On the heels of an announcement this morning that Amazon, Berkshire Hathaway, and JPMorgan are partnering to cut health costs, Warren Buffett made a statement that has already gone viral: “The ballooning costs of healthcare act as a hungry tapeworm on the American economy.” He then proceeded to blast some of the industry’s largest players while describing the new venture as one that would be “free from profit-making incentives.” While how that works remains to be seen, I was reminded of how the consumer marketplace tends to sort the wheat from the chaff, provided it’s given a fair shot.
Yes, given all the economic challenges facing healthcare’s acute care market, its response has been predictable: epic rates of unbridled consolidation and, finally, a rational focus on the non-patient-facing side of the balance sheet. Big systems are getting bigger and regaining control of their supply chains. Wrestling back control from the industry’s old guard (Group Purchasing Organizations) has led to compromises both good and bad, but one thing is clear: Multibillion-dollar health systems have finally gained an appreciation for the value of “doing it themselves.”
And technology? Well, it’s all there. Health systems have bought the procurement and supply chain management tools that create competitive markets for their demand, rationalize what they buy and who they buy from, and drive compliance with “standards.” Finding talent that can execute is now being matched by enabling budgets, so we’re starting to see all kinds of interesting, competitive twists.