Meet Dr. Atul Gawande
It was recently announced that Dr. Atul Gawande will be leading the healthcare joint venture between Amazon, JP Morgan and Berkshire Hathaway. This is big news. It is also very good news. Dr. Gawande is a surgeon at Boston’s Brigham and Women’s Hospital as well as one of the nation’s leading authorities on the ills that plague our healthcare system.
My first experience with Dr. Gawande came while attending Sanford Bernstein’s annual Strategic Decisions investment conference in NYC. It was probably around 2010. He was there to discuss the importance of … wait for it … checklists. That’s right, a genius polymath surgeon who writes books in his spare time was in front of thousands of people discussing checklists. It makes sense as Dr. Gawande is the author of The Checklist Manifesto: How to Get Things Right.
By way of background, the Bernstein conference key note is always a big draw. Former presidents, secretaries of state & industry titans always presented at Bernstein. We’re talking A-List ballers. I had never heard of Dr. Gawande, so needless to say, it struck me as nothing short of amazing that his checklist talk topped them all.
It turns out checklists are really quite handy. His book highlights several examples where a thoughtful checklist can drive efficiencies, ensure a safety-first mindset, and act as a forcing mechanism to yield more consistent behavior. His logical checklist framework allows anyone to distill very complex activities (like surgery!) into logical chunks. For example, one item on the surgery checklist is to confirm the correct-side body part that is being operated on. Evidently, a surprisingly high number of surgeries are wrong-side. Yikes.
Simplicity, Patience and Talent
We believe the joint venture will succeed and eventually alter the entire trajectory of the US healthcare system.
Gawande not only has the ability to diagnose the highest drivers of waste, he will also likely convince his employees why they should care. That’s a really big deal because if the employees themselves don’t care about and understand the problem better, no one will ever crack the healthcare consumerism code. We believe Dr. Gawande is the right person at the right time. His communication & leadership skills coupled with a few unfair advantages tilt the odds in favor of success.
Agency, or ownership, is a powerful force. The level of agency in healthcare today is virtually non-existent. For years, we’ve never bothered to ask how much a service was going to cost before going to the doctor. There was no value in price discovery when all you faced was a $10 co-pay. Gawande has what it takes to build a new system where employee agency is the secret sauce. A successful implementation of agency concept could yield more organic momentum. Berkshire Hathaway’s Charlie Munger once said ‘Show me the incentive and I will show you the outcome’. Gawande has an amazing opportunity to rip up the failed healthcare playbook and start fresh. That starts with a brand new playbook centered around getting the employees to know they have a dog in this fight by creating engaging employee incentives. Health savings accounts are an ideal way to build plenty of incentives.
Embrace these Unfair Advantages
We all know out-of-pocket healthcare costs have grown exponentially. In our small corner of the healthcare world at HealthyHive, we believe health savings account are a big part of cracking the agency nut. But that is hard to do when you are trying to influence stakeholders who may not want to see you succeed. Thus, Gawande’s first unfair advantage is that he has the ideal captive audience in 1 million employees. If he keeps his new playbook simple and engaging, it will be Gawade 1, status quo 0.
Gawande’s second unfair advantage is the freedom to be very patient given the joint venture is not a profit-seeking initiative. This is critical because a lot of what Gawande says and does may not necessarily work. Not right away, that is. His captive audience gives him ample cover to fail early and hopefully fail often. I think it is safe to say our friends at Amazon will be capturing every meaningful data point as a way to fail faster. This will allow Gawande to try a new twist on any specific goal without wasting millions in failed projects.
Plenty of Arrows in the Quiver
One experimental arrow in Gawande’s quiver may be to build out a strong data science team. I’m sure he’ll be allotted a few Amazon Web Services credits to get off the ground and there are endless insights to be gained by employing a stacked data science team.
Another experimental arrow: Direct Primary Care (DPC). Dr. Gawande could recruit 1,000 of the best primary care physicians and allow them to spend more time with patients and less time battling health insurers through adopting a Direct Primary Care model. Just as Amazon has a built-in market for entrepreneurs looking to enter the last-mile logistics market, one million employees represent a built-in market for DPC. JP Morgan & Amazon could team up to design a killer SaaS platform for DPC and monetize it to the rest of the world. In short, Dr. Gawande can and should extend unfair advantages to primary care providers. They could go from being treated as a loss leader at massive hospital systems to recapturing their role as patient quarterback. It’s time primary care gets the respect it deserves.
DPC is the potential sleeper here. It would require some lobbying to drive policy change, but several bills are already being worked on. If Gawande can align incentives for employees and primary care providers, the money-sucking referral machine may vanish. Gawade 2, status quo 0. DPC could be a silent but deadly force for the status quo.
One final experimental arrow in Gawande’s quiver is the ability to leverage strategic acquisitions across the three companies. If you think the JV will be confined to simply renegotiating lower reimbursement rates, think again. Amazon’s acquisition of PillPack is the opening salvo. The crazy reality of this one acquisition is that PillPack may pay for itself in the first few years of the joint venture. The combined companies likely spend over $1 billion on Rx alone.
Three Strikes and You’re Out
The third unfair advantage is Gawande’s team. Seeing that Buffett loves unfair advantages in any business, he and his deputy Todd Combs likely devised the JV structure in a way that would maximize its chances at success. Dr. Gawande, please pump this mission full of unfair advantages and give it a shot. Sorry status quo, you’ve be caught looking on the third strike.