Why Haven Failed to Disrupt Healthcare--and How It Could Have Succeeded

Three years ago the healthcare industry was buzzing about Haven, the new partnership between JPMorgan Chase, Berkshire Hathaway and Amazon that was poised to disrupt healthcare. The name Haven suggests a place of safety and refuge, and with healthcare costs continually rising, that sounded good to me and other employers. This coalition represented an estimated $20 billion in healthcare spending, 1.2 million employees and all the capital needed to lower cost and improve access for all Americans. So why, after 3 years, millions of dollars in investments and a team of 57 healthcare veterans, did Haven fail? What does this mean for an employer like me with 41 employees and $400k in healthcare premiums? It is not a good diagnosis.

What went wrong?

Haven hired healthcare veterans who had years of experience in how the current system works, then hired a CEO who was a brilliant physician and academic, but who had limited experience in how healthcare administration works. A public fight over a non-compete with UnitedHealthcare was an encouraging sign early on. If one of the industry giants was so concerned about its trade secrets, perhaps Haven could use the knowledge of how the system works to change it. That did not happen.

So why quit now? Recently, Amazon announced a mail-order partnership with a large PBM to grow its pharmacy prescription market share. Amazon was unable to break into the healthcare system because it could not get referrals or data from the major health plans (all own PBMs) who blocked them from participating in their networks. So eventually Amazon partnered with one of the major PBMs and subsequently agreed to a relationship that did not disrupt, but rather played by the current rules. One can even speculate that part of that arrangement may have been to end the Haven partnership.

Most Fortune 50 companies have some stake in the current healthcare system other than just covering their employee benefits. Three of the top 10 are healthcare companies. If you are a large bank like JPMorgan Chase, you sell profitable, growing healthcare companies that are benefiting from the broken system. Berkshire Hathaway has been in the insurance and reinsurance business for 57 years to benefit from the prepayment of premiums to leverage its investment strategies. Amazon needs to find a way to keep growing, and at some point, if your market cap is $1.6 trillion, healthcare may be the only industry that is big enough to make a difference to your shareholders.

What could have gone right?

Berkshire could have leaned on some of their current companies that execute in the healthcare space and have demonstrated an ability to both improve healthcare and drive savings for specific populations such as college students. Haven should have hired employees who understand the system at a painfully detailed level and incented them to change it. They should have partnered with experts in driving disruption in the space, not just hired those with experience in how the broken system runs. Disrupting in this space is a very complicated and treacherous endeavor and it takes individuals willing to weather not a safe harbor, but very rough seas.

The reality is that Haven had all the ingredients needed to significantly change healthcare with one big gap: a strategic partner or expertise in disrupting this space. I know what we would have done at Goodroot with 1.2 million lives, significant market influence, our team and some capital. We would have saved ~30% of pharmacy cost or roughly $250 million through efficient formulary options, direct rebate contracts and an integrated point-of-sale pharmacy solution that delivered the best pricing at the pharmacy regardless of the PBM contract. We would have also audited all the hospital payments and delivered $100 million in savings on the medical benefit while implementing policies that make sense. ~$350 million would have been just the start in the first 12 months within the spend of JPMorgan, Amazon and Berkshire Hathaway.

If that same approach was packaged up and delivered broadly the impact would be billions in savings back to employers, members and society as a whole. This is what Goodroot is already doing, with over $800 million in wasted healthcare spending eliminated to date. With Haven’s advantages, we would reach our goal of lowering healthcare costs by $30 billion long before our 2025 target.

It will remain critical for any effort to disrupt and change healthcare to understand the systems that create inefficiencies and prevent competition in the current environment. As CEO of a company with 41 employees, I am hopeful that a strong understanding of the current challenges combined with a disruptive strategy will deliver more promising results.