The U.S. health care industry might be seeing the early signs of major shifts in the health care system. Amazon, Berkshire Hathaway, and JP Morgan Chase announced on January 30 their partnership to create a new company that will offer affordable, high-quality health care. According to a news release, "The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints."
Lawrence A. Cunningham, Henry St. George Tucker III Research Professor of Law, participated in a Q&A about the significance of this partnership and what this could mean for the current health care industry.
Amazon, Berkshire Hathaway, and JPMorgan Chase announced that they would form an independent health care company for their employees in the United States. What does this alliance mean?
As announced, it is a statement rather than a plan. So it is modest. But, given its founding fathers and institutions, it is a credible threat of institutional pressure on health care providers to improve the industry. The goal – "simplified, high-quality and transparent healthcare at a reasonable cost" – is also vague. But it suggests a greater customer orientation, and increased focus on the patient. Today patient interests are sometimes obscured by a thicket of intermediaries that both impairs care and inflates costs.
CEOs Warren Buffett, Jeff Bezos, and Jamie Dimon are aiming to create for their workers health care that improves satisfaction and reduces costs. While the alliance will apply only to their employees, these corporations are so closely watched. Could they become models for other businesses?
If it works, others will follow. The partnership appears prepared to be transparent with its own initiative. So benefits achieved for their employees should be readily obtainable by others. Even if some details remained confidential, labor market competition would result. Rivals of these companies would likewise invest in improved health care options for their employees.
Jeff Bezos nods to the fact that it's going to be a formidable endeavor. What do you think of the partnership?
Bezos and Buffett are both renowned for achieving the unachievable, over long periods of time across many contexts. Amazon is famous for its customer-centered approach to merchandising. So however formidable an endeavor it is, the industry would be unwise to ignore the partnership—even if vague or tentative in outline.
What are some of the challenges the CEOs could face?
Dimon's company has many clients in the health care industry, so managing the partnership's goals with the interests of those clients is an immediate and obvious challenge. It would help if the partnership can make the case that the industry will benefit from a more patient centered approach. Berkshire has not usually centralized corporate decision making or policy, leaving employee benefits and other matters to its subsidiaries. So coordinating the partnership at headquarters would be a change and could be a challenge.
Could these three heavyweights reinvent health care? If yes, how so?
I don't know and it sounds like they don't either. But there may be value in the simple act of announcing the partnership: if it it's not reinventing health care, it may at least focus more attention on the patient.