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The Keckley Report

The Big Four: The Table is Set for a New Center of Gravity in Healthcare

By January 11, 2021March 1st, 2023No Comments

Last Sunday, Haven Healthcare, the highly touted joint venture between Amazon, JP Morgan and Berkshire Hathaway that promised to change healthcare “free from profit-making incentives and constraints” announced its shutting down next month:

In the past three years, Haven explored a wide range of healthcare solutions, as well as piloted new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable. Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of their own employee populations. Haven will end its independent operations at the end of February 2021.” Haven

The post-mortem by pundits about the Boston-based venture included familiar themes—

  • ‘the management team led by Guwande and Optum-Comcast ex-pat Jack Stoddard was heavy on ambition but light on healthcare operations and execution’

  • ‘too much bravado, too little focus’

  • ‘conflicts between Amazon, Berkshire Hathaway and JP Morgan disabled Haven’s impact’

And so on.

What’s known for sure is that the $100 million bet by the trio produced a clear winner: Amazon. Buoyed by the steady growth of online retailing and the pandemic windfall, that saw its market capitalization double to $1.6 trillion last year, Amazon doubled down on healthcare. It had already expanded its over-the-counter offerings in 2017. In 2018, it acquired PillPack to support out its online prescription drug capability. In 2019, it added HIPAA-compliant Alexa skills set and launched Amazon Care. In 2020, it launched Amazon Pharmacy, the Halo wearable, and a partnership with Crossover Health to build primary care clinics. And last Wednesday, it announced that an FDA-approved coronavirus test hit (COVID-19 Saliva at-Home Collection Kit developed by DxTerity Diagnostics) is now available at the Amazon marketplace for $110 for a single pack with results in 48-72 hours.

Notably, each of these is integrated with AWS (Amazon Web Services) to support data capture and decision support and Amazon Prime, its member affinity program that has 95 million members who use it as their primary price-comparison site for the majority of their purchases.

Amazon has declared war on healthcare business as usual. It’s not alone. Walmart, Optum, and CVS are pursuing the same endgame but differ in how they’re executing their plans. There are notable similarities among the four:

  • All four aim to reduce health costs. All four see affordability and access as fundamental flaws of the status quo. All four consider healthcare’s spending addiction at 5% per year unsustainable but fixable. Unnecessary hospital and specialist’ utilization, inflated prescription drug prices which account for 61% of costs are targets. Amazon reminds analysts that food prices at its subsidiary, Whole Foods, went down 43% after Amazon took over. They see the same for healthcare.

  • All leverage skillful management of relationships with consumers. Each of the four operates a Business-to-Consumer (B2C) business model. Each thinks healthcare’s conventional orientation to “patients” sustains non-adherence and passivity. All view healthcare as an emergent direct-to-consumer marketplace in which employers are partners in equipping consumers to buy healthcare products and services intelligently. And all are building out their primary care footprint as their front door to consumer relationships.

  • All target employers as gatekeepers for their healthcare businesses. Each of the four targets local employers as gatekeepers to their 160 million employees and dependents as well as their retirees. All four offer health insurance plans and direct-to-employer health management solutions. All four have contractual relationships with hospitals, specialists, and diagnostic providers to channel referrals, and all think prescription drug prices are a place for immediate savings to employers and their employees.

  • All are well-capitalized and have access to more. The combined revenues ($1.45 trillion) and market capitalization is (S2.46 trillion) exceeding total spending for all hospital services in the U.S. All are making big deals to expand the scale and scope of their operations. Optum announced its $13 billion acquisition of Change Healthcare last week. Walmart is partnering with Oak Street Health to build-out its $38-billion healthcare vertical, and CVS is investing in its network of Health Hubs. They’re all making big investments in healthcare!

The landscape for new mega-competitors in healthcare is not confined to these four. There are two drivers:

Strategic growth by incumbents: Established players are expanding their efforts. Last week, for instance, Walgreens Boots Alliance, long criticized by analysts as an under-performer to CVS, announced it’s selling its wholesale business to AmerisourceBergen for $6.5 billion to focus on its 21,000 retail stores. Humana, the second biggest sponsor of Medicare Advantage Plans, is building out its senior care health delivery services and forging strategic relationships like Humana.

Opportunities for private equity (PE) investors: PE investors seek to buy assets in underperforming sectors, improve their financial performance by cost cutting and revenue growth, and sell to another fund or take a company public in 5-7 years. PE has $1.5 trillion cash on hand and is the force behind 32 healthcare-focused SPACs (Special Purpose Acquisition Companies aka “blank check” companies) now shopping for deals. As a result, PE is capable of creating mega-competitors in a matter of 1-2 years.

So, the landscape for competition in healthcare seems destined to expand well-beyond traditional intramural jousting in sectors and communities to regional/national organizations that are diversified in offerings spanning the financing and delivery of products and services.


Few obstacles stand in the way of non-conventional competitors like Amazon, Walmart, CVS and Optum and perhaps others. Consider:

  • Efforts to lower the federal government’s $27 trillion debt are not a threat: as healthcare spending, which accounts for a 29% of federal spending, becomes a target, bigger players in managed care and retail health will be advantaged.

  • Biden administration health policies will not impede their momentum: increased coverage through federal subsidies, constraints on prescription drug prices and hospital consolidation, increased investment in public health and primary care services for under-served populations are opportunities for the Big Four.

  • And consumers are receptive. They’re not happy with the status quo. While the majority fear “government run healthcare”, they readily embrace private sector solutions that improve access and affordability. Notwithstanding growing public angst about data privacy and the over-sized role of Big Tech (Facebook, Apple, Microsoft, Google et al) that’s attracted unwelcome attention from regulators, the Big Four have the wind at their backs.Embracing the likes of Amazon or Optum Care is a viable alternative for most.

The takeaway is this: the landscape in healthcare is shifting to bigger players with deep pockets and wider capabilities. Lack of response by incumbents today likely means irrelevance or insignificance tomorrow. They should not be ignored nor discounted.

Haven Healthcare’s demise is Amazon’s win.


P.S. I try to be fiercely independent in my politics and data driven in forming my views on issues and trends in healthcare. Like many, last week was an emotional roller coaster: the harsh name-calling and partisan brinksmanship around the Georgia Senate run-off Tuesday, the sickening sight of the Capital insurrection that took 5 lives Wednesday and the jaw-dropping COVID-19 death rate that reached 4,000 last Thursday. Sobering. Sickening. Is there a silver lining? Maybe.

The time seems right for our industry start a national discussion about the future of our health system wherein disinformation is addressed, prevention and public health prioritized, personal wellbeing pursued, and profits balanced with purpose. It could be the Manhattan Project our industry needs to reset its goals and direction for the next generation and beyond. In so doing, we can demonstrate civility, statesmanship and commitment to the greater good so needed in our divided country.


Alex Kacik; “Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven”; January 5, 2021; Modern Healthcare

“Why Even Bezos-Buffett-Dimon Dream Team Couldn’t Fix Health Care: Viewpoint”; January 8, 2021; Bloomberg/Quint

Sebastian Herrera, David Benoit “Why the Amazon, JPMorgan, Berkshire Venture Collapsed: ‘Health Care Was Too Big a Problem’”; January 7, 2021; Wall Street Journal

Charley Grant “Health-Care Companies Shake Off Disrupters, Make Deals”; January 7, 2021; Wall Street Journal

“National Health Spending in 2019: Steady Growth for the Fourth Consecutive Year”; December 16, 2020; Health Affairs

“The Next Normal Arrives: Trends that will Define 2021 and Beyond”; January 4, 2021; McKinsey

“Healthcare Transactions in 2021: Year in Review”; January 2021; Bass, Berry, and Sims

Sebastian Herrera, Kimberly Chin “Amazon, Berkshire Hathaway, JPMorgan End Health-Care Venture Haven”; January 4, 2021; Wall Street Journal

Erin Broadwin “Haven, ambitious health venture backed by Amazon, to shut down”; January 4, 2021; STAT

Erin Brodwin, Casey Ross “Inside the collapse of a disrupter: How Haven’s high hopes of redefining health care came to a crashing halt”; January 5, 2021; STAT

“Atul Gawande: To fix our broken healthcare system, start with primary care”; January 6, 2021; Fast Company


CDC Alert: Overdoses Likely to Spike, CMS Issues Opioid Abuse Treatment Guidance

On December 17, the CDC issued a Health Alert Network (HAN) Advisory to expect substantial increases in drug overdose deaths across the United States, primarily driven by rapid increases in overdose deaths involving synthetic opioids excluding methadone (hereafter referred to as synthetic opioids), likely illicitly manufactured fentanyl, and others.

On New Year’s Eve, the Centers for Medicare & Medicaid Services (CMS) issued guidance about newly required Medicaid coverage for treatment of opioid use disorders. Under the new benefit, state Medicaid programs must cover all drugs and biologicals approved or licensed by the FDA to treat opioid use disorders, including methadone, along with related counseling services and behavioral therapies.

Note: the CDC estimates that 81,230 drug overdose deaths occurred in the United States in the 12 months ending May 2020, the highest number ever documented in a 1-year period.

“Increase in Fatal Drug Overdoses Across the United States Driven by Synthetic Opioids Before and During the COVID-19 Pandemic”; December 17, 2020; CDC

“CMS Issues Guidance about Expanded Medicaid Coverage for Treatment of Opioid Use Disorders”; December 30, 2020; CMS

AHA Asks for Delay in Price Transparency Rule Compliance due to COVID-19 Surge, Vaccine Distribution Responsibilities

On January 7, the American Hospital Association sent a letter HHS to exercise enforcement discretion when ensuring compliance with the price transparency rule that took effect Jan. 1: “Implementing the rule is adding another large burden to the finance, billing and information technology staff, who are also responsible for helping hospitals navigate the surge in COVID-19 patients and vaccine demand.”

January 7, 2021; AHA

During Pandemic, Children’s Mental Health Issues have Spiked

The proportion of children who arrived in emergency departments with mental health issues increased 24% from mid-March through mid-October, compared with the same period in 2019. Among preteens and adolescents, it rose by 31%. Anecdotally, some hospitals said they are seeing more cases of severe depression and suicidal thoughts among children, particularly attempts to overdose.

Before COVID-19, more than 8 million kids between ages 3 and 17 were diagnosed with a mental or behavioral health condition, according to the most recent National Survey of Children’s Health. A separate survey from the Centers for Disease Control and Prevention found 1 in 3 high school students in 2019 reported feeling persistently sad and hopeless — a 40% increase from 2009.

Leeb et al “Mental Health–Related Emergency Department Visits Among Children Aged <18 Years During the COVID-19 Pandemic — United States, January 1–October 17, 2020”; November 13, 2020; Mortality and Morbidity Weekly Report, CDC

Loades et al “Rapid Systematic Review: The Impact of Social Isolation and Loneliness on the Mental Health of Children and Adolescents in the Context of COVID-19”; June 2020; Journal of the American Academy of Child Adolescent Psychiatry

“Children’s Hospitals Grapple With Wave of Mental Illness”; January 6, 2021; Kaiser Health News

Study: Televisits During Pandemic Increase for Routine Care that’s not COVID Related

The research team examined the utilization of telehealth services for respiratory illness, unscheduled behavioral health, scheduled behavioral health, and chronic illness. provided by Doctor On Demand, Inc. before and during the COVID-19 pandemic. Findings:

“Growth was not fueled by COVID-19 concerns but by visits for behavioral health and chronic illness. Telehealth services may play a role as a “safety valve” for patients who have difficulty accessing care during a public health emergency.”

Uscher-Pines et al “Where Virtual Care Was Already a Reality: Experiences of a Nationwide Telehealth Service Provider During the COVID-19 Pandemic”; December 2020; Journal of Medical Internet Research


Wholesale Drug Prices up 4.5% in January

Per 46brooklyns’s Brand Drug List Price Change Box Score which is based on changes in drugmaker Wholesale Acquisition Costs (WACs):

  • The median wholesale price increased 4.8% for 645 brand-name medicines in the U.S.

  • 40% of prescription drugs in state Medicaid programs will increase on an average cost per claim to $809, from $777 last year—an increase of 4.1%.

“Brand Drug List Price Change Box Score”; January 4, 2021; 46 Brooklyn

Tennessee to Implement Closed Formulary

Tennessee is slated to be the first state to operate a closed formulary in its Medicaid program under block grant provision approved last week by CMS that allows the state to continue receipt of rebates from drug manufacturers. The CMS approval explicitly excludes drugs prescribed to children under the federal Early and Periodic Screening, Diagnostic and Treatment program that requires states provide a wide array of preventive health and treatments to those under age 21 who are enrolled in Medicaid.

Note: The incoming Biden administration opposes Medicaid block grants to states and is certain to review CMS authorization.

Ed Silverman, “Tennessee to become the first state to run a closed Medicaid drug formulary”; January 8, 2021; STAT

Urban Institute Study: Medicaid Expansion Benefits Hospital Finances

This study estimated the effects of the Affordable Care Act (ACA) Medicaid expansion on hospital finances in 2017 to update earlier findings. “We found that the early positive financial impact of Medicaid expansion was sustained in fiscal years 2016 and 2017 as hospitals in expansion states continued to experience decreased uncompensated care costs and increased Medicaid revenue and financial margins. “

Fredric Blavin, Christal Ramos “Medicaid Expansion: Effects on Hospital Finances and Implications for Hospitals facing COVID-19 19 Challenges”; January 2021; Health Affairs

Study: Opioid use by Parents Associated with Children’s Use

The Columbia University research team examined patterns of association between parental and adolescent medical prescription opioid use and misuse in the US based on a cross-sectional study of 15,200 parent-adolescent dyads from the National Survey on Drug Use and Health. Findings: controlling for other factors, parental medical prescription opioid use within the past year was associated with adolescent medical prescription opioid use and misuse, whereas parental misuse was not.

“The findings of this study suggest that parental medical prescription opioid use is associated with offspring prescription opioid use, whereas parental misuse is not.”

Griesler et al, “Assessment of Prescription Opioid Medical Use and Misuse Among Parents and Their Adolescent Offspring in the US”; January 7, 2021; JAMA Network

Study: Universal Coverage Increases Utilization

Researchers analyzed utilization rates in single/universal coverage systems vs. others. Findings: “Our review of the utilization effects of past coverage expansions suggests that a first-dollar universal coverage expansion would increase ambulatory visits by 7–10% and hospital use by 0–3%. Modest administrative savings could offset the costs of such increases.”

Gaffney et al “Pricing Universal Health Care: How Much Would The Use Of Medical Care Rise?”; January 2021; Health Affairs

Congress Approves 3.75% Pay Bump for Physicians

Last week, Congress authorized a 3.75% increase in 2021 Medicare Physician Fee Schedule as part of the stimulus and government funding bill. Twelve specialty societies banded together to force increases for specialists equivalent to primary care bumps costing the Medicare $3 billion.

Rachel Cohrs, “Congress recalibrates Medicare Physician Fee Schedule after lobbying”; January 5, 2021; Modern Healthcare

Altarum Analysis: for High-Risk Medicare Beneficiaries, Medicare Advantage Outperforms Medicare FFS

Altarum conducted this study on behalf of the Better Medicare Alliance applying an algorithm for identifying the high-need, high-cost beneficiaries (individuals under age 65 who are disabled, the frail elderly, and those with major complex chronic conditions) in Medicare Advantage and Traditional FFS Medicare. Findings:

  • Outcomes in Medicare Advantage vs. Traditional FFS were better on 17 of 22 clinical quality of care measures i.e., rates of pneumonia vaccination that are 50 to 52% higher, rates of eye exams for diabetics that are 14 to 56% higher, rates of depression screenings that are 18 to 27% higher and others.

  • MA enrollees have higher rates of physician office visits within 14 days of a hospital discharge, higher rates of outpatient visits, a 57% lower rate of avoidable acute hospitalizations and 12% lower rate of 30-day readmissions.

  • Inpatient hospital costs that were 9 to 23% lower, Part D drug costs that were 38 to 44% lower and combined pharmacy and medical care cost that were 8 to 18% lower.

“Positive Outcomes for High-Need, High-Cost Beneficiaries in Medicare Advantage Compared to Traditional Fee-For-Service Medicare”; December 2020; Better Medicare Alliance