Disbanding Haven Healthcare: Failed joint venture or useful experiment?
News that Haven Healthcare is shutting down less than three years after its unveiling has prompted questions around the merits of the joint venture (JV), with media coverage continuing to debate the reasons for its demise months after the announcement was made (January 5).
Much of our work here at Science Group centres on planning for innovation and designing new value propositions, and defining business architectures and the partnerships needed to deliver them are firmly at our core. Not surprisingly then, the Haven Healthcare experiment has provoked some interest among colleagues, particularly as many of our clients operate across the spectrum of consumer, health and medical industry sectors.
The announcement in 2018 that three ‘powerhouse’ companies – Amazon, JPMorgan Chase (JPMC) and Berkshire Hathaway (BH) – were joining forces to improve healthcare for their combined workforce of over one million employees jolted the market, with shares in the likes of CVS and Walgreens suffering. The vision behind the project made sense. These companies were reportedly spending over USD four billion per year on employee healthcare, with an expectation that costs would continue to spiral – why wouldn’t they try to reimagine that space and take control of these costs? It could be argued, with hindsight, that this market reaction was overly sensitive to the future potential of the Haven JV, with visions of the ‘Amazonation’ of US healthcare likely playing on the minds of investors. A team founded on a tech company with a proven capacity to disrupt markets – coupled with a leading bank and investment firm – made a compelling case for success, yet three years on from this heralded launch we now see the disbandment of the venture.
Narratives around the move talk of ‘progress made’, with the venture allowing the trio of companies involved to explore wide-ranging healthcare solutions and pilot new ways to improve access, simplify and improve the service and user experience, and find routes to drive affordability. Drawing a conclusion as to the success or otherwise of this venture depends on what we interpret the original intent behind the project to be – an intelligent market experiment of limited scope and scale, or a grand disruptive joint venture which failed. While the disruptive intent of some of those involved may have been real, this was an ambitious and difficult to realise goal. Healthcare is a challenging market with powerful incumbents – including insurance companies, drug benefit managers, and hospitals – who share a vested interest in maintaining the status quo. Disruption at any scale would be an ‘Everest’ of an ambition at any time, not least during a period afflicted by a global pandemic.
Warren Buffett, CEO of BH, acknowledged the difficulty of the challenge in an interview in 2019 and noted the project had “no guarantee of success”. Yes, the combined pool of 1.2 million employees provided a solid foundation to build upon, in theory at least. In practice, these employees were geographically scattered in a market that operates locally, to a large degree, with healthcare provision driven by key regional players – an effect that would likely dilute Haven’s bargaining power.
We might also question whether Haven’s plans were hindered by the design of the venture. Was a JV really the best structure to use, for long-term success? JVs often have a limited life expectancy and their interests are always going to be subservient to the parent companies. JVs can also be compromised by difference in culture and vague objectives, issues both referenced in respect to Haven. We may also question whether a not-for-profit model affected the final outcome. While it may have released Haven from short-term pressures related to performance and financial goals, it may also have influenced the culture and appetite within a business that needed to compete in a difficult space. Operational issues may also have hampered progress. Managing talent is always a critical issue and Haven needed to retain people, but it appears to have suffered from relatively high staff turnover and the loss of key senior executives must have compounded the problem. CEO Atul Gawande’s lack of direct experience was also flagged as another concern and problem for the business.
The dynamics between the JV and the three stakeholder companies may also have been detrimental to Haven’s success, with suggestions that the wider healthcare interests and initiatives of the three stakeholders ؘ– Amazon in particular, with Amazon Care – may have contributed to its demise. This is a particularly competitive sector, so it’s not unreasonable for the involved parties to have other initiatives underway at same time as supporting the JV – companies are unlikely to want to put all their eggs into one basket – but Haven may reasonably have expected to be the jewel in the crown and may have felt it was treated more like ‘another iron in the fire’.
Haven’s own messaging and stated gaols, which seemed at odds with any consideration of the project as a ‘disruptive’ force, are perhaps most significant in narrowing down our question of whether it was intended as a disruptive JV or as a market experiment to be learned from. Disruption typically requires meaningful changes in areas such as affordability, ease of use, performance, price, and accessibility, or the introduction of some new value parameter. Haven’s own website was explicit about not wanting to displace or disrupt the value system, and instead spoke of aspirations to be a collaborator or partner. Haven’s aims, from this viewpoint, seem conservative and conventional from the start – a focus on making primary care easier to access, making insurance simpler to understand and use and prescription medicines more affordable – though undoubtedly challenging.
The dominant message coming from Haven’s creators, now it is to close, is not one of ‘failed venture’ but of ‘valuable initiative’, further suggesting the project was designed to explore and evaluate different ideas – a transactional market experiment. All three companies are expected to take forward what they have learned from the project and have expressed intentions for continued informal interaction. While the disruptive ambitions of Haven’s backers may have been sincere and, therefore, Haven’s success their preferred outcome, the act of creating and operating the JV – as well as the market interest it created – may yet serve as a catalyst for disruption, albeit perhaps enacted by other organisations, and this could still be viewed as win for employers, including Amazon, JPMC and BH, in terms of the cost of healthcare to their employees.
Despite the current messaging, I am left wondering whether the level of commitment, ambition and expectation were truly aligned across all three partners. Were some of the stakeholders more committed to the market experiment than others, who perhaps envisioned Haven as the end game? As vocal advocates of business model innovation, founded on creative but sustaining value systems, the alliances behind Haven made good sense. Here at Science Group we have a particular interest in the use of technology to drive innovation and disruption and, viewed through this lens, the proposition certainly looked compelling. We also work widely with companies that operate in more agile and innovative industries who routinely use incubator type models to explore opportunities, and we’re especially familiar with the use of transactional experiments to test for traction in the market. From this point of view, the restated assessment of Haven also holds water. While we – as outside observers – are not privy to the plans of the business partners behind Haven, it is interesting to consider what the original intent might have been, given this context.
- Michael Zeitlyn, President Advisory Services, Science Group