By Robert Pembroke
“The ballooning cost of healthcare acts as a hungry tapeworm on the American economy,” said Berkshire Hathaway chief Warren Buffett, recently. Along with Jeff Bezos of Amazon and Jamie Dimon of JPMorganChase, the three have vowed to cut the cost of providing healthcare to their employees. They have yet to provide any details on how they are going to do it, but I believe they can easily reduce their healthcare costs by at least 30 percent.
Six years ago, I started a nonprofit, The Forgotten Electorate, to accomplish substantial healthcare cost reductions for Utah small-business employers. Our business model was simple: A group of small-business employers would hire its own primary-care doctors, set up primary-care clinics, contract with a major healthcare system hospital for major procedures, buy pharmaceuticals in bulk and reinsure for catastrophic events.
The Forgotten Electorate began to recruit small-business members and entered into contract negotiations with a major healthcare hospital in Salt Lake City. Things were progressing nicely until we ran into two major difficulties. The major healthcare hospital really didn’t want our business and the small-business employers were afraid to upset the apple cart when it came to their employees’ healthcare. The Forgotten Electorate then faded away.
Messieurs Buffett, Bezos and Dimon will not run into these two difficulties with one small tweak to the above business plan. Rather than contract with a major healthcare system, they should start their own major healthcare system. The Veterans Administration provides healthcare to 9 million veterans and has hospitals all over the place. Buffett, Bezos and Dimon have 1.1 million employees and should easily be able to attract other big businesses to join the venture. One call to Doug McMillon, president of Walmart, signs up an additional 1.4 million employees.
Regarding the second difficulty that I encountered, that of the small-business owners not wanting to upset the healthcare apple cart when it comes to their employees, Buffett, Bezos and Dimon have already decided to enroll their employees in the program and I believe that small-business employees will go along happily.
Yes, we would eliminate a lot of non-productive healthcare jobs, but that’s what capitalism is all about. The displaced employees could easily be trained to provide healthcare to other employees or work for other employers in the same positions that they have now. There is not a lot of difference between a receptionist job description for a plumber or for a receptionist at a hospital.
A powerful incentive for both large and small businesses to follow this business plan is the competition that it would bring to the healthcare industry. Statistics could be developed and published by the media to compare not only the financial ratios, but also the quality of care and access. How would you like to be the head bureaucrat of Medicaid and every day have to compare your job performance to that of private industry?
The advancements of technology have made the business model a piece of cake. All appointments could be scheduled through a centralized call center. Doctors could enter the prescriptions that their patients need online. The meds would then be processed and delivered from an automated prescription drug warehouse. A panel of physicians could develop quality-care matrices which could be entered into the system by scanning barcodes and artificial intelligence algorithms would alert management when there are any discrepancies.
There is one other consideration: Other nations and businesses, both large and small, just might come to the same conclusion. China has a whole bunch of very intelligent people and would jump at the chance to get a competitive edge over American companies.
Berkshire Hathaway, Amazon and JPMorgan Chase have shown the way and it’s time for Utah’s small business to join them in this exciting new venture.
Robert Pembroke is the former chairman and CEO of Pembroke’s Inc. in Salt Lake City.