Three U.S. industry mavens are turning their sights toward healthcare. The ultra-cost minded Warren Buffett has labeled healthcare costs as "a hungry tapeworm on the American economy,” and his Berkshire Hathaway is partnering with Amazon and JPMorgan Chase to create a new company with the goal of providing high-quality health care for their U.S. employees at a lower cost.
The trio has formed a new venture that is seeking to eliminate profit motive incentives and constraints that they see as barriers to efficiency and overall satisfaction for customers, with a major focus on cutting costs.
As part of that strategy, technology is being looked at to devise new solutions that will offer employees and their families more simplified, transparent high-quality healthcare at more reasonable costs.
Given that none of these respective companies have any experience in healthcare, they have acknowledged the enormity of the task that they are taking on. "The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty," said Jeff Bezos, Amazon founder and CEO. "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." But if anyone knows about creating more streamlined systems to reduce cost and increase efficiency, it’s these players.
Why This Matters
Together, the three companies employ more than 950,000 people worldwide. While significant, it represents a very small portion of the world’s workforce. What’s more important, though, is that none of these entities – or their leaders – undertakes major challenges without the goal of achieving total market success. They understand scale and efficiency like few do, possess broad and deep resources, and have a strong combined track record of creating financial viability across systems. And, with regard to their collective, almost 1 million employees, it’s a great place to pilot their ideas.
In addition, given their companies cover a wide range of business sectors and brands – retail, banking, services, and technology – they can likely create a model that can suit any business. They also expect a major trickledown effect where smaller business could pool their employees to opt-in to this new approach.
And while these entities and their leaders are not ones to take bets that are not likely to lead to succeed, many employers have tried this and failed. With this change, the insurance industry may have to rise to the occasion. This type of consolidation and innovation in technology not only supports business, but may also change how customers interact with their health plans. Tom Albers, SVP, Content Expert, Managed Markets Communications at Syneos Health points out that, "the traditional PBM model has been suspect for some time, and PBM 2.0 could certainly evolve. The CVS/Aetna merger is an example of evolution, which may have been a defensive move to compete with what Amazon, Berkshire and JPMorgan Chase could build. United already owns a PBM and Anthem is building one – so the integrated model at least among the big three is here. This is a huge lift for anyone."
Time will tell, but this could be a major disruptor to the current medical system that has historically not had the ability to become more agile, cost-effective nor satisfactory in the eyes of its customers. “And with many consumers being more in control of their healthcare decisions (with more financial accountability and responsibility than ever), combined with the ways in which information is consumed and purchases are made, this certainly could hit a mark that has yet to be conquered,” Danielle Bedard, President, Managed Markets Communications, Syneos Health.
Jamie Dimon, JPMorgan Chase CEO summed up their ambitions well, stating, "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."