Atul Gawande/Wikimedia Commons
The joint venture launched earlier this year by Amazon, Berkshire Hathaway and JPMorgan Chase to explore new ways of lowering health care costs for their employees now has a dedicated leader. Dr. Atul Gawande, a renowned surgeon, medical researcher, and author of several highly regarded books on medicine who has also been a staff writer at the New Yorker for 20 years, will serve as CEO of the as-yet-unnamed organization, Fortune reported on Wednesday:
Gawande may come as an unexpected choice to lead this new health care company, whose aim is to decrease health care costs and improve outcomes for the approximately one million employees in the triumvirate’s workforce. He practices general and endocrine surgery at the renowned Brigham and Women’s Hospital in Boston and is a researcher and professor at Harvard’s T.H. Chan School of Public Health. …
Following the Amazon-JPM-Berkshire announcement, Gawande stated that he would continue his positions at Brigham and Women’s and Harvard and will keep writing for the New Yorker even as he takes the reins of the health venture on July 9. He will, however, step away from his role as executive director of Ariadne Labs—a company he founded that focuses on health care delivery with a global health-focused bent—to become its chairman.
Few other details are publicly known about the partnership, which was announced in January, sending ripples through the stock market as pharmacy benefit managers, health insurance companies, and biotechnology firms wondered what it would mean for them. The organization Gawande has been hired to lead is an independent nonprofit based in Boston, which is expected to focus on technological solutions, data sharing, and its participants’ bargaining power as large buyers in the health care marketplace. The organization may eventually partner with other companies along with Amazon, Berkshire, and JPMorgan.
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Amazon, Berkshire Hathaway, and JPMorgan Chase made headlines—and sent health insurance stocks into a tailspin—when they announced in January that they had partnered to form an independent nonprofit organization dedicated to finding ways of providing health care to their employees at a lower cost. However, Kathryn Mayer at Employee Benefit News flags a new report from venture capital firm Venrock in which healthcare experts say that this partnership is unlikely to have as immediate or dramatic an impact as its founders might expect:
Of the 300 healthcare professionals, employers, investors and academics surveyed by Venrock, 73% said that the Amazon, Berkshire Hathaway and JPMorgan effort was going to take a lot longer than expected and endure many obstacles. Meanwhile, 25% said the companies “have no idea what they’re getting into.” There are a number of reasons for the industry’s skepticism, say Venrock partners Bryan Roberts and Bob Kocher.
“[One is that] many new entrants have sought to dramatically improve healthcare for many years and nearly all have failed to produce any material impact. Remember Google Health and HealthVault?,” Roberts says. “While these are all large, successful companies, they do not have any real market power in healthcare, where all leverage is locally driven.” Meanwhile, Kocher notes, the companies haven’t yet formed a leadership team.
January’s announcement reflected the pressure many US employers of all sizes are feeling as rising health care costs force many of them to shift more of these expenses onto their employees. Businesses are bracing for a further spike in costs next year, as Congress has declined to take action to stabilize the individual health insurance marketplace established by the Affordable Care Act, potentially paving the way for premium hikes of as much as 30 percent. Higher expected costs for insurers mean higher prices for group insurance customers (mainly employers) as well as individuals.
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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:
JPMorgan Chase CEO Jamie Dimon recently announced that his company was planning on raising wages for its employees at the lower end of the wage continuum, and he is doing this for several good reasons: It will benefit those employees and make his company stand out from the pack in terms of the values that it represents. It also starts to speak to the increasingly important role that private companies have to play in addressing wage stagnation and inequality. But Thomas A. Kochan asks a really important question at the Harvard Business Review: If this is so good for JPMorgan, why don’t they advise the many other companies they work with to follow suit?
After all, investment analysts at JPMorgan Chase are assigned to monitor specific industries, speak up in companies’ quarterly conference calls, help execute deals and transactions, and advise corporate clients. It would be better news for all American workers and for the economy if Jamie Dimon were to instruct his investment analysts to urge their clients to do the same as his company: pay low-wage workers more. … I believe there is one key reason why the high road strategy is not spreading across industries. It’s because the investment community continues to pressure firms to focus on short-term shareholder returns and looks askance at any efforts to invest in employees for the long run. This power of the financial sector over company actions is real and costly.
Unfortunately, only a small number of investment analysts have begun to pay attention to the evidence of a good jobs strategy. Some have been asking firms for data on whether they are following strategies that pay off for both shareholders and employees. Most of these analysts are still only niche players, often labeled as “social investment” funds. The power of Jamie Dimon’s pulpit could help transform this nascent movement from the social fringe to the mainstream investment community.
Guardian reporter Jana Kasperkevic tempers enthusiasm over JPMorgan Chase CEO Jamie Dimon’s announcement last week that the bank was raising wages for its lowest-paid workers, arguing that the minimum wage hike neither makes a significant difference for these workers nor is it distinctive among major financial firms:
Lawrence Mischel, president of the left-leaning Economic Policy Institute, calculated that the wage hike, which will go into effect in 2017, amounts to a 3.2% annual increase. “That’s good, but it’s not other-worldly. The fact is those wages are not all that high. For a leading sector, they should pay more,” Mischel said. Looking at the overall US economy, the average hourly earnings reached $25.61 in June, far above the minimum wage. The hourly wages have grown at the annualized rate of 2.6% over the past 12 months, an increase that Barack Obama earlier this year said was still “too slow”.
Considering all that, the 3.2% boost by JPMorgan Chase appears to be an effort to offer competitive wages. The fact is the bank is playing catch up. A report by Reuters revealed that other banks already pay wages within the range that JPMorgan Chase hopes to pay in next three years. “We started looking at our entry-level workforce a couple of years ago and have gotten already to the, call it, $12 to $16.50 range,” John Shrewsberry, Wells Fargo’s chief financial officer, told Reuters. Similarly, Citigroup’s spokeswoman said the bank’s US tellers start at a minimum of $13 an hour and overall earn an average of more than $15.50 an hour.
Suzanne Lucas at Inc. is encouraged by the trend of major employers voluntarily raising the minimum wage for their lowest-level employees, including this week’s announcements from JPMorgan Chase and Starbucks:
The reality is, when you raise wages you get a better talent pool. Years ago (1999-2000), I worked for a retail organization that is always on Fortune’s Top 100 Companies to Work for: Wegmans. I focused on making sure we paid our employees more than all our competitors. While former CEO Bob Wegman was a truly good boss (I have nothing but praise for him), he also recognized that he got the best employees when he paid the best wages.
Wages can rise and fall without government intervention. Companies compete with each other for talent. And raising wages at one big company can have a ripple effect on other companies. That’s how the free market works. When Walmart raised wages back in 2015, TJ Maxx and other stores followed suit. Why? It’s not nobility. It’s simple economics.
If Walmart pays $10 an hour and its competitor pays $9, who would want to work at the competitor? Well, some people would because they like the work better, but you’d see people fighting for the higher-paying jobs and the lower-paying companies would have both increased turnover and a limited employment pool–as the only people available would be those who were incapable of obtaining a higher-paying job. Turnover is a lot more expensive than a pay increase.
In the case of JPMorgan Chase, however, Harvard Business Review associate editor Walter Frick argues that CEO Jamie Dimon’s move could actually end up hurting the bank’s image if the public views it as hypocritical:
In a New York Times op-ed published on Tuesday, JPMorgan Chase CEO Jamie Dimon revealed that the bank would raise the minimum wage of its retail banking employees from $10.15 today to between $12 and $16.50, “depending on geographic and market factors,” over the next three years:
A pay increase is the right thing to do. Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all, it enables more people to begin to share in the rewards of economic growth. And it’s good for our company, helping us attract and retain talented people in a competitive environment. While businesses, including ours, are understandably cautious when it comes to expenses, there are good expenses (investments that will pay off in the long run) and bad expenses (waste and inefficiencies). We have never hesitated to invest aggressively if we thought it would improve our long-term prospects.
While a higher wage is important, so are benefits. Our lower-compensated employees receive a medical plan — subsidized up to 90 percent by the company — as well as dental, vision and other coverage. Many of these and other benefits, including a 401(k), pension, a special annual award, paid family leave, paid vacation and bereavement, have been increased in recent years. In total, the annualized value of all of our benefits for these employees is on average approximately $11,000 a year above their existing wages.
It is true that some businesses cannot afford to raise wages right now. But every business can do its part through whatever ways work best for it and its community.
Dimon’s announcement comes as other large employers are moving to raise wages for their lowest-paid staff.