Perhaps of interest for persons of a certain age still going through puberty :) ?

HEARD ON THE STREET [:] Amazon and Walmart Have an Rx for Healthcare. The Cure Won’t Be Easy.

Tech, banking and retail giants face numerous obstacles in their efforts to fix—and profit from—an industry that attracts $4 trillion annually 

image from article, with caption, ROB DOBI

By Charley Grant, The Wall Street Journal,  May 28, 2021 5:30 am [article contains additional links and charts]

Corporate America has four trillion reasons to get into, and perhaps upend, the business of healthcare, but even a tech genius will find the system puzzling. 

Google parent Alphabet and hospital chain HCA Healthcare struck a deal this week to develop algorithms using patient records in order to guide medical decision making and improve operating efficiency. Megabank JPMorgan Chase is building a new unit that will work on health initiatives for its employees and invest $250 million in startups and technologies meant to make their healthcare more efficient and effective. Meanwhile, retailers Walmart and Amazon AMZN -0.22% are pushing into telemedicine and beefing up primary care and pharmacy offerings.

Investors are watching carefully: Shares of traditional pharmacies like Walgreens Boots Alliance and CVS Health CVS 0.02% sold off sharply on Wednesday after Insider reported that Amazon is weighing a push into physical pharmacies. Analysts at Morgan Stanley estimate Amazon’s total addressable health market is $119 billion across a variety of services.

There are good reasons for big companies to get out of their comfort zones. They only have so many opportunities to grow, and this is a natural place to look. The U.S. is projected to spend about $4 trillion on healthcare this year, according to Centers for Medicare and Medicaid Services data—nearly a fifth of gross domestic product. Big employers foot the bill for a significant share of the tab via their contributions to workers’ health insurance premiums. JPMorgan’s Chief Executive Officer Jamie Dimon includes the U.S. healthcare system on a list of policy failures that create a drag on the U.S. economy.

The national tab is likely to increase in the near term as the population ages. The agency [jb: Centers for Medicare and Medicaid Services data?] projects the number of Americans aged 65 and over will increase to 68 million by 2028, up from 58 million this year. Pandemic-driven deferrals of routine doctor visits and elective surgical procedures might result in sicker patients who require high-cost care in the years to come.

There has been plenty of incentive to fix this convoluted system without much success. A joint venture to lower costs from heavy hitters Berkshire Hathaway, JPMorgan and Amazon launched in 2018 to great fanfare and fizzled out without much impact. The newest round of challengers have their work cut out for them.

Thanks to consolidation among both medical providers and payers, prices for care are hard to find and even harder to change while incumbents are likely to hang onto large chunks of that revenue. Hospitals, which account for more than $1 trillion in annual spending, set prices via contracts with insurers. Large hospital systems are able to flex their bargaining muscle. For example, they can mandate that insurers include them in every plan, whether or not the system offers the lowest cost.

As a result, prices vary dramatically for even basic services depending on who is paying for it. A caesarean section at one California hospital ranges from $6,241 to $60,584, The Wall Street Journal reported earlier this year. A Trump administration rule requires hospitals to post their prices in public, but the penalty for noncompliance is just $300 a day.

Artificially high costs are passed on to patients, employers and taxpayers in the form of higher premiums and deductibles. And because many Americans get insurance via their employer, those who are dissatisfied with their plan might need to change jobs to get a better one.

A similar dynamic takes place in other corners of the market. Take generics, which can be dramatically cheaper than brand name drugs and more affordable if purchased directly.

“Almost 30% of the time, patients would save money by paying cash instead of using their insurance. The fact that this is ever the case tells you how messed up the current system really is,” says Zach Reitano, CEO of the cash-pay healthcare startup Ro. Nearly nine in 10 prescriptions filled are for generics.

To respond, large insurers have acquired their own outpatient surgical centers and physician practices. CVS Health put insurance and pharmacy operations under one roof with its 2018 acquisition of Aetna. But those changes only increased the industry’s concentration.

Granted, the outsiders aren’t entirely starting from scratch: Walmart already is one of the largest retail pharmacy players in the U.S. and offers some primary care services, while Amazon has invested heavily in its online pharmacy offering in recent years. Even there, though, industry incumbents are still part of the equation. Amazon’s pharmacy savings benefit for members of its prime service is administered by a subsidiary of insurer Cigna.

Outsiders might grab a slice of the $4 trillion pie. Don’t hold out too much hope about them shrinking it. 

Write to Charley Grant at charles.grant@wsj.com  

Appeared in the May 29, 2021, print edition as 'A $4 Trillion Medical Mystery.'