Amazon, Berkshire Hathaway, JPMorgan Partner to Solve Health Care Cost Challenge

Amazon, Berkshire Hathaway, JPMorgan Partner to Solve Health Care Cost Challenge

Amazon, Berkshire Hathaway and JPMorgan Chase have announced a partnership to establish a nonprofit entity dedicated to lowering health care costs for their employees, the Washington Post reports:

The independent company would be jointly led by executives from all three companies and would be focused on technology that could increase transparency and simplify health care, according to the joint announcement. It will be free from the need to deliver a profit. … Few details were available about the new initiative, described as in the initial planning stages. The announcement comes amid anticipation that Amazon could disrupt health care as it has in other industries — sending tremors through companies that make and supply prescription drugs.

The announcement sent health care stocks tumbling, Bloomberg adds, affecting several major pharmacy benefit managers, health insurance companies, and biotechnology firms. While the details of the partnership are still sketchy, it is expected to focus on technological solutions, data sharing, and its participants’ bargaining power as large employers. The initiative may also expand beyond these three companies in the future:

The group announced the news in the very early stages because it plans to hire a CEO and start partnering with other organizations, according to a person familiar with the matter. The effort would be focused internally first, and the companies would bring their data and bargaining power to bear on lowering health-care costs, the person said. Potential ways to bring down costs include providing more transparency over the prices for doctor visits and lab tests, as well as by enabling direct purchasing of some medical items, the person said.

The announcement comes at a time when health care costs are on the rise, forcing many organizations to shift more of these expenses onto their employees. This new partnership is reminiscent of the Health Transformation Alliance formed two years ago by a group of 20 large corporations, which is also aimed at reining in health care costs by sharing data. US companies of all shapes and sizes have been exploring alternatives to traditional group health insurance, such as self-funded health care schemes and value-based programs.

In the meantime, the health care sector is also facing disruption on the supply side through integration and consolidation. More insurers are chasing the integrated business model pioneered by UnitedHealthcare, in an effort to change the way they pay health care providers from a fee-for-service model to a more results-based system. The latest development on this side was the announcement in December that the pharmacy giant CVS had made a deal to acquire the insurer Aetna for $69 billion, though this deal must still pass muster with antitrust regulators.