In 2018, Berkshire Hathaway founder Warren Buffett set out to satiate the "hungry tapeworm" of rising healthcare costs plaguing the U.S. economy, partnering with Amazon and JPMorgan to create Haven. The joint venture was supposed to solve all of the problems in the U.S. healthcare system—and that's exactly where it went wrong, said Alyssa Jaffee, a partner at the Chicago-based 7wireventures venture capital firm.
By focusing across companies with different employee populations, markets, and which operate in different industries, Haven tried to do too much, with too many people.
"Haven created so much bureaucratic tape that ultimately trying to move the ship didn't work," Jaffee said. "They almost got, I feel, paralyzed in the process of wanting to be so innovative without remembering the fundamental core thesis of what it means to change healthcare."
Employers that want to change healthcare need to become experts in how the system works, the incentives that drive it, how consumers are impacted and prepare for a long ride, Jaffee said. To that end, she feels more optimistic about Morgan Health, JPMorgan's second attempt at reforming the employer-sponsored coverage market, which it launched on Thursday with a $250 million investment arm. The willingness to partner with existing companies, providers and insurers—rather than building their own technology and benefits designs from the ground up—all represents a shift in thinking, Jaffee said. The company's new CEO is emblematic of this charge. Morgan Health hired Dan Mendelsohn, the founder and former CEO of healthcare advisory firm Avalere Health who worked in the White House Office of Management and Budget during the Clinton administration, to serve as its head.
"Instead of saying, 'Hey, we can solve every single problem in healthcare and every single condition, every single specialty for every single type of person,' all of a sudden, you're trying to fix the entire U.S. healthcare system as one organization," Jaffee said. "I think about the companies I invest in. They are very good at what they do, but they don't do everything, right?"
Unlike Haven, Morgan will first focus on cutting healthcare costs for the bank's 285,000 employees and their families. The D.C.-based company will work with JPMorgan's benefits team and insurance carriers to evaluate and identify new employee health options. CVS Health—which owns insurance carrier Aetna—already announced it planned to work with Morgan.
Over time, Morgan will expand its reach and attempt to create benefits structures that other employers can use. Eventually, Morgan will collaborate with provider groups, health plans, employers and other organizations aimed at reforming the healthcare system.
"The scope is more narrow. There may be more flexibility in what you can do when it's just one employer, as opposed to trying to coordinate across multiple employers," said Ari Gottlieb, a healthcare consultant.
By intentionally aiming to cut healthcare costs for just one company, Morgan already will have more flexibility around the types of programs its pilots, Gottlieb said. It also has narrowed its employee population to a single industry, rather than the 1.2 million workers Haven attempted to serve across the three companies. Morgan will still face the challenge of scaling across geographies, since its employees are scattered across the U.S.
And it could look to virtual solutions as the answer. That's the route Amazon has gone by making its virtual primary care program available to all companies across the U.S. Walmart, meanwhile, recently purchased MeMD, in a move to scale its digital care offerings. And today Goldman Sachs and The Heritage Group dropped an undisclosed sum in telehealth provider AvaSure.
Digital health could help Morgan offer care across borders, but would still require changes in employee access behavior, Gottlieb said. This is generally where prior purchasing coalitions have stumbled, he said, and which has led to just "marginal" cuts to their healthcare costs.
"It's hard to change employee behavior," Gottlieb said. "It's easy to talk about things, and there are a lot of things that conceptually look like they will work but, in practice, tend to have a little bit less of an impact."
One issue Morgan will not face, at least to the same scale as Haven, is high market expectations.
When Haven was first announced, health insurers, pharmacy benefit managers and care providers' stock prices immediately dropped, Gottlieb said, with investors holding "this massive fear that [Haven was] going to fundamentally disrupt all the companies that are in that space today." The strong market reaction influenced Haven employees' expectations, Gottlieb said, creating sky-high ambitions that hampered Haven's ability to nail down a single strategy. Today, meanwhile, stock prices have been stable. And Gottlieb said that's a good thing.
"We learned a lot from Haven," said Anne Pace, a spokesperson for Morgan Health. "To be honest, Morgan Health wouldn't exist if Haven hadn't existed."