Why didn't Haven work?
The Amazon, J.P. Morgan, Berkshire Hathaway health initiative was supposed to change health care as we know it
After three years, Haven is disbanding.
I have distinct memories of the employer health initiative’s launch. It seemed so promising that three industry giants - Amazon, Berkshire Hathaway and J.P. Morgan - were coming together with a mission to fix health care. Remember how Warren Buffett described the ballooning costs as the “hungry tapeworm” on the economy? It seemed like someone was finally going to do something to fix the most gaping problems.
Of course, there were skeptics from the start who pointed out that these employer health joint ventures almost never work.
And those folks have already been proven right.
As CNBC reported on Monday, Haven started informing employees that it would terminate operations by the end of February. The news comes about six months after Haven’s CEO, Dr. Atul Gawande, stepped down from day-to-day management.
When I saw the news, I immediately picked up the phone and called Brian Marcotte. Brian was the longtime President and CEO of the Business Group on Health, an organization that represents dozens of self-insured employers. Prior to that, he was the Vice President of Compensation and Benefits at Honeywell. If anyone knows what employer benefits teams are thinking about health care, it’s Brian.
So here’s a summary of our conversation, edited for brevity:
CF: “Okay, I’m still reeling from the news. What’s your hot take on why Haven didn’t work?”
BM: “There have been purchasing coalition attempts over the years that have aimed to bring big employers together to bring down the cost of health care. But there have always been challenges. Each company is different, based on the industry they’re in or their economic position. Think about it this way. If you’re going to move the needle with a standardized benefit design, there might be something that one employer in the group won’t give up. Or if you try a narrow network, that might be more disruptive to one company versus another.”
CF: “The geographic piece seems like a challenge too. With Haven, for instance, the combined 1.2 million employees are scattered in different markets across the U.S.”
BM: “That’s the issue. Health care is market by market - and there are very few geographies where Haven would have been the dominant player. I’ve seen Centers of Excellence programs work, like this offering from Walmart, which involve navigating members to high-quality care. But that’s less disruptive than going into a market saying ‘this is the only health plan or provider system we’re going to be working with’.”
CF: “Amazon, J.P. Morgan and Berkshire Hathaway are very different employers too…”
BM: “Each company is different and their benefits strategy might be driven by high or low turnover, margins, culture, or other factors. That’s why a lot of these coalitions haven’t been as successful. Health care is an emotional issue.
It’s not like you’re coming together to purchase widgets. You’re purchasing health care - and that can mean a disruption to physicians, to providers, to continuity of care.”
CF: “Some folks will point the finger at benefits teams to explain why Haven shuttered. Having worked with employers for years, what do you think?”
BM: “It’s a spectrum. There are progressive thinkers and early adopters. There are also more conservative benefits leaders, who wait for everyone else to go first. It’s like any other profession. Think about Shawn Leavitt from Comcast (Leavitt, the SVP of Total Rewards, passed away in the spring of 2020). No one would refer to Shawn as anything less than a trailblazer. There have always been people like that who have pushed the envelope.”
CF: “So if you were put in charge, what would you have done?”
BM: “Going market to market like prior purchasing coalitions have tried to do was only going to drive incremental change. Health care is local and it’s dominated by health systems in certain markets with a lot of consolidation.
To me, changing health care will start with some kind of virtual, scalable solution that will integrate with local health care but won’t be defined by local health care.
I’m intrigued by what we’re seeing with these new virtual primary care models.”
CF: “Are you still bullish on what Amazon can do in health care outside of Haven?”
BM: "Yes. Think about online shopping. It’s routine. You might not always go to Amazon, but you often end up there. Imagine if it was that same way with health care. How can we make health care routine, whether it’s through accessing wellness information or the best doctors for you or alternative treatment options?
The number one issue for employers is always about how to engage employees in the great health care benefits they already have. They’re just not being utilized to the extent that they could be.
Health care lacks that front door. Haven could have started by building it. You could really change the health care delivery system through virtual steerage that feels personalized.
On the Amazon question, if you want to make health care routine, you should hitch it to a wagon of a company that gets how to incorporate into people’s routines. I don’t know if there’s a better wagon out there. Amazon is the 800-pound gorilla for shopping, for books and music. Why not health care?”
CF: “How about pharmacy? You’re passionate about fixing the drug supply chain. Could Haven have focused there and moved the needle?”
BM: “The challenge with the market is that there’s a perverse supply chain model where there’s no incentive to control costs. Everyone wins when drug prices go up. There’s something fundamentally wrong with that model. It’s also an industry that’s dominated by just a few key players. Enter Amazon. If you think of one possible player with the supply chain savvy, the distribution capability that’s not afraid to move into entrenched business models… Amazon could still be a big player there.”
CF: “Thank you Brian.”
And our take…
In my new role at OMERS Ventures, I work closely with our managing partner, Michael Yang. He’s always been a go to of mine on employer benefits questions, as he’s worked closely with Accolade as an investor and board-member for many years.
So I asked Michael for his thoughts on Haven.
As he puts it, there has to be an owner of a project like this. It isn’t going to work if it’s no one’s job to make sure it happens. CEOs can move on from one project to another and need to be held accountable.
Strategy is also key. Haven had a strong vision, but never really laid out a clear roadmap. It may have been a case of too many good ideas; and not enough execution. As Michael puts it, “someone has to write it down on a piece of paper.”