The race is on: Amazon, Buffett, and JPMorgan enter healthcare
Today's news that Amazon, Berkshire Hathaway, and JPMorgan Chase are teaming up to create an independent healthcare company "free from profit-making and constraints" to serve the needs of their U.S. employees is a shot across the bow to the traditional American healthcare system.
Much as Peter Finch shouted, "I'm mad as hell, and I'm not going to take it anymore" from the rooftops in the 1976 cult classic Network, three of the most innovative and influential companies in the world are banding together. They're designing a system that will work for their million-plus employees and potentially serve as an incubator for the rest of American business and the U.S. healthcare system to learn from, emulate, and even compete with.
Coverage and comments from Amazon CEO Jeff Bezos in particular suggest the trio are approaching this task with great humility and a recognition of the challenges inherent in the task that lies ahead. They are not innovating at the edges via incremental improvements; instead, within the closed system of their three companies, they are attempting a large-scale experiment that deploys technology to improve the delivery of healthcare at lower cost. They are going after what Warren Buffett rightfully called "the hungry tapeworm on the American economy."
The news followed CVS stating its intention last month to buy health insurer Aetna, a vertical integration that signals more corporate appetite for game-changing delivery versus simple horizontal dominance. Hospitals and healthcare systems have been on a steady march to gain economies of scale through mergers of like-minded organizations. Increasingly, those traditional moves may have lesser impact as the biggest players in health, and in business writ large, throw out the playbook that focuses on gaining market share for one that is driven by redefining the market itself.
Today's news is also a clear signal that business is tired of waiting for traditional players to find ways to demonstrate value, reduce costs, and drive better outcomes. Technology has helped to solve too many problems not to be better and more widely applied to health, more quickly and at larger scale. There's an impatience among innovative and forward-looking companies with the intractable problem that continually rising healthcare costs has presented for too many years. A rising U.S. stock market, corporate tax reform, a gridlocked Congress, and the rolling back of the Affordable Care Act are just some of the factors empowering business to step forward.
No doubt this will take time to get up and running. There will be learnings and missteps along the way, and a new model will not appear overnight. But imagine the possibilities, and the impact on healthcare as it is delivered, as they realize success and satisfy what is undoubtedly massive corporate and consumer appetite for a solution. The challenge, and the opportunity, that this move presents for the American healthcare system is unprecedented.
What are the early takeaways for American healthcare companies?
Technology matters. In this day and age, solutions without technology at the center are bound to provide incremental advances at best.
Increased market share is only one way forward and represents increasingly short-term thinking. Forward-looking companies aren't just fighting for a bigger slice of the pie; they're changing the pie itself.
The status quo is not an option. Healthcare has been notoriously difficult to change for many reasons. But companies as diverse as Amazon, Berkshire Hathaway, and JPMorgan Chase, as well as Apple, are getting in on the game. There's no turning back.
Simplified, high-quality healthcare at a lower cost—that's the Holy Grail. The race is on.
Kym White is global practice chair for health at Edelman.