Moneybox

Atul Gawande, CEO?

The New Yorker writer and surgeon is an unconventional choice to lead the Bezos-Buffett health care startup, and a good one.

Professor Atul Gawande, M.D. delivers speech during Geisinger Health System A Century of Transformation and Innovation Symposium at Pine Barn Inn on September 25, 2015 in Danville, Pennsylvania.
Atul Gawande delivers a speech during Geisinger Health System’s “A Century of Transformation and Innovation Symposium” at Pine Barn Inn on Sept. 25, 2015, in Danville, Pennsylvania.
Lisa Lake/Getty Images for Geisinger Health System

The doctor, New Yorker writer, and public health researcher Atul Gawande has famously and convincingly demonstrated that there is effectively no correlation between price and quality when it comes to U.S. health care. What’s more, he has argued quite effectively that there are many ways to reduce costs while also improving the quality of care. Gawande founded Ariadne Labs, a joint project of Brigham and Women’s Hospital and Harvard devoted to improving health outcomes around the world, with a focus on the days when people have surgery or give birth. On a relatively modest eight-figure budget, Ariadne has already touched millions of lives and has received support from a long list of organizations including the Gates Foundation, the World Bank, and the World Health Organization.

Now, Gawande is giving up his job as executive director of Ariadne Labs to take on an even bigger challenge: He’s becoming the CEO of the mysterious new organization known as ABC.

His first job there will be to define exactly what ABC is, because right now, no one really knows. But if he gets it right, the potential impact of ABC could end up dwarfing that of Ariadne or anything he’s done.

That’s because of how enormous ABC’s backers are: A is for Amazon, B is for Berkshire, and C is for Chase. ABC is a not-for-profit joint venture that those companies’ CEOs—Jeff Bezos, Warren Buffett, Jamie Dimon—have created to reinvent the way they provide and pay for health care for their employees. We’re talking about truly enormous sums of money, here: Amazon, Berkshire Hathaway, and JPMorgan Chase have 1.2 million employees between them, the overwhelming majority of whom are in the U.S. Assume that they and their employees are spending a typical $1,000 per employee per month on health care; that would come to more than $14 billion per year. ABC says that its ultimate goal is national: It wants to reduce the ever-growing share of the economy that’s taken up by health care. But even if all that ABC manages to do is decelerate health care cost increases for its own companies—bring them down from, say, 5 percent increases a year to 3 percent—then that alone would be worth billions of dollars to the three employers.

Gawande is an unconventional choice for CEO. He has no experience running a big business, and that’s good: ABC didn’t want a typical corporate CEO, because ABC is not a typical corporation. It wanted a leader with a deep understanding of the health care industry, and it wanted someone who has the respect of the entire profession. It’s succeeded on both counts.

The nonprofit aspect of ABC’s incorporation is important. ABC is an upside-down organization: Its job isn’t to maximize the amount of money coming in so much as it is to minimize the amount of money going out. Think of it as starting in a multibillion-dollar hole, as represented by its owners’ health care costs; any success in making that hole a little bit shallower would not only be a financial win for the joint venture but could also act as a template that other companies and insurers might be able to learn from and improve upon.

It is now up to Gawande to work out the best way to do it. Certainly there’s a lot of low-hanging fruit: He has the opportunity, for instance, to bring a lot of routine health services in-house using salaried doctors and nurse practitioners, and to use those employees not only to treat common conditions but also to work hard on preventing those conditions from occurring in the first place. The potential savings are not only obvious but also enormous, even if you look only at the massively reduced amount of paperwork and billing. And the insurers will have to play nice with ABC, because of the consortium’s sheer size and market power. It’s even possible, if improbable, that ABC will attempt to replace insurers entirely.

The skills needed to run ABC are not those of a classic CEO. No one’s going to be looking for revenue or profit growth, because there are no revenues or profits. Neither is it important to be able to compete aggressively against other companies in the same space. The whole point of the ABC coalition is to bring big companies together. If they can help each other out when it comes to their enormous health care costs, that will make them better positioned to compete on other fronts.

At the same time, ABC is ambitious, which is why it doesn’t want to simply hire a hard-nosed executive who can be aggressive at the negotiating table. The goals here are much bigger than just reducing a corporate line item.

That’s why the choice of Gawande to run ABC might well turn out to be an inspired one. Gawande has made it his life’s mission to improve people’s health while keeping costs low, and he deserves an enormous amount of credit for being able to successfully navigate the notorious internal politics of two different Boston institutions in order to achieve that outcome at Ariadne. Clearly, he’s more than capable of managing up, even when he has multiple bosses who work for entirely separate institutions.

Gawande, who will continue to work as a surgeon, is universally respected in the health care world. I’m sure he’s received hundreds of emails from people who want to work with him already, will be able to put together a fantastic team, and won’t have remotely enough time to micromanage them. Instead, he will provide what’s vaguely known as “moral leadership”—something that is hard to define, but that will ultimately determine whether ABC is a success. A project this ambitious can’t be executed by fiat: It needs the buy-in of health care professionals and employees across dozens of different organizations. Having the well-known and unconflicted Gawande in charge makes that buy-in much more likely.

Gawande’s job is not going to be easy, and there’s a real chance he won’t succeed. American health care is a mess, after all, and it has defeated thousands of well-intentioned individuals in the past. But he’s coming in with an enormous tail wind of goodwill, as well as the explicit backing of two of the three richest men in America. He’s seen the system from the inside, he’s seen how broken it is, and he’s seen what works.