Rae Woods:
From Advisory Board, we're bringing you a radio advisory. My name is Rachel Woods, you can call me Rae. It's the end of February, which means that Haven Healthcare, that conglomerate between Amazon, JP Morgan and Berkshire Hathaway, it's officially come to a close. And it wasn't too long ago that the creation of Haven had providers just shaking in their boots. But I don't think this is a story just about Haven or even just about Amazon. So, today, I want to talk about the broader push from Silicon Valley to disrupt the healthcare industry. We'll talk about what we can learn from the rise and, ultimately, fall of Haven. And what sort of disruption might be coming next? To do that, I've brought back digital health expert. Andrew Rebhan.

Rae Woods:
Hey Andrew.

Andrew Rebhan:
Hey Rae, how are you doing?

Rae Woods:
I'm doing all right. I mean, it's kind of weird that it's almost March and it feels like March was yesterday, which I guess just means we're creeping up on a year of living through this crisis.

Andrew Rebhan:
Yeah, it's definitely not been the funnest year of my life. But I'm really kind of keeping my fingers crossed for 2021 looking a little bit better, at least in the second half of the year.

Rae Woods:
Well, I'm glad you're back because there have been a bunch of big changes and announcements in the kind of digital health, big tech space. And maybe the biggest change that's happened is the announcement with Haven. Haven is not the first time that these kinds of outsiders have attempted to enter, and maybe even disrupt the healthcare space. I think a lot of folks have seen disruptors come and go, and try to make their way into healthcare and, ultimately, to fail. What other examples beyond Haven have you seen?

Andrew Rebhan:
Yeah so, when it comes to big tech's efforts and some of their previous failures, I think there's a lot of common examples that keep coming up. One being Google Health which, at the time, was more of a product. It was focused around, essentially, creating a personal health record. Another one was Microsoft's HealthVault, which lasted a little bit longer, but it was launched around the same time. We've seen Google Glass, for example, that kind of came into the market with a lot of attention, but really only lasted a couple of years, mostly because they didn't really know what to do with it. From a consumer perspective, it was quite expensive. Didn't really have a lot of tested use cases. But it's come around now as kind of an enterprise product, so it is still actually out there.

Andrew Rebhan:
And then, there's some maybe less high profile examples. IBM's Watson kind of having some stumbles with its drug discovery program. Verily also recently down their research on smart contact lenses that could essentially track glucose. It was something they were studying for years, and it had all this potential behind it, but they actually just decided they can't do anything with it, or it's just too difficult. So, they're pivoting away from that research. And, now, Haven is more or less just the latest example of just an initiative that got a lot of attention at the start, and just couldn't really turn into anything over a couple years.

Rae Woods:
So, I wonder if they're all of these examples of failed products, why would a big tech company even want to get into the healthcare space?

Andrew Rebhan:
Healthcare has so much running room for improvement, just when you think of the size and the scale, and the scope of it all really. I mean, just the amount of inefficiency, waste, overall dissatisfaction from whether it's the workforce, or whether it's the customer. And big tech, these are employers themselves, they employ plenty of folks all over the world. And so, naturally, they're incentivized to try to cut back on healthcare costs for their employees. And I think that, while they're still very innovative and always coming up with new products and services, they also have established core businesses that, over a certain period of time, would potentially slow down in terms of their growth. And so, healthcare serves as just another means of kind of diversifying their revenue streams.

Rae Woods:
I should also say that I think we, in the kind of traditional healthcare space, think about failure in a very different way than a Google or an Amazon thinks about a failed product, right?

Andrew Rebhan:
Yeah. I mean maybe for big tech they might not even necessarily frame something as a failure, or rather just a learning experience. I mean, I listed off some of those initial products or services that we would say have failed, but in many respects, those projects were just revamped, or put into stealth mode, or just repurposed for something else down the line. And so, it's really just kind of a working iteration of how they do business compared to other folks who don't fall into that big tech category.

Rae Woods:
And it's not all bad. Like you mentioned that a lot of folks like to point to the same handful of examples of "failure." I've actually even had providers be super bullish with me and almost say like, bring it on big tech. You want to try to get into our industry, you just wait and see how hard it is. But I have to imagine that there are also a lot of success stories out there. What are some of those?

Andrew Rebhan:
So, in some regards, success is relative for a lot of these companies. They are actually, if you look at what Google, Amazon, Apple, and the like are doing, there's a bit of overlap as far as who can kind of optimize a certain product or service the best way. And it's still unfolding. There's a lot of these initiatives that are still early days. We're still trying to figure out what their long-term potential is. But we can see where a lot of these companies are focusing in on their particular areas of strength. So, Apple seems to be focusing a lot more on their personal health record, something that could have very well taken from Microsoft and Google's previous efforts. But now they're, essentially, trying to use their iPhones as a core hub of connectivity. They also are really running at their smartwatch being a growth segment of their business.

Andrew Rebhan:
Amazon, of course, they got their big foothold into the industry with the PillPack's acquisition. Now, they're running with their distribution and logistics platform to build out their own pharmacy service that they recently announced. And I think Google is really just all about the data, at this point. They obviously dominate and search. They've finished their acquisition of Fitbit, which gives them a ton of new consumer data to work with. And they're really leveraging their cloud platform and new research apps that they've created.

Andrew Rebhan:
I mentioned Google Cloud, but really if you think about Amazon Web Services, Microsoft and their Azure platform, all these big tech vendors are looking at cloud functionality, in particular, as well as virtual assistants and all the growth we've seen with Siri, and Alexa, and Cortana services.

Rae Woods:
So, it's clearly not the kind of graveyard of disruption that maybe that angry provider would have liked to convince me of. And what you're describing is that big tech is casting a really wide net in terms of what they can do with healthcare. And even within those organizations, you mentioned several things beyond Haven that Amazon is doing, just as one example.

Rae Woods:
I do want to take a few moments to talk about Haven specifically, maybe just remind everyone in our audience what the initial goal of Haven Healthcare actually was.

Andrew Rebhan:
Yeah so, if we think about what Haven was all about this is, obviously, three big companies coming together and Amazon, and JP Morgan, and Berkshire. And the idea was combined, we have over a million employees, and we know healthcare is a mess in certain ways. And we should be able to leverage our resources to fix this problem with employee costs for healthcare. But I think the issue with Haven is that when it comes to what their goals were, they were actually just so vague. They were quite general, this idea of we're going to come together to create better health outcomes. We're going to improve primary care access. We're going to simplify insurance. We're going to make drugs more affordable.

Andrew Rebhan:
It's certainly, well-intentioned. These are positive things that we should be hoping that they succeed in. But I think it's just a fact that when Haven was initially launched, and what we were trying to understand what they were actually trying to do it was pretty hard to parse out. I mean, even their website was really limited on details. There really wasn't a whole lot to dig into this. That's why there was so much speculation about just what Haven was meant to do.

Rae Woods:
And I think fear about what Haven was meant to do too. But, ultimately, was maybe a set of goals that is too broad. Is that one of the reasons why Haven has, ultimately, ended up in this position?

Andrew Rebhan:
Yeah, it was certainly one aspect of maybe why things didn't work out. Trying to fix too many big problems all at once. Not really having a focused strategy. They didn't necessarily have any immediate products that they could put out to the market. So, they announced the venture to the whole world, and get all this attention for it. But, perhaps, they announced it a little bit too early without really having a set plan in place. They were trying to disrupt the industry, but when you look at some of their initial steps in building out these, particularly insurance plans for some of their employees in select states, they were doing this with entrenched players. They were just relying on, on groups, I believe it was Cigna and Aetna to implement these test pilot programs that they were working on.

Andrew Rebhan:
So, it's hard to disrupt when you're still tied into the existing ways of doing things. And, not to mention, these are three vastly different companies that work all across the nation, different regions, different geographies. And that old rule that healthcare is local, and the way that insurance works is very local. And so, I think Haven was just running up against a lot of barriers.

Rae Woods:
And Atul Gawande kind of famously stepped up as the CEO of the conglomerate. And then, a couple months ago announced he was stepping down from Haven's kind of top position. Do you think that should have been a sign to the market for what was ultimately to come?

Andrew Rebhan:
I think it might've been more of like the nail in the coffin. Namely because Haven was just plagued with a lot of executive turnover over the couple of years that they were in business. So, they actually had a number of high profile gigs that were filled, and then very quickly dropped, and they were constantly reshuffling their leadership position. So, with Dr. Gawande stepping down, I mean, that's really just hard to come back from. It's hard to run a business when you don't have a CEO at the helm. Dr. Gawande, I mean, he's a notable surgeon, he's a professor, well-respected thought leader. I think everyone knows that he's very much an experienced leader in healthcare. But I think there's a difference between the typical roles that he's handled versus the day-to-day business of running Haven.

Rae Woods:
And now he's in a different leadership position at the helm of trying to help the Biden administration fight against COVID-19. So, maybe that's more of the COVID effect of what happened with Haven, then maybe a direct response to the pandemic.

Andrew Rebhan:
Yeah. I mean, this type of advisor role him is probably far more well-suited to what he can do versus needing to try to scale up a new business. I think COVID certainly did not help with Haven trying to get off the ground, but I don't think that was the sole reason why Haven, ultimately, didn't work out. But it was unfortunate. The timing was not very good.

Rae Woods:
Do you, ultimately, think that this was just kind of over-hyped? I mean, I don't know if you remember the day that Haven... I guess it didn't even have a name at this point, the day that an Amazon, Chase, Berkshire Hathaway, something was announced. I mean, it was like shock waves in our industry. Was it, ultimately, over-hyped, too ambitious?

Andrew Rebhan:
Over-hyped probably, but we say that with hindsight bias. When it actually was announced, I believe it got the amount of attention it did deserve. This news did come out of nowhere. These are three very large companies deciding to come together. It was intriguing, that's why we talked about it. I think it was fair to give the amount of coverage that we did.

Andrew Rebhan:
And I think that whenever big initiatives or big companies like this end up failing, it's just sort of human nature to want to come out and say like, "Oh, I knew it all along. Or, I totally anticipated this. Or, I can't believe anyone took this seriously." Like that kind of perspective I get it. And it sort of makes you feel good you had the future sight to see that this wasn't going to work out.

Andrew Rebhan:
And the other part of that is was this too ambitious again? Probably. If you look at their goals and what they were trying to do, I just think that they set out a plan that was far too vague, and tried to balance way too many big, complex challenges at once.

Rae Woods:
Should we take the rise and kind of fall of Haven as a signal that efforts for big tech to disrupt the healthcare industry are just doomed? That maybe healthcare is disruption proof. Is that the right takeaway?

Andrew Rebhan:
I would say, no. And the reason why is-

Rae Woods:
You can say, absolutely not [inaudible 00:14:48] answer by the way.

Andrew Rebhan:
I mean, yeah, I would lean towards that. I mean, at the start of this, we talked about how there's those common examples of failure that industry skeptics like to bring up with health falter, with the initial Google Health efforts and so on, and yet look where these companies are today. It's not like they've fallen off the map. We are still very much interested in what Microsoft is doing, they're establishing a ton of partnerships lately. They've actually been on a pretty exponential growth path in healthcare. Google has what started out as a simple product is now a division that is headed up by industry leaders, and not just in the clinician space, but in the policy world. They have over 500 employees, at this point, just working on healthcare. And so, in many respects these failed efforts, a lot of ways, they were ahead of their time.

Andrew Rebhan:
And the components were not really in place to let these early initiatives take off. But I think that if there were lessons learned, if these initiatives could be repurposed, deconstructed in some sort of way, and put together later down the road, I think that that's just as helpful. Haven failed but, in those efforts, I'm sure Amazon learned plenty of lessons with respects to their Amazon Care program that they've been running on the side anyway. And so, why not combine those lessons and keep running at this? I don't think big tech's anywhere near giving up on healthcare.

Rae Woods:
And like you said, Haven was just one of the healthcare efforts that Amazon had, just one of many. So, we shouldn't take that as the demise of Amazon, or a big tech more broadly.

Rae Woods:
We're, obviously, living through a pretty seismic shift in the healthcare industry with the COVID-19 crisis. But it sounds, to me, like disruption, or at least efforts to disrupt are maybe here to stay. If Haven was trying to disrupt maybe the old world of healthcare, the pre-COVID reality do you have a sense of what would disrupt our sort of new reality in the peri or post COVID world?

Andrew Rebhan:
Well, understand that big tech is also trying to have a hand in helping with COVID response. So, we know something like the contact tracing efforts that Google and Apple tried to kick off the ground, that really probably might be another example of something that's going to fail. I really don't think that that's going to be taking off. They are also trying to reach out, as far as helping with vaccine distribution, and the logistics around all that.

Andrew Rebhan:
Even still, when I think about the idea of why did Haven fail versus what's potentially going to kick off this new future of healthcare in big tech? It makes me think about how Haven failed because it was, essentially, working with entrenched players, and working within the balance of existing healthcare, rather than trying to really disrupt from a... When we think disruption, we think of something that turns an industry on its head. Something that creates new demand, that reaches future needs that we're not even aware of today.

Andrew Rebhan:
So, there's this very popular book, The Innovator's Dilemma, it's by Clayton Christensen. And he's like a business strategist, thought leader, former professor. Unfortunately, he passed away recently, but the idea being that if you're a business, you have essentially two tracks of innovation: you have sustaining innovation and you have disruptive innovation. And sustaining innovation is really just you've got existing customers, you have high value opportunities, you're really just optimizing the way things are done. Versus disruptive innovation, which is like what Airbnb did, and Netflix, and Uber and all those companies. And so, when I think of Haven and what they were trying to do, they were essentially just trying to fix things that are broken in healthcare. They were trying to-

Rae Woods:
So, they were sustaining innovation?

Andrew Rebhan:
If I could apply the theory, maybe I'm stretching it a little bit, but the idea is that Haven, in my mind, they came onto the map on paper looking like a disruptor, when really they were falling more in line on that sustaining innovation track. They were basically coming in and saying, here's an established industry that needs some fixing. So, let's tweak and optimize things. And, hopefully, we can maintain the existing customers, we can focus in on existing value opportunities. But they were, essentially, neglecting the possibility of a niche market, or creating and reinventing products and services. That's where disruption really comes in.

Andrew Rebhan:
And so, it might be unfair or unrealistic to always expect big tech to be a disruptor because they might've disrupted industries, this is why they became such a huge force in basically every other industry. But we can't always expect the likes of Google, Apple, and Amazon to constantly reinvent everything that we do. It might be the case that with the new world order the next stage of healthcare is going to be redefined by some startup that is serving some really niche market that we're not paying any attention to. And, out of nowhere, they're just going to come out with a new product or service that's just going to totally upend the market.

Rae Woods:
And to your point, disruption can come from different players. I would like to think that it can come from within the entrenched healthcare systems themselves, or maybe from policy, or maybe from the non kind of tech competitors, like the Walmarts and the retailers of the world. But I really want to hear your opinion, I guess, what is or what could be the next sort of disruptors that we should be watching for?

Andrew Rebhan:
I mean, this does sort of play to how, again, we give big tech gets its fair share of attention. And I think that we should. I think that they are definitely a group of innovative organizations that do amazing things, especially in the technology space. But I also give plenty of credit to a lot of the digital health startups that are still, often, just trying to get on people's radar, trying to fix very select areas of healthcare leveraging technology. I think that's where you start to see real innovation at play. These are people who are thinking not just outside of the box, they are essentially thinking without a box. And they are looking to not just tweak and fine tune the way healthcare is today, we are fully aware that healthcare needs a complete remodel in a lot of ways. And I think that if we have these external companies that are just going to continue to try to work with the existing playbook that's really not going to get us where we need to be.

Andrew Rebhan:
Of course, there are factors here that are just beyond their control, in some regards. Obviously, healthcare is extremely regulated. There are a lot of rules, I'm not going to act like they don't have barriers that they need to overcome. But I think that when we look at how they're playing in this industry, I mean, some folks are going to be excited about big tech. Others are going to expect them to fail or, worse, they're going to hope that they fail. And the real question is, should we be rooting for these companies? I mean, I, as a consumer or as a patient, I would love for Apple, or Google, or Amazon to come up with something revolutionary. It would be great. Make my life easier. But the entrenched players, the folks who are incentivized, and paid a certain way, regulated a certain way, how are they going to respond. That's just the kind of ongoing open-ended question.

Rae Woods:
Well, from my experience, their response has largely been fear. Even if, it's not the outright kind of rooting to fail, if I, again, think back to the initial announcements of the conglomerate, as Haven came together, as we've watched what Google and Apple, and even the Walmarts of the world have been doing, a lot of the response from the traditional players is fear, is being afraid of what that's going to do to their business model. And I sort of want to ask you directly, what is your message to those people who are wary of that next big disruptor?

Andrew Rebhan:
So, it comes down to framing in a lot of ways, like we just said, if they're weary of a new entrant and if we fear them. And I think that it's that perspective of, if we fear big tech, then we will naturally set up resistance to them. Even if we label them as disruptors, which I use the term a lot, I know that we've thrown that term around a lot already just on this podcast, because it's just the established term that most people use for-

Rae Woods:
Yeah, I don't know what other term to use. Outsiders, maybe?

Andrew Rebhan:
I feel like that's even kind of a negative term. Like this idea of they're these outsiders, these disruptors, these external companies. It kind of gives off this vibe like they don't have any business being here. Or even just disruption, meaning like to break things apart, that sounds kind of dangerous when you're dealing with healthcare.

Andrew Rebhan:
But it's really just a frame of mind, like I said. Imagine if we looked at this from more of a glass half full perspective and said let's hope that these companies actually come in here and fix things. And let's work collaboratively with them rather than trying to constantly run up against them head on.

Rae Woods:
Or beat them at their game which, let's be honest, is not going to happen.

Andrew Rebhan:
Yeah. And I think that also, I mean, these are big tech companies that have made tremendous amount of profit. And they've grown substantially over the years. They're, obviously, public companies. They have stockholders that they need to do a piece to. So, I think that there is this sense of skepticism, or perhaps some negative light about big tech, just going into healthcare for the sake of growing their own businesses and making money off of it. That's always going to be there as well. That's probably a conversation for another day though.

Rae Woods:
Well, Andrew, thank you so much for coming back on Radio Advisory. I know that as more news comes out, maybe the next big tech innovation, we'll have to have you back on the podcast.

Rae Woods:
But before we close, I want to give you another moment to just kind of speak directly to our listeners. What do you want to make sure they take away this week?

Andrew Rebhan:
So healthcare incumbents, and by that I mean established legacy players or hospitals, health systems, clinics, and so on, they obviously have their core competencies. Their knowledge of medicine and clinical pathways, their relationships with physicians and payers and patients, their ability to work with clinical data. We know what they're good at. And whenever we have these discussions about big tech, or other types of innovative disruptors that are coming into play, there's always this discussion of where do we fit in all of this?

Andrew Rebhan:
And I think that the incumbents, they know what they're good at and they should work and focus on that, but they still need to be at least alert and nimble enough to be able to adapt to all of the other innovations that are coming their way. So, do we expect them to be experts at things like digital advertising, or e-commerce, or app development, or hardware development to build the next wearable, or the next smartphone, or do we expect them to be AI experts and know how to work with advanced analytics? Probably not.

Andrew Rebhan:
When it comes to big tech and these other kinds of emerging entrants, you need to pick your battles, if you're looking to choose to compete with them head on. Or you start to strategically outsource and develop the right partnerships with them. Or you invest in innovation centers, you start to think about how do we co-develop and spin out solutions that can diversify our business growth, and help to get us an edge in the marketplace? So, that you're not just standing still while the whole market continues to evolve right by you.

Rae Woods:
So, said another way, disruption is not something that just happens to you. You actually can shape the environment by talking about where do I compete? Where do I partner? Where do I, maybe, even invest?

Andrew Rebhan:
Yeah. It's about finding your core competency. You don't need to have a core competency in everything. A lot of incumbents feel like they're out of the loop when it comes to everything big tech is doing but they still, like I said, have their areas of expertise, their connections with patients and with clinicians, they still very much have a part to play in all of this.

Rae Woods:
Well, thanks for coming on Radio Advisory, Andrew,

Andrew Rebhan:
Thanks for having me back. Hope to have a future session.

Rae Woods:
Andrew is spot on. I'm not sure the right way to think about Haven, or Amazon, or anyone in big tech is to be afraid of them. The reality is that big tech has done a lot of good for our industry. And it's not like they're going away. So, the question for incumbents is what is your role, or your opportunity to partner with any of these so-called disruptors? We'll be right back with more of the news that our research team is watching.

Rae Woods:
Democrats’ plan to lower individual market costs would increase enrollment and improve assistance to existing enrollees, but it comes with a high price tag. The Congressional Budget Office has put out an assessment of current House proposals related to pandemic response, which includes a plan to increase premium tax credits on the Obamacare exchanges. The good news is that the CBO predicts that the enhanced credits would encourage 1.7 million more people to enroll in an exchange plan in 2022. The bad news is that the total cost of tax credits for new and existing enrollees is estimated to increase federal deficits by $34.2 billion between now and 2030. There's some confusing reporting around Covid-19 and health equity. The share of white Covid-19 deaths increased at the end of last year, but I want to be clear, significant disparities still remain for many communities of color. We saw a large spike in cases in the Midwest during the fall and winter and that increased the proportion of white Americans who have died of Covid-19. However, when adjusted for age, deaths among Pacific Islander, Latino, Indigenous, and Black communities are still more than double those of white and Asian communities. Senate hearings to confirm some of Biden’s nominee for top health care jobs have been scheduled for this week. The confirmation of Xavier Becerra for HHS secretary will begin today. This will be an opportunity for the former California AG, who has raised some concerns among Republican lawmakers for his stance on abortion, to start outlining his plans for HHS. Hearings for the Surgeon General nominee Vivek Murthy and Assistant Secretary of HHS nominee Rachel Levine are to scheduled to begin this week as well. We are still waiting for when hearings will be scheduled for Chiquita Brooks-LaSure, who has been nominated to lead CMS. And remember, as always, we're here to help.