Chase et al declare creation of joint venture health care firm
Amazon, Berkshire Hathaway and JPMorgan Chase, three giants in the technology, insurance and finance industries, recently announced that they would form an independent health care company for their employees based in the United States, according to The New York Times. “The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost,” the companies said, according to NPR. For years, businesses have been frustrated with the nation’s health care system and the rapidly increasing cost of medical treatment. U.S. health care is notorious for its inefficiency and high cost, a problem only exacerbated by the numerous, profit-seeking doctors, hospitals, insurers and pharmaceutical companies.
According to The New York Times, Berkshire Hathaway CEO Warren Buffett said, “The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable.” It is still unknown how these three partner companies would change the health coverage of their employees. People are wondering if it will make it easier for employees to find local doctors, encourage greater use of online medical advice or negotiate lower prices for drugs and procedures. It seems that they will initially focus on using technology to simplify care, but how that will be carried out remains to be seen. One solution may lie in modernizing traditionally cumbersome tasks, such as doctor appointments. Patients might open an app on their phone and be able to see a list of highly rated doctors in their area, the respective specialties of the doctors and an appointment time sheet they can select from in a convenient manner. Whatever they choose, these companies are so prominent that their approach to employee health care may become a standardized model for other businesses to follow.
In fact, the announcement of the formation of a healthcare company by these three companies sent the stocks of insurance companies and other health-related companies plummeting.
Amazon, one of three companies, is an online retail giant that has surpassed traditional brick-and-mortar stores. Berkshire Hathaway is one of the largest companies in the world by market capitalization. JPMorgan Chase is the largest bank in the United States by assets. These three titans are definitely strong entrants into the chaotic health care industry.
The movement of an online retailer, insurance and holding and finance companies into health care is not that strange, considering that U.S. health care itself has become less solidly defined in recent years. Major changes are occurring at a rapid pace, such as CVS Health’s recent deal to purchase health insurer Aetna for $69 billion.
Amazon has suggested it might want to enter the pharmacy business, which also negatively impacted the stocks of major drug companies and distributors. Apple has made its move into the electronic health records space, by allowing patients to aggregate their health records on their iPhones via the native Health application.
There are other companies seeking to impact this space, as well. According to The New York Times, Walmart contracted with groups like the Cleveland Clinic, Mayo and Geisinger Health System and others to take care of their employees who need organ transplants or heart and spine care. Caterpillar, which manufacturers construction equipment, set its own rules for drug coverage, hiring its own doctors and pharmacists, among other changes, which resulted in the company saving millions per year.
The health care firm created by these three companies, in its early stages, is supposed to be “free from profit-making incentives and constraints,” but it was not specified whether a nonprofit organization would be created or not. The main idea is to build a firm that has no other motives or obligations besides providing for the care and well-being of the workforce of the three companies.
Jamie Dimon, chief executive of JPMorgan Chase, stated that the ultimate goal is to “create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” according to TechCrunch. All three CEOs said that they are aware of the immense challenges that they face. “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.”