N.J. experts not shocked by trio’s health care plan

Medical and health insurance claim form with stethoscope on clipboard

Reports of a new nonprofit health care entity created by Amazon, Berkshire Hathaway and JPMorgan Chase created a buzz among New Jersey’s business leaders this week.

The response was a mix of skepticism (about what seems like a combination of existing ideas like self-insurance and preferred networks) and enthusiasm (for what the announcement could mean for New Jersey as a partner and for Amazon’s HQ2).

As chronicled in the annual survey from the New Jersey Business & Industry Association, health care costs continue to rise and are a top concern and cost burden for employers.

In the announcement, the three companies addressed the issue.

“The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost,” they said.

This isn’t a surprise, some said, since Amazon has made small moves in the health care industry in the last couple of years — between a number of health care hires and applying for a wholesale pharmacy license.

But how the companies will disrupt the industry remains to be seen.

Some suggested it would be an iteration of self-insurance, which wouldn’t be a surprise, since 70 percent of New Jersey’s insurance coverage is self-funded. Others suggested a more involved role.

Here is what some industry leaders had to say about the announcement:

Brian Gragnolati, CEO of Atlantic Health System and chair-elect of the American Hospital Association, said the announcement did not come as a surprise.

“We clearly know we have an affordability problem in this country,” he said. “It’s not unusual for companies to band together and face the market. We need to figure out how to partner with these people, not run away and not be horribly defensive in this setting. We have got to address this problem.

“What I think is exciting about this is you have a technology company (Amazon) that’s kind of perfected how to interface with a consumer, you’ve got an incredibly regarded Berkshire Hathaway conglomerate that … can fund things that have made this country great economically and then you have a financial services company (JPMorgan) that has employees all over the place. This could be very transformative in how companies work on this problem together. The exciting part to me is how you master the technology piece.”

John Fanburg, attorney with Brach Eichler in Roseland, also said the announcement was not surprising.

Fanburg said revenues that the insurance companies are “sucking out of the system,” paired with the increased cost of providing care, has resulted in a lot of frustration over the overall cost of health care.

“I think what we are seeing here is three titans of business and industry who also provide health care to their employees are trying to come up with a different mousetrap to deliver health care in a much more efficient way that we have never seen before,” he said.

Gary Herschman, an attorney with Epstein, Becker and Green in Newark, said the big players aiming to reverse the trend of higher health care costs by doing it themselves are part of a trend that is forcing providers to adapt and offer services to meet that demand. Between Accountable Care Organizations (a byproduct of the Affordable Care Act that has pushed for shared savings between providers and payors), and Clinically Integrated Networks (which are provider networks focused on providing a broad range of services outside of just a hospital), the discussion has been ongoing.

“We’ve been talking with clients about this for a few years now,” Herschman said. “It’s starting to pick up momentum now that the big corporations are catching on in the West and Northwest, and around the country, that have been doing direct contracting. We are going to start to see more and more cutting out the insurers and doing self-insured health plans. My gut tells me that it involves direct contracting with clinically integrated networks in their communities.”

Linda Schwimmer, CEO and president of the Health Care Quality Institute, said her first reaction to the announcement Tuesday was to note that the companies were confident they will be disruptors, but without a clear plan.

“A lot of companies thought, with the Affordable Care Act, way back when it was being debated, that they would take a wait-and-see attitude and see if it would sort of take the cost of health care off their hands, and see if it would create a system that would move their employees to a more publicly funded option rather than have health care so tied to employment,” Schwimmer said. “But not only did that not pan out, they are not seeing leadership at the federal (level) push the ball forward on innovation and to tweak the Affordable Care Act to potentially create that.”

Which is why companies have been trying to take on health care alone.

Boeing has ventured in the insurance space, as have other companies like AT&T and Walmart, as well as the companies in the Health Transformation Alliance — headed by former U.S. Rep. Rob Andrews of New Jersey, who is also on the board of the HCQI.

“He has over (40) Fortune 500 companies that created a purchasing alliance as a way to specifically change how health care benefits are purchased by large employers,” Schwimmer said.

And, now, the three companies, which have been disruptors in their own right in the past, have said they are not going to continue waiting for the government to make a move, she said.

“I think that is exciting, because they are stepping up and filling a void that needs to be filled,” Schwimmer said.

Robert Glenning, chief financial officer, and James Blazar, chief strategy officer, at Hackensack Meridian Health, which has focused on innovation and diversifying its revenue stream in recent years, see this as an opportunity to partner with Amazon.

“The opportunity to potentially work with these organizations would be exactly what we would want. And with Amazon coming to New Jersey as a potential site, we would look forward to the opportunity to be able to work with the three of them to make a difference for their employees, so that our network, which spans two-thirds of the state, and has really terrific results in the Medicare shared savings plan, could show them we can improve access, reduce inappropriate ED visits … that we could reduce readmissions and lots of other experience-related indicators we have been working on,” Blazer said.

Glenning added: “If we could find a strong partner (like these three), we could really do something that could be a model for the country. It could create a real reason for Amazon to want to locate in New Jersey and be part of the metropolitan experience here.”

Especially with JPMorgan located in Manhattan, and Berkshire’s interests in the state and Amazon’s existing warehouses, it would make sense to choose Newark to locate its second headquarters.

While it remains unclear what the next step will be, the three titans of business said the following in their announcement:

Warren Buffett, Berkshire Hathaway chairman and CEO: “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. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”

Jeff Bezos, Amazon founder and CEO: “The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

Jamie Dimon, chairman and CEO of JPMorgan Chase: “Our people want transparency, knowledge and control when it comes to managing their health care. The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”