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How Amazon & Co. can revolutionize the health care system

Out of the gate, the new health care venture from Amazon, Berkshire Hathaway and JPMorgan Chase seems to be headed in the right direction — using new technology to provide their employees better value and health outcomes. That’s where things will start, but this could be a laboratory for a more sweeping transformation.

The big picture: To bring lower costs and better care to their employees and others, these companies will need to do more than deploy a modern technology overlay. They will have to better align payments and outcomes in health care across the board. If they accelerate this process, we will all benefit.

The problems: Our health care system is afraid of new technology, partially because of outdated ideas about how to pay for care that are layered into government programs. Consider the example of Type 1 diabetes — a chronic condition that affects more than 1.2 million Americans.

  • New technology called continuous glucose monitoring, or CGM, uses a digital sensor to monitor patients’ blood-sugar levels throughout the day, without requiring them to draw blood.
  • CGM is even more effective when it pairs with analytic algorithms and a smartphone. Patients can share readings with a doctor in real time, or automatically alert loved ones in the case of an emergency. These are precisely the kind of technologies a company like Amazon should know how to leverage.
  • Because of old and often inflexible rules, Medicare won’t have anything to do with CGM if a smartphone is involved. The government doesn’t want to be in the business of paying for smartphones.
  • Private coverage has moved in the right direction on these challenges, but some patients worry — for legitimate reasons — about whether their plans will fully cover their costs.

But it’s not just about paying for new technology. We also need to pay for new expertise and approaches to care.

  • Right now, most of our health care system pays doctors for what they do, not what they achieve. Instead, payments should be based on long-term outcomes and factor in overlooked but critical parts of a doctor’s job, like time spent helping their patients learn to use these new technologies.

The bottom line: Amazon, Berkshire and JPMorgan are deep-pocketed companies whose executives have a track record of discovering value. But their leverage and creativity will only bring about widespread change if they address fundamental payment and regulatory issues that govern American healthcare.

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