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Our Take: The demise of a proclaimed disrupter: Haven comes to a halt

Jan 11, 2021

Haven, the nonprofit joint venture that Amazon, Berkshire Hathaway, and JPMorgan Chase launched in early 2018 with the mission of providing their 1.2 million U.S. employees with simplified health care at a reasonable cost, is calling it quits after just three years.

The company posted a statement on its website saying it would end its independent operations at the end of February.

Our Take: When the three corporate powerhouses said they were joining forces to tackle the high costs and complexities of health care, it was huge news within the sector. Stock prices fell and analysts delivered a flurry of forecasts.

When the startup brought the highly respected Dr. Atul Gawande on board six months later to lead the company, that was also major news.

Last week, when CNBC first reported that Haven was disbanding, there was a lot of buzz as well.

Unfortunately, there wasn’t much about Haven that made the news in between those announcements. Now, it seems, there simply may not have been much happening at Haven that was newsworthy.

A spokeswoman for the company told CNBC that the Haven team “made good progress exploring a wide range of health care solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable.”

That may have been the case, but if so, the rest of us didn’t hear much about it. Not like, say, everything we’ve heard about Amazon’s inroads into health care these last few years.

Speaking of what Amazon has accomplished, that, apparently, is part of the reason Haven is going away — not Amazon’s progress, per se, but the three founding companies’ preference for experimenting with different measures on their own to address their employees’ health care issues. It makes sense that if there isn’t going to be an integrated, collaborative effort to establish employer-sponsored health care, then there really isn’t much need to keep Haven around.

“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 our individual employee populations and locations,” the Haven spokeswoman told CNBC.

Like many, we were surprised when we heard about Haven last week. But after some consideration, it didn’t seem like such a surprise after all.

Despite the initial splash when the joint venture was announced, there wasn’t much substance from the start. The goals were lofty, but the details were less than scant.

Dr. Gawande, we thought, was an excellent choice to lead the new venture, once he was finally chosen. But we did voice our concerns at the time that he would still continue to teach at Harvard and practice medicine at Brigham and Women’s Hospital. After all, trying to make health care more affordable for 1.2 million people seems like a full-time job — and then some. We were not surprised when he stepped down as Haven’s CEO in May to lend his expertise to fighting the pandemic.

That it took more than a year to even give the fledgling company a name was telling. There was speculation after the company was launched that whatever was going on behind the scenes was being kept “secret” so that competitors wouldn’t catch wind, but come on. The name of a company is kind of important, and there’s no good reason we can think of for not squaring away that bit of business and making it public right away.

We’ve seen quite a bit of conjecture in the last several days as to why Haven ultimately failed to deliver on its objectives. Some have said the country’s health care system, with its meshes and layers of payers, provider networks, pharmacy benefit managers, and health policies, is just too complex for anyone — even an entity with the combined heft of Amazon, Berkshire Hathaway, and JP Morgan Chase behind it — to effect serious change very quickly. That the three companies’ employees are scattered throughout the U.S. likely further complicated matters, since rates and networks tend to be established on a local or regional basis.

Others hypothesized that unless and until more progress has been made in the transition from fee-for-service reimbursement to value-based, capitated models, attempts like Haven’s are essentially doomed. Writing for Harvard Business Review, Dr. John Toussaint, founder of Catalysis, referred to this as the “perverse incentives” of the volume-based system that give insurers and hospital leaders little reason to switch, unless health systems also serve as a health insurer, like Intermountain and Kaiser Permanente.

Still others criticized Haven for not forming alliances with established businesses that have some health care expertise. At the time Haven was launched, none of the founding companies had any experience in health care to speak of, and as far as we can tell, Amazon is the only one that has taken any steps in that direction. As the head of a consulting firm said last week, you can’t just throw “tech and dollars” at the problem and expect to make a difference.

Undoubtedly, the pandemic added to whatever other obstacles the Haven team was already grappling with. Dr. Toussaint noted in his article that providers have had to focus on managing the health crisis, of course, along with the resulting financial fallout of postponing elective surgeries and nonurgent procedures, making them less likely to entertain new ideas — or new risks. He said that a CEO of a large, unidentified academic medical center told him that it planned “to jettison as many risk contracts as [it could] over the next two years.”

Whatever led to Haven’s demise, we’re confident that Jeff Bezos, Warren Buffet, and Jamie Dimon have learned from their endeavor. Failure isn’t a word that’s commonly associated with any of them, so it will be interesting to see what they do with the insights they’ve gained.

What else you need to know

UnitedHealth Group’s Optum will acquire Change Healthcare for $7.84 billion in cash and will assume an estimated $5 billion in debt as part of the deal, the companies announced Wednesday. Change Healthcare will join with the OptumInsight business unit “to provide software and data analytics, technology-enabled services and research, advisory and revenue management offerings,” they said. Neil de Crescenzo, Change Healthcare’s CEO, will become CEO of OptumInsight when the transaction closes, which is expected to occur in the second half of this year if shareholders approve and customary closing conditions are met. The acquisition share price of $25.75 is a 41% premium to the closing price of Change Healthcare’s stock on Tuesday.

Centene signed a definitive agreement to acquire Magellan Health in a cash transaction valued at approximately $2.2 billion. According to the press statement, the merger will combine the companies’ complementary capabilities in behavioral health, specialty health care, and pharmacy benefit management (PBM). By purchasing the Phoenix-based company, Centene will establish itself as one of the largest behavioral health platforms in the U.S., with 41 million unique members. It will also gain 5.5 million new members in government-sponsored plans, 2 million PBM members, and 16 million medical pharmacy members. Magellan will operate independently as part of Centene’s Health Care Enterprises unit, and senior management at Magellan will transition to Centene. The boards of both companies have approved the acquisition, but it is still subject to regulatory and shareholder approval. The companies anticipate completing the deal in the second half of this year.

Amerisource Bergen will acquire Walgreens’ drug wholesale business for approximately $6.5 billion. That includes $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock, the companies said in a press release announcing the agreement on Wednesday. Walgreens Boots Alliance, which has nearly a 30% stake in AmerisourceBergen, said selling its Alliance Healthcare pharmacy unit would allow it to “focus on growing and transforming its core retail pharmacy and health care businesses.” The two companies also expanded and extended their strategic U.S. partnership through 2029. Provided it meets required regulatory approvals and other customer closing conditions, the acquisition is expected to close by the end of September, which is AmerisourceBergen’s fiscal year-end.

Virginia Mason and CHI Franciscan completed the merger they announced in July, forming Virginia Mason Franciscan Health — which is part of Chicago-based CommonSpirit Health. The newly combined health system has 11 hospitals and nearly 300 sites of care throughout Washington, as well as 18,000-plus employees (including almost 5,000 employed physicians and affiliated providers), according to a news release. For now, Ketul Patel and Dr. Gary Kaplan are co-CEOs of the new entity. Virginia Mason Memorial, a hospital in Yakima, Wash., ended its four-year affiliation with Virginia Mason Health System and is not part of the merger. The hospital is taking back its former name, Yakima Valley Memorial Hospital. Carole Peet will become its CEO on Feb. 3.

Harvard Pilgrim Health Care and Tufts Health Plan completed their merger as of Jan. 1. The two insurers first tried to merge in 2011. For the time being, the heritage brands and products of the original two insurers will remain in the market, with no changes to members’ benefits, programs, or services in 2021, the new company said in the announcement. A new name for the combined insurer will be released in the second quarter, and the headquarters will be moved to Canton, Mass., in the fourth quarter. Tom Croswell, who was CEO of Tufts Health Plan, is CEO of the new company, and Michael Carson, who was CEO and president of Harvard Pilgrim, is its president. To address the federal government’s antitrust concerns about the merger, Tufts Health Plan divested its Tufts Health Freedom Plan to UnitedHealth Group in December. The new company will serve 2.4 million members in five New England states.


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