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JP Morgan, Amazon, and Berkshire Health: Will They Partner or Disrupt?

Amazon, Berkshire Hathaway, and JP Morgan Chase announced Tuesday that they were partnering up to create an independent, non-profit company aimed at addressing healthcare costs.  The announcement is light on details, leading to speculation on whether the newco will leverage existing models or look at completely changing the way health is provided.  One thing is clear, though: the market is taking notice.

There a few reasons to take notice, of course. The first is that it’s been done successfully before. This is straight from the Kaiser Permanente website:

“Kaiser Permanente evolved from industrial health care programs for construction, shipyard, and steel mill workers for the Kaiser industrial companies during the late 1930s and 1940s. It was opened to public enrollment in July 1945.”

KP emerged from the shipyards to become a leader in high-quality and cost-effective treatment by closely integrating care delivery.  Could this partnership be the next Kaiser? Honestly, probably not; a different time calls for a different solution.

This deal represents roughly 1 million employees but it could disrupt the 160 million Americans on similar health insurance plans. This remains some of the most profitable business for health systems and carriers today. Any disruption to this business could have a serious impact on the economics of healthcare.

Finally, these three companies have a track record of outperforming in their respective markets, primarily through innovation, creativity, and execution. I’ve written about JP Morgan’s success by implementing high-tech and high-touch here, and Amazon’s potential in healthcare here.  The potential of these companies working together is already shaking markets and moving healthcare stocks down in anticipation. Of course, this is something that will likely take some time to make any real impact on the market.

What can we learn from the founders?

Warren Buffett, CEO of Berkshire Hathaway

“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.”

Warren Buffet is pragmatic and frustrated, but always optimistic about what we can achieve together. His words represent all three of these.

He is pragmatic in that he knows healthcare can be a quagmire for even the smartest business minds. The regulatory framework is both federal and state, the payment models are confusing, and the culture is fairly static. He is frustrated by the impact of healthcare costs on the economy and the American people.

However, a hallmark of Buffet is his optimism to overcome this problem as others we have faced.

Jamie Dimon, CEO of JP Morgan Chase

“People want transparency and more control over their own healthcare and the partners intend to work toward that for their own employees initially and potentially for all Americans.”

Jamie Dimon provides us with some idea of how this new company might go about addressing the cost of healthcare. The model will be built first for the 1 million or so employees of the three companies, then expand outward to others.

Dimon believes that transparency – presumably of cost, quality, and clinician performance – will lead to better outcomes, along with putting the consumer/patient in the driver’s seat. His words are spoken like someone who believes in capitalism’s ability to influence a market.

Jeff Bezos, CEO of Amazon

“Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

Jeff Bezos is the “something from nothing” entrepreneur. He dreams of a better life for his employees and their families, brought about with the help of technology.

We learn that Bezos believes that we should approach the problem with greenfield solutions. There is nothing on the whiteboard now, so let’s create.

There is one thing on everyone’s mind after this announcement: Will the new company plug into the existing healthcare framework or will they create something new? In other words, are they going to partner up with or simply disrupt the healthcare industry?

Here is what we will be watching for.

Leadership

The company has yet to name a leader. I expect that the leader will come from within the ranks of one of these three companies. That will indicate that they are looking for new ideas and new models.

If they go outside the firms and find someone from the healthcare industry, this likely will indicate that they are looking to partner with the industry. Either way, the leadership will tip their hand as to their primary approach.

It won’t exclude the other approaches but it will show their leaning.

Pilots

At some point in the future, we will be reading about a pilot from the new company to their employee base. It could be a chronic condition management program, a new application, a self-managed pharmacy program, or something altogether different. They could employ doctors, or not.  They could set up a virtual clinic, or not.

If they decide to delve into traditional healthcare, they will have to wrestle with EHR integration, workflow integration, and transitions of care. The initial pilots will indicate what problems they are trying to solve and what pitfalls they are trying to avoid.

Do you think the new entity will be a Cerner or Epic client?  I doubt it, but stranger things have happened. The pilots will be an early indicator of their intentions.

Partners

I doubt that the new company will completely go at it alone. I can’t imagine an Oncology or Cardiology program delivered by the new company.  It could happen, I guess, if you refer back to the Kaiser example at the beginning of the story.

I expect that you might see a narrow network-type of arrangement with some of the best programs in the country. Walmart already does this with Mayo for specific conditions, and this would be an easy win for the new company. Either way, if they choose to partner and who they choose to partner with will be an indication as to what impact this new company will have on the industry.

It’s too soon to tell which way the new company will go. However, it cannot be ignored that these players have a track record of making things happen.

Buckle up, this is going to be a fun ride.

Hope this helps. Please follow me on Twitter @ThePatientsCIO, connect with me on LinkedIn, or reach out at [email protected] if you wish to discuss all of this further. Thanks for reading.