Our take: The Amazon-Berkshire-JPMorgan partnership's potential—and unanswered questions

Read Advisory Board's take on this story.

Amazon, Berkshire Hathaway, and JPMorgan Chase on Tuesday unveiled a new partnership under which they will launch a health care company for their 1.2 million U.S. employees.

Upcoming webconference: Get 20 tactics for a system-wide approach to maintain margin performance

Company details

The three companies released limited information about the new partnership, but they said the goal is to improve employee satisfaction with health care and reduce health care costs. The company will focus initially on "technology solutions" that would provide "simplified, high-quality, and transparent health care at a reasonable cost." The three companies said the new health care company will be "free from profit-making incentives and constraints."

According to the New York Times, Amazon, Berkshire Hathaway, and JPMorgan Chase are three of the county's "most influential" companies: Amazon is the world's biggest online retailer, Berkshire Hathaway is the holding company led by Warren Buffett, and JPMorgan Chase is the biggest bank by assets in the United States. Overall, according to Bloomberg data, the three companies have combined market capitalization of $1.6 trillion. According to CNBC, the companies hope the size of each firm will provide the scale and resources for the project to work.

The formation of the new company is being "spearheaded" by Marvelle Sullivan Berchtold, a managing director at JPMorgan; Todd Combs, an investment officer at Berkshire; and Beth Galetti, a SVP of human resources at Amazon, Bloomberg reports.

The companies said operational details such as the location of new company's headquarters and the company's management team, including a CEO, will be announced later. According to a source familiar with the plans, the companies also plan to partner with other organizations as they develop the new company.

Comments

Amazon CEO Jeff Bezos in a statement said, "The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty." He continued, "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."

Buffet in a statement said, "The ballooning costs of health care act as a hungry tapeworm on the American economy." He said the partner companies "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 Chair and CEO Jamie Dimon in a statement said, "Our people want transparency, knowledge and control when it comes to managing their health care." He added, "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."

Drop in health care stocks

The announcement led to a dip in health care stocks in early trading, Bloomberg reports. Express Scripts saw shares drop 6.7%, while CVS Health saw shares drop 5.5%. Health insurers Anthem and Cigna saw shares fall as well, according to Bloomberg. UnitedHealth Group was down by about 5% in premarket trading, the Times reports. (Daily Briefing is published by Advisory Board Research, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group.) (Cox/LaVito, CNBC, 1/30; Tracer/Somayaji, Bloomberg, 1/30; Wingfield, New York Times, 1/30; Berkshire Hathaway release, 1/30). 

Advisory Board's take

Rob Lazerow

Rob Lazerow, Managing DirectorHealth Care Advisory Board

Health care leaders across the country have a range of questions about the news that Amazon, Berkshire Hathaway, and JPMorgan are partnering to enter the health care economy. (In fact, the very first question a health system leader asked me this morning at the Health Care Advisory Board National Meeting was about the announcement.)

Details about the new venture remain scarce—except that the company will initially focus on health care for the three companies' U.S.-based employees—but today's announcement provides additional evidence that employers are frustrated with their increasing health benefit costs. This new company joins the ranks of the Health Transformation Alliance and other employer coalitions that are searching for new solutions to bend their health care spending curve.

Amazon, Berkshire Hathaway, and JPMorgan have yet to reveal the precise steps their new venture will take, and the leaders acknowledge the operational and regulatory complexities of the health care industry. Regardless, hospitals, clinicians, and health plans will want to closely monitor the new company, especially if it shows any signs to eventually expand efforts beyond the founders' employee base. The sophistication of these companies, their significant financial resources, and their ability to disrupt established markets is clear.

As the new company launches, I would not be surprised to see the partnership focus on engaging their employees, fueling competition in the payer and provider markets, and applying additional downward pricing pressure on the health care entities that serve their employees. We will continue to monitor the implications for health care leaders as more details emerge.



Next, get 8 strategies to contain future cost growth

Download our new research report, "The New Cost Mandate," to learn the drivers of the emerging margin management challenge and get a road map of strategic solutions for hospital and health system leaders.

Get the 8 Strategies

Next in the Daily Briefing

Advance directives do a terrible job at handling dementia, experts say. How can we do better?

Read now