Amazon has been steamrolling industries since its founding in 1995, making owner Jeff Bezos the richest man in modern history. But now it’s picking on an industry of equal caliber, and one that’s not going to be as easy as books to crack—the health care industry.
Amazon is partnering with Berkshire Hathaway and JP Morgan Chase Co. to offer health insurance to its combined employees, which number over 1 million.
In June, the three companies announced it had found a CEO to lead the initiative: surgeon, writer, and Harvard professor Dr. Atul Gawande.
As of July 9, he became the CEO of a separate, nonprofit company based in Boston that has been given the task of not only coming up with a system that delivers better health care to the three companies’ employees, but that does it at a lower-than-industry cost.
Mastering that puzzle, which no one in the health care industry seems to have done thus far, is a challenge that he seems to have embraced.
“I have devoted my public health career to building scalable solutions for better healthcare delivery that are saving lives, reducing suffering, and eliminating wasteful spending both in the U.S. and across the world,” he said in a statement. “Now I have the backing of these remarkable organizations to pursue this mission with even greater impact for more than a million people, and in doing so incubate better models of care for all.
“This work will take time but must be done. The system is broken, and better is possible.”
Why have Kaiser that insures 10m lives and United that insures 45m lives failed at this, and how will Atul make more progress with 1m lives? #HealthPolicyTwitter will view this as being stubborn, but it's a question that MBAs are trained to ask https://t.co/CPQkL8A4TZ
— Amitabh Chandra (@amitabhchandra2) June 23, 2018
While it’s not clear if Gawande will be involved, Amazon is getting into another health-related initiative. In June, the company announced it was planning to acquire PillPack, an online pharmacy with licenses in 50 states.
The company ships monthly packages to customers with pre-sorted prescriptions and other health products. The merger still is subject to regulatory approval, but the companies hope it will go through by this fall.
PillPack could fit nicely into a part of an idea that Guwande outlined in June at the Aspen Institute’s “Ideas Festival,” which is to eliminate waste through cutting out middlemen, inflated pricing, and misallocated care. If three companies can get rid of the need for a pharmacy, that’s one less middleman they will have to pay for.
Part of the challenge with offering health care will be dealing with the diversity of the companies’ workers. Amazon has fulfillment center employees all around that country, “most of them people who probably are there only about a year or so,” Guwande said. Berkshire Hathaway owns such properties as Acme Brick, Burlington Northern Santa Fe Corp. and Dairy Queen. With JP Morgan Chase, the employees are mostly bank tellers.
What they do have in common, he says, is that are paying taxes that go toward Medicare and Medicaid, but are receiving worse care than people on either of those programs.
“These are people who are as stressed as everybody else in the U.S. health care system,” he said.
Guwande could not be reached for comment. The three companies have been keeping their cards close to their chests concerning their plans, if they have any, for the venture. But they are sober about the challenges they face.
“This is an absolute critical issue and all of us have a long-term view and we’ve been through the amount of money spent on fraud, administration, end-of-life, the misuse of drugs,” and others, JP Morgan Chase CEO Jamie Dimon told CNBC‘s Wilfred Frost.
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway Chairman and CEO Warren Buffett in a statement. “We share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
If Guwande, who has been writing about the shortcomings in the health care industry for years, is able to successfully realize some of his ideas, then Amazon, with JP Morgan Chase, and Berkshire Hathaway in tow, could find itself disrupting yet another industry.