Published: Mon, February 05, 2018
Finance | By Cynthia Curry

How Amazon, JPMorgan, Berkshire alliance could affect the larger healthcare market

How Amazon, JPMorgan, Berkshire alliance could affect the larger healthcare market

What follows is an edited version of the conversation.

The company has made a habit out of crushing competitor market values with even the most basic of announcements, and their healthcare team-up is just the latest example of that.

This is an interesting combination of companies. The three companies are teaming up to create a health care company that they say is "free from profit-making incentives and constraints". He has a legendary knowledge of the financial and payment systems. That could mean tinkering with how insurance, rather than the pharmaceutical industry. It is like healthcare companies saying they don't like their telephones or computers so they are going to re-invent the IT industry.

That still might come to pass, but in the meantime, Amazon is doing something that could prove far more disruptive. They should, in theory, due to their size and scale, be able to negotiate lower cost structures. "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".

"And I think that therein lies the opportunity". By doing so, Amazon, Berkshire and JPMorgan could gain more control over their spending and save money pharmacy-benefit managers now consume, he added.

The chairman and CEO of Aetna responded positively to today's announcement, acknowledging that 'there is an unmet need in health care. Is it frustration over rising healthcare and prescription costs? Is it a frustration with employees who won't travel an extra 15 miles for a cheaper MRI or who use the emergency rooms as a primary care facility?

Kwicien: All of the above. They know the elements of the past playbook individually.

The basic idea being toyed with here is, however, a good one: By having significant buying power through the representation of a large number of people, it is indeed possible to negotiate medical costs. "That's an insurance pool similar in size to many US states".

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Dr. Dennis Gottfried is a physician in private practice in CT for over 30 years, and the author of "Too Much Medicine: A Doctor's Prescription for Better and More Affordable Healthcare." . The alliance will apply only to their employees. If you can begin to impact those employees in a more favorable way so that they see the doctor on a regular basis, they have checkups, they take the appropriate medications and don't skip their treatments - well, all those things contribute to better outcomes for the individual.

EBN: How will this change the benefits business and change how employees get their benefits? As Andrew Hart of Wallace Hart Capital Management pointed out, "These three companies employ over 1.1 million and health-care coverage would extend to their families, so this endeavor could cover 1 million to 3 million people".

Lower pay than in the rest of the USA health care economy would be justified by having to do zero insurance paperwork - something that forces US doctors to hire extra staff and waste precious time.

Also see: "4 ways Amazon, Berkshire, JPMorgan partnership can target healthcare problem areas".

The second thing is, I'm not sure that necessarily a benefits broker per se fits into the equation. Maybe they'll solve one piece of the puzzle. The person said that the joint venture is not now expected to be a direct replacement for existing health-care companies. "This can only speed up the creation of a well-functioning healthcare system for all Americans".

Kwicien: There's a lot of work to be done, but on a strategic side, I think it makes all kinds of sense and I think a lot of other employers are going to take note of this.

Thompson says that given Amazon and Berkshire's records, it's clear "that they have the potential to truly change the consumer experience for their employees, and frankly, that could become a model that could be used by other employers".

That begs the question: If they make it available to the open market, will it have a profit motive to it?

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