Three giant U.S. companies — Amazon, JPMorgan Chase and Berkshire Hathaway — announced Tuesday that they will form their own healthcare company to battle the “hungry tapeworm” that is the ever-expanding American healthcare market.
But despite a lot of talk about innovating and improving outcomes, the announcement offered almost no details on how the companies plan to achieve that goal and left open a number of important questions about their plans. Amazon declined to comment beyond the basics of the joint press release.
The venture will initially serve the U.S. employees of the three companies, which employ just over 1.1 million people globally, but JPMorgan Chase CEO Jamie Dimon hinted that it could also move beyond that group. “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 said.
So what do we really know about how this project that aims to make drastic changes to U.S. healthcare? The companies do say that the venture is “in the early planning stages,” but the lack of concrete plans is still remarkable.
Who’s going to be in charge?
We don’t know for sure.
The companies said the initial effort will be led by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a JPMorgan Chase managing director; and Beth Galetti, an Amazon senior vice president.
Neither Coombs nor Galetti has a background in healthcare, although Berchtold spent eight years on the mergers and acquisitions team at Novartis. The longer-term management team “will be communicated in due course,” the companies say.
The project will likely be under the purview of Dimon, Amazon CEO Jeff Bezos and Berkshire Hathway CEO Warren Buffett, but its immediate leadership will be key to its success or failure.
Those in charge of the project will need to navigate both the highly conservative, entrenched world of healthcare and the fast-moving world of innovation. That’s not an easy task.
And although Bezos said the companies are approaching the project with “a beginner’s mind,” the venture will almost definitely need healthcare expertise to be successful. Balancing those two approaches will take some top-tier leadership from both sides of the aisle, so to speak.
What, exactly, are the companies planning to offer?
From the announcement, it’s hard to tell.
The companies say the initial goal will be creating “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost,” and that the overall goal is “improving employee satisfaction and reducing costs.”
So will the venture offer healthcare services, like primary care or telemedicine? Health insurance? Or just technology that complements those existing services?
The healthcare industry is so complex that each of those avenues would require an entirely different set of expertise and resources and would have different impacts on the companies’ employees. Offering a combination of those possibilities becomes even more complicated.
Creating new technologies would likely be the easiest path from a regulatory and expertise standpoint. It would also play into Amazon’s strengths and could leverage the company’s cloud computing and artificial intelligence resources.
But there’s a real limit to how much a new technology can change the healthcare system without creating new kinds of care or insurance.
How will it be funded?
Again, it’s hard to tell.
The companies said the venture will be “free from profit-making incentives and constraints,” which could mean a number of things. Most likely, it will be funded by the overwhelming wealth of the companies bringing it to life, at least in the short run.
But for any healthcare solution to be sustainable — and scalable — it needs to pay for itself. And for that to happen, the venture must take on the age-old challenge of getting health insurance to cover new products and services, something every healthcare company must grapple with.
Of course, the companies could skip that step entirely and create their own health insurance program, which comes along with another set of ethical, regulatory and logistical concerns.
How will it scale innovations beyond the companies’ employees?
If the new venture really does aspire to move beyond the companies’ employee base, it will face an incredible scaling challenge. The employees of the companies are all working age, make a steady income and are healthy and able-bodied enough to work. That’s a very easy group to work with when it comes to healthcare.
The innovations created for and tested on a small group of well-off, healthy people won’t necessarily work for the general population. The general population will likely be sicker, older and have a lower income than those employees.
The most important difference may be in insurance. Almost 10 percent of Americans don’t have health insurance, which can be a huge challenge when it comes to lowering healthcare costs.
Hospitals don’t turn away patients without health insurance — that cost is instead absorbed by the health system. And because uninsured patients wait until they have an emergency to seek care, they are often more expensive to care for than those who were able to address problems early on.
So healthcare experts have a right to be skeptical of the new venture, at least given the information we have on it so far. It makes many promises, but leaves many questions unanswered.