Source: The New York Times
Amazon, Berkshire Hathaway and JPMorgan Chase announced on Tuesday that they would form an independent health care company for their employees in the United States.
In a statement, chief executives at the three corporate behemoths expressed their frustration with the nation’s expensive, often confusing health care system. The news added further uncertainty to an industry already reeling from attempts by new players to attack a notoriously inefficient, intractable sector. The lines between traditionally distinct areas, such as pharmacies, insurers and providers, are increasingly blurring.
CVS Health’s deal last month to buy the health insurer Aetna for about $69 billion is just one example of the shifts underway. Amazon’s potential entryinto the pharmacy business is also reverberating.
The three companies provided few details about the new entity, other than saying it would initially focus on technology to provide simplified, high-quality health care for their employees and their families, and at a reasonable cost.
They said the initiative, which is in the early planning stages, would be “free from profit-making incentives and constraints.” Jamie Dimon, the chief executive of JPMorgan Chase, said in a statement that the effort could eventually be expanded to benefit all Americans.
“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” Jeff Bezos, Amazon’s founder and chief executive, said in a statement. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.”
News of the announcement sent the stocks of established health care providers plunging, and touched off a wave of speculation about what the new company might do. It was unclear whether the new venture would make it easier for consumers to understand their health care costs and access medical records, or take on more ambitious changes like the wider use of telemedicine and virtual doctor visits.
One thing is clear: these are not companies known for narrow ambitions. The partnership brings together three of the country’s most influential companies to try to improve a system that other companies have tried and failed to change: Amazon, the online retail giant; Berkshire Hathaway, the holding company led by the billionaire investor Warren E. Buffett; and JPMorgan Chase, the largest bank in the United States by assets.
“It could be big,” Ed Kaplan, who negotiates health coverage on behalf of large employers as the national health practice leader for the Segal Group, said of the announcement. “Those are three big players, and I think if they get into health care insurance or the health care coverage space they are going to make a big impact.”
Even the three companies don’t seem to be certain how they intend to shake up the health care system. People briefed on the plan, who asked for anonymity because the discussions are private, said the leaders of the three companies decided to announce the initiative while it was still a concept in part so they can begin hiring staff for the new company.
“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Mr. Buffett said in the statement on Tuesday. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
One of these people said the new company wouldn’t replace existing health insurers or hospitals, though it’s too soon to say exactly what form it would ultimately take. One idea is an online health care dashboard that connects employees with the closest and best doctor specializing in whatever ailment they select from a drop-down menu, one of the people said.
The three backers of the new company foresee striking deals for employee discounts with service providers like medical testing facilities, the person added.
“Each of those companies has extensive experience using transformative technology in their own businesses,” said John Sculley, the former chief executive of Apple who is now chairman of a health care start-up, RxAdvance. “I think it’s a great counterweight to what government leadership hasn’t done, which is to focus on how do we make this health care system sustainable.”
Planning for the new company is being led by Marvelle Sullivan Berchtold, a JPMorgan managing director who was previously head of the Swiss drugmaker Novartis’s mergers and acquisitions strategy; Todd Combs, an investment officer at Berkshire Hathaway; and Beth Galetti, a senior vice president at Amazon.
One of the people familiar with the partnership between the companies said it took form as Mr. Bezos, Mr. Buffett, and Mr. Dimon, who are friends, discussed the complications of the country’s health care system and the challenges of providing insurance to their employees. They decided their combined access to data about how consumers make choices, along with an understanding of the intricacies of health insurance, would inevitably lead to some kind of new efficiency — whatever it might turn out to be.
Erik Gordon, a professor at the University of Michigan’s Ross School of Business, predicted that the companies would attempt to modernize the frequently cumbersome process of making appointments with physicians by making it more like booking a restaurant reservation on OpenTable, while eliminating the need to regularly fill out paper forms on clipboards.
“I think they will bring the customer-facing, patient-facing thing into your smartphone,” he said.
Amazon has long been mentioned by health care analysts and industry executives as a potential new player in the sector. But much else is also changing, from government programs like Medicare after the overhaul of the tax law, to the uncertain future of the Affordable Care Act. All the while, medical costs have persistently been on the rise.
The announcement on Tuesday again highlighted investor worry about Amazon disrupting the health care industry. Shares of UnitedHealth Group were down 4 percent in midafternoon trading, while Anthem’s were down 5.7 percent.
One group of more than 40 employers, including Coca-Cola, American Express and Verizon, has banded together to negotiate with pharmacy-benefit managers — who oversee drug coverage for health insurers — in an effort to lower costs. The group, the Healthcare Transformation Alliance, says it has further plans to better analyze health data and improve medical networks.
Large corporations have often taken an active role in their employees’ health care. In 1915, Henry Ford opened a hospital in Detroit, The Henry Ford Hospital, to help serve his growing work force.
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