Why Healthcare Is Not a Normal Market

On 30 January 2018 three of the most admired chief executives in America announced that they would fix healthcare for their own employees. Amazon, Berkshire Hathaway and JPMorgan Chase, with roughly 1.2 million US employees between them (reported), would create an independent company "free from profit-making incentives and constraints" to make care simpler, better and more transparent. Warren Buffett called healthcare costs "the hungry tapeworm on the American economy" (reported). The announcement alone pushed down the shares of insurers, pharmacy benefit managers and pharmacy chains. In June the venture named the surgeon and writer Atul Gawande as its chief executive, and in March 2019 it took the name Haven.

Haven never delivered care, never had a revenue model and never had authority over any of its owners' benefit plans. Each parent kept its own vendors, budgets and contracts, and their employees were spread across hundreds of local markets, each dominated by a few hospital systems that none of the three could pressure on its own. Gawande moved to chairman in May 2020. On 4 January 2021 the parents announced that Haven would close at the end of February. Three companies that had each reshaped an industry had spent three years learning that the money in healthcare is not where an outsider expects to find it, and that leverage in healthcare is local.

This chapter explains why healthcare behaves so differently from the markets those companies knew, and sets out the framework used in the rest of the book.