is real insurance that is aggregated across multiple employers and probably anchored by Amazon. This risk pool, when properly and proactively managed by good, data driven* primary care will provide the basis for low cost premiums that that be focused on emergencies and exceptional conditions such as car crashes or cancer. This will be an insurer in the European model, a true bearer of risk, not in the US model of a claims administrator.
Prices will be substantially lower as a condition of entry will be membership of the DPC offering which will offer the population health management (as a verb) and the net effect will be the creation of the value flywheel that prints cash to fund the expansion of the DPC model that expands the population in new markets, thus increasing the market and thus more cash.
If done properly, this long term insurer has the potential to be the highest margin part of the Amazon portfolio as it will have the ability to charge at the level of the competition, but with none of the claims overheads. Whether the MLR will apply here or not will be interesting – if it does, then the above won’t hold true, but the offering will be all the cheaper as a result.
On the data platform, this is hard. Building a Meaningful Use compliant system is an undertaking, but if the above holds true, then the system won’t have to deal with much of the complexity that exists to handle payments (maybe MU compliance won’t even be required?) so could be truly clinical in scope, not activity and claims centric as the systems are today. This remains hard, but it’s not the same as rebuilding Epic.
So where does Amazon go from here?
Three pieces missing in the puzzle above:
- a platform to broker elective care at fixed price reimbursement
- An insurance company that knows how to price risk
- A data platform that supports a symptom to outcome medical record
My guess is that it may be easier to build something for the insurance piece rather than try to change the culture of an existing business, but if not, I’d put my money on Lemonade and I’d offer it across the board on all Amazon offerings. People will say ‘healthcare is different’ and that’s true, but what we should be talking about is using data and analytics to price risk. That isn’t what US health insurers do today but it is what Lemonade does.
On the elective care broker, there’s only one that I know of that fits the bill: Transcarent.
On the data side, these systems exist abroad – we actually designed one for the formative DPC group mentioned above – but if the data model can be built correctly, then the proactive coordination of care at scale becomes much easier, and possible to do algorithmically rather than manually as it is done today.
Who’s the competition? CVS/Aetna, Walmart, Optum/United etc. – these are easy to name but the key question for me is one of culture. Disrupting existing behaviors is hard and changing the operating model of publicly traded companies is borderline impossible without taking them private.
The winner will be the one that willingly destroys its existing models to create space for the new ones. For that reason, any and all of the above players could be in or out of the running. I don’t see United changing overnight but the reality is it doesn’t have to: it is so vast that it could create this model in a quiet dusty corner of its business and the markets would never even notice. It has form on this – see Livongo vs Level2 – and it already owns the biggest primary care assets in the country and is buying more, both locally and internationally where much of the legwork on this is already done.
It will be interesting to see who gets there first.
*for clarity, data driven means fully linked problem oriented longitudinal medical records that cover symptom to outcome combined with proactive care coordination. No off the shelf EHR in the US delivers this today.
This article was originally published on Robbie Hughes’ LinkedIn and is republished here with permission.