In a move aimed at providing healthcare to their respective workers and their families, Amazon’s Jeff Bezos, JPMorgan’s Jamie Dimon and Berkshire Hathaway’s Warren Buffet are pooling their company resources to build a fully independent healthcare company, which they say will be “free from profit-making incentives and constraints.”
The three CEOs announced Tuesday (Jan. 30) morning that the, yet to be named, company would direct its efforts towards “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”
Acknowledging the level of difficulty and complexity of the healthcare system, Bezos said that the expected positive impact on the economy and benefits for the workers and their kin outweighed the challenges, adding that skilled experts, a beginner’s mindset and long-term planning were necessary ingredients for the success of the joint endeavor.
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said the Amazon CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
Warren Buffet said that burgeoning healthcare costs were eating into the country’s economy, and while the three giants have not come together with ready solutions, they do believe that pooling the massive resources at their disposal, and involving the nation’s top talent, would not only bring some order in healthcare costs but also benefit patients, given time.
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said the Berkshire Hathaway CEO. “Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
JPMorgan CEO Dimon dropped a hint in his statement that the joint efforts of three of the most formidable companies in the nation had the potential to grow beyond just employees and their families and reach out to all Americans.
“Our people want transparency, knowledge and control when it comes to managing their healthcare,” Dimon said. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he added.
The three business giants have not revealed any details about the size, scale of operations, or even location of the new company’s headquarters, saying in a joint statement that the undertaking was “in its early planning stages.”
“The effort announced today is in its early planning stages, with the initial formation of the company jointly spearheaded by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a Managing Director of JPMorgan Chase; and Beth Galetti, a Senior Vice President at Amazon. The longer-term management team, headquarters location and key operational details will be communicated in due course,” the companies said in the press release.
Three of the most powerful American business entities uniting to form a healthcare company for the long-term benefit of all may be a first, but there have been others who have individually tested the healthcare waters only to find out that overcoming the regulatory barriers was, indeed, no walk in the park, as Bezos has correctly pointed out.
Who would know this better than Elizabeth Holmes, founder of Theranos, who was banned from running her own labs out of health and safety concerns!
Google’s parent company Alphabet has also burnt its hands along with Calico and Verily Life Sciences, having failed in its healthcare venture.
“When [tech companies] start to understand the complexity, even just the idea of an electronic health record, they pull out,” Avalere Health CEO Dan Mendelson said.
Ali Diab, founder of Collective Health – a company that specializes in providing healthcare coverage to self-insured employers through its cloud-based platform – suggests that the new venture would be better off working with Collective Health.
“I would suggest they focus exactly on what we are already doing, which is build infrastructure that knits everything together,” said Diab. “It’s not stuff that people see. It’s all the infrastructure to ingest data from various sources, process claims, to make that data analyzable, to build machine learning and AI-based systems on top of it that help identify people that need care way before they might even know.”
Pembroke Consulting president Adam Fein says it is high time companies took such initiatives, referring to the announcement by the three companies.
“For better or worse, there are warped incentives baked into every aspect of the U.S. health-care system, from medical innovation to care delivery to insurance and benefit management,” Fein said on CNBC.
“Rather than merely bashing the current system, I hope this new organization can help patients and their physicians make more informed and more cost-effective decisions. Technology will be necessary but not sufficient to make positive changes,” he added.
The announced has attracted some skepticism as well.
“If this winds up being the low-cost provider to make insurance more affordable at employer level, it could wind up being a real disruptive competitor to an industry that has not seen any new players in years/decades,” Jared Holz, an analyst at Jeffries, told CNBC. “[I’m] not going to call this black swan event yet because there are few details and would be making too many assumptions but it has potential to be.”
The announcement, however, saw a sharp dip in healthcare companies’ share prices, including that of Express Scripts and Aetna (down 3%) as well as CVS and UnitedHealth (down 4%).
“Today’s announcement by Amazon, J.P. Morgan & Chase company, and Berkshire Hathaway is clear recognition that the healthcare system needs to continue to create and deliver meaningful value to payors and patients,” Express Scripts said in a statement. “We look forward to hearing more about this new initiative and how we can work together to improve health care for everyone.”
“We find that technology initiatives which facilitated information sharing between disconnected hospitals resulted in significant reductions in healthcare spending,” said Idris Adjerid, Management IT professor at the University of Notre Dame’s Mendoza College of Business, in a statement.
“That said, it is unclear what the scope of this effort will be. If this partnership is to meaningfully improve healthcare delivery, it needs to include more than the employees of these companies,” Adjerid added.