The creation of the new entity highlights the growing frustration with rising healthcare costs among U.S. employers. In a statement, Berkshire Hathaway Chairman and CEO Warren Buffett labeled those rising costs "a hungry tapeworm on the American economy."
Employer-sponsored spending per person in 2016 grew 4.6% to $5,407 over 2015, according to the latest annual report by the Health Care Cost Institute. In 2015, spending grew 4.1% over the prior year. The report did not account for inflation.
Businesses are increasingly looking for ways to hold down healthcare costs, either by shifting more costs to the worker through high-deductible health plans or by investing in wellness programs or on-site clinics. Some employers are going a step further by bypassing insurance companies and contracting directly with hospitals systems for healthcare services.
"Employers have figured out that managed care providers are not fulfilling their promise," Dr. Mario Molina, CEO of Golden Shore Medical and former head of insurer Molina Healthcare. "Healthcare is becoming enormously expensive and things that people tried in the past are not working anymore. Companies will look for new, creative ways to lower costs."
While the venture is hardly the first time employers have banded together to better control healthcare costs, it may be the one that finally cracks the code.
There have been other attempts. In 2016, 20 major companies joined forces to create the Health Transformation Alliance to leverage their combined heft to secure better pharmacy contracts. The group's membership has since grown to 40 large members, including American Express, Coca-Cola Co., hospital system HCA, and IBM Corp.
The alliance this year also began contracting with healthcare providers in three areas—Phoenix, Chicago and Dallas-Fort Worth—to care for employees with diabetes, hip and knee replacements and lower back pain. It has started looking at expanding that program to Atlanta, Houston, Memphis, Tenn., Nashville and New York in 2019, Alliance CEO Rob Andrews told Modern Healthcare in a recent interview.
But Amazon, JPMorgan Chase and Berkshire Hathaway seem to working from a different angle with their focus on technology. Experts see promise in combining the nation's leading e-commerce giant with a major player in banking — an industry miles ahead of healthcare in terms of innovation and consumerism — and the capital of Berkshire Hathaway.
"There's nothing that's out of bounds for them," said Will Hinde, a managing director with West Monroe Partners in Chicago.
With their combined 1 million employees, the three companies have a built-in audience with known risks to test and refine new products that could eventually be rolled out to the masses.
Ripe for a change
Analysts wonder if the companies will go beyond leveraging digital tools such as telemedicine to also change how care is paid for and delivered.
"More than 1 million combined employees at minimum gives them leverage to hold existing vendors more accountable for health and cost outcomes for their workers," Maulik Bhagat, managing director in the healthcare practice of consultancy AArete, said in a statement.
It's possible the companies will combine their employee bases into a purchasing population that they can use as test bed for self-diagnosis, claims adjudication or customizing benefit plans, said Paul Keckley, an industry consultant.
The major question is whether the venture could influence healthcare pricing, said Vaughn Kauffman, U.S. health services and new entrants advisory leader at PricewaterhouseCoopers.
"Can they take this as an opportunity to reimagine what a provider network looks like in the future — a combination of a traditional hospital system plus innovation around virtual care and the retail side of things to bring down the price of healthcare?" Kauffman asked.
Those that have tried have had difficulty cracking the reimbursement equation, he added.
Hinde speculated about the potential for the three companies to create a one-stop shop for medical, life, home and auto insurance. But he noted that the companies will likely move slowly, starting with improving pieces of the healthcare puzzle that would create the best value for their own employees.
The venture marks one way that Amazon is moving into the healthcare space. Rumors about the online retailer's healthcare debut have been rampant for months, and it's still unclear if Amazon is poised to move into the pharmacy business. Already, Amazon has quietly established a growing presence in the medical supply sector.
The announcement sent healthcare stocks spiraling. No. 1 health insurer UnitedHealth Group's shares were down 4.4% by the market close. Insurer Anthem's shares dropped 5.3%, Cigna's decreased more than 7%, and Humana's and Aetna's shares fell more than 3%.
Meanwhile, pharmacy benefit management company Express Scripts' shares were down 3.2% while shares of drugstore giants CVS Health and Walgreens fell more than 4% and 5%, respectively.
"The twitchy stock market reactions and the idea that billions of market cap would disappear from established companies like Aetna or Anthem with a story with the name Amazon attached to it tells you how much anxiety there is about Amazon," said Jeff Goldsmith, national advisor at the consultancy Navigant.
"Anyone with a high-cost, high-margin business has to be worried about this partnership," said John Driscoll, CEO of health benefit-management company CareCentrix. "There's no question that these outsiders have a deep interest in providing higher quality care at lower costs to patients.
In a research note to investors, Mizuho Securities healthcare analyst Ann Hynes cautioned that the market overreacted. Amazon, JPMorgan and Berkshire appear to be focused on new information technology and increased transparency for their employees, she said.
Even if the companies did form a managed care plan, it would be difficult to disrupt the already competitive sector.
"The problem these endeavors face is that these employees are scattered all over the place," Goldsmith said. "The idea that you will do some comprehensive benefit redesign, the degree of difficulty in executing that is pretty darn high."
