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Was Haven just 'too big to succeed'?

By Andrew Rebhan

September 29, 2020

    What happens when three CEO billionaires decide to revolutionize health care?

    Over two and half years later, we're still searching for an answer.

    Editor's note: This story was updated on January 5, 2021.

    The news broke today that after three (somewhat uneventful) years, Haven will be disbanded.

    Considering all of the hype that surrounded this joint venture at its launch, this news comes as a warning sign to those companies looking to disrupt health care from the outside. However, the past three years will also provide valuable lessons for its founding members moving forward.

    Haven's early days

    In January 2018, Amazon, Berkshire Hathaway, and JPMorgan Chase announced a partnership to improve the health care of their combined 1.2 million U.S.-based employees and dependents. This partnership resulted in Haven, an independent nonprofit that would focus on providing high-quality, transparent health care at a lower cost.

    The news caused quite a stir, dragging down stock prices for various insurance companies and other firms such as CVS, Walgreens, and Express Scripts. Here were three notable business tycoons—Jamie Dimon, Jeff Bezos, and Warren Buffett—combining their resources to change health care for the better.

    And by June of 2018, the company made more headlines by announcing that Atul Gawande would serve as the company's CEO. With his experience as a surgeon, public health academic, and highly regarded author, Gawande brought an immediate sense of credibility to Haven—and he was soon surrounded by several other notable hires with experience across the health care industry.

    A strategy emerges … sort of

    The new venture was shrouded in mystery for a time. A basic website was created with a handful of press releases and a vision statement. Even the general goals of the organization were awfully vague, and included:

    • Creating better health outcomes and satisfaction for their employees;

    • Improving primary care access, simplifying insurance benefits, and making drugs more affordable; and

    • Leveraging data and technology to drive better incentives, lower costs, and a better system overall.

    There was some speculation early on about how Haven could use its resources to inflect change, such as by building a risk-based clinically integrated network, or a network of doctors selected based on their performance and costs. Haven could then use this network to direct employees to the most appropriate type of care for their condition—steering them away from higher cost or lower quality providers. Haven could also aim to contract directly with providers and pay them based on value, pushing away from traditional fee-for-service transactions.

    In November 2019, we got our first peek behind the curtain when JPMorgan announced the formation of two pilot health plans for 30,000 employees in Arizona and Ohio. The plans were established in consultation with Haven but would be run by Cigna and Aetna. These plans launched during 2020 and included free preventive care, no coinsurance or deductible, copays for in-network doctor visits as low as $15, and other incentive programs. It's still unclear what impact these plans had on employee health costs.

    Industry 'outsiders' may underestimate the complexity of changing health care's business model

    By May 2020, the company announced that Gawande would be stepping down as CEO to serve as chair of Haven's board of directors—serving as CEO for less than two years. In a press release, Gawande indicated that this new role would be a better fit, allowing him to step away from daily business management to focus more on Haven's strategy and to devote more time to policy work and addressing the Covid-19 crisis. However Gawande was not the only executive to step down, as Haven's initial COO left after just eight months, along with a number of other leaders at the firm.

    While Gawande shouldn't have held the entire burden of getting Haven off the ground (Bezos, Dimon, and Buffett were not heavily involved in the company), his step down from the CEO role was seen as a major blow to the firm. While a skilled surgeon and thought leader, Gawande likely struggled with trying to handle day-to-day operations. Haven was unlikely to make much short-term progress without a strong CEO leading the way.

    Haven's challenges went far beyond turnover though, and likely stemmed from several issues, including:

    • Announcing the venture too early, seemingly without any immediate strategy or products of its own;

    • Attempting to disrupt the status quo for employer health care costs by relying heavily on entrenched players and services;

    • Trying to fix too many big industry problems at once—and focusing on costs that stem from relatively low-margin services that leave little room for generating profit;

    • Navigating the bureaucracies of three major companies that operate across different industries; and

    • Trying to build a viable enterprise by starting with those same three companies' own employees.

    Should Amazon go it alone?

    Despite its involvement in Haven, Amazon appears to have created enough traction on its own to disrupt health care. In late 2019 the company announced the creation of Amazon Care, a primary care service which provides in-office, in-house, and virtual services for its Seattle-based employees (Amazon recently announced it is expanding this program throughout Washington state, and rumors spread that these services may be sold to other companies in the future). Many saw the move as duplicative to what was happening at Haven.

    As we noted in another blog, Amazon is ideally positioned to bring care delivery to scale more quickly than most other external disruptors. The firm has a large, loyal customer base, a strong brand name, a streamlined supply chain, various tech solutions (Comprehend Medical, Alexa, Halo, HealthLake, etc.), and has made numerous health care-related acquisitions (most notably, PillPack). Most recently, Amazon also launched its online pharmacy that allows customers to order prescription drugs to their homes.

    Partnering with JPMorgan and Berkshire Hathaway may have provided greater negotiation leverage, but Amazon already has the size, scale, and resources to make significant headway alone. The Haven venture may have been a costly distraction.

    For every Goliath, there is a stone

    Perhaps it's unfair to have put so much pressure on Haven. Bezos, Dimon, and Buffett each stated early on that they knew this was going to take time to get this venture right, and industry stakeholders know very well that health care has historically been slow to change, even when you have loads of money to throw at the industry's problems. Despite health care's clear need for reform, there are stakeholders who benefit from the existing system's complexity, and will resist external disruption for as long as it stands to benefit them.

    But despite the macro forces at play, the dissolution of Haven—at the very least—highlights the importance of starting with a solid business strategy with clear and specific goals (i.e., your strategy shouldn't be to just "make health care better"). In the initial press release announcing the launch of Haven, Buffett said, "The ballooning costs of health care act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable." This statement carries an overall positive sentiment, but I believe Buffett's second sentence should have served as a warning sign.

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