Amazon Enlists Marquee Partners Berkshire Hathaway and J.P. Morgan Chase to Take On Healthcare

A. DeCarlo
A. DeCarlo

Summary Bullets:

  • Amazon teamed up with Berkshire Hathaway and J.P. Morgan Chase to create a separate operating company to find a more cost-effective and efficient way to deliver healthcare to the company’s respective employees.
  • While all three companies bring unique characteristics that set this union apart from other alliances, it is Amazon’s history of transformative innovation that elevates the alliance.

When three giants of their respective industries strike an alliance around U.S. healthcare, the world is bound to react (as are markets). And when one of those companies is Amazon, the word ‘disruption’ almost automatically enters the conversation. So, when news hit the wires that Amazon, Berkshire Hathaway, and J.P. Morgan Chase are entering a healthcare-related partnership to benefit their employees and lower their cost structure, speculation went into high gear and the conjecture started.

The companies provided minimal detail about the ‘independent’ company they are jointly forming to carry out this effort beyond the fact that it will initially focus on technology solutions designed to “provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” With healthcare comprising approximately 18% and growing of the U.S. gross domestic product (GDP), virtually every employer in the United States is grappling with cost and management issues.

Thus, it was little surprise when theories went immediately to exactly how the companies would re-engineer U.S. healthcare. Would the fledgling company become a mega distributor of healthcare services? Could it reinvent the way consumers and businesses pay for medical care? Would it revolutionize the entire healthcare model as Americans – and potentially the world – know it?

Insurance company stocks slid in the immediate aftermath of the announcement. The Wall Street Journal reported that J.P. Morgan Chase CEO James Dimon spoke directly to some of his company’s insurance clients to reinforce that the aim of the tie-up is to support more effective healthcare delivery to the triumvirate’s employees, not compete with insurance payers.

Still, questions swirled about how potential ripple effects from the alliance could affect the broader market. Each company brings something beyond scale and vast resources to the healthcare table. Multi-national holding company Berkshire Hathaway has big investments in insurance, though not specifically healthcare-related. J.P. Morgan Chase has proven to be a formidable financial player in times of crisis and rebound. But, it is really Amazon and its technology savvy that conjure up phrases like ‘game changer.’

While the company is an outsider in the healthcare space, it is exploring opportunities in the sector. Last year, Amazon obtained wholesale pharmaceutical licenses in multiple U.S. states. Given its vast distribution platform and its unique talent for commercializing services and changing delivery models, Amazon seems primed to play a role in healthcare. That is almost assured with its development efforts in areas like voice recognition, analytics, and artificial intelligence, which ultimately could help Amazon reinvent healthcare to leverage a more virtualized delivery model.

What is your take on the partnership? Do you think Amazon will be a factor in the broader healthcare market? Are there technology-oriented, non-healthcare players that you could see stepping up to play a disruptive role in the sector?

What do you think?

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