Amazon, Berkshire and JPMorgan move to target healthcare costs
Three corporate giants are teaming up to combat what billionaire Warren Buffett calls a “hungry tapeworm” feasting on the U.S. economy—healthcare.
Amazon.com, Buffett’s Berkshire Hathaway and JPMorgan Chase & Co. say they plan to collaborate on a way to offer healthcare services to their U.S. employees more transparently and at a lower cost. The three companies say they plan to set up a new independent company “that is free from profit-making incentives and constraints,” according to a short statement issued Tuesday.
The move sent shares of healthcare stocks falling in early trading.
The healthcare industry has been nervously eyeing the prospect of competition from Amazon for months. While the new company created by Amazon, Berkshire and JPMorgan would be for their U.S. staff only, this is the first big move by Amazon into the industry. The new collaboration could pressure profits for middlemen in the U.S. healthcare industry.
“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,” Amazon Chief Executive Officer Jeff Bezos said in the statement. “Success is going to require talented experts, a beginner’s mind and a long-term orientation.”
Healthcare spending was estimated to account for about 18 percent of the U.S. economy last year, far more than in other developed nations. Despite efforts to curb costs, studies suggest that U.S. doctors and hospitals continue to provide too much healthcare. In a survey of physicians’ perspectives published last year in the journal PLOS One, the average estimate was that 20 percent of medical care was unneeded, including about a quarter of tests, a fifth of prescriptions and more than one in 10 medical procedures.
Amazon, Berkshire and JPMorgan are among the largest private employers in the U.S., with a combined 1.2 million workers. And they’re among the most valuable, with a combined market capitalization of $1.6 trillion, according to data compiled by Bloomberg.
The effort is in its early planning stages, the companies said. It’s being spearheaded by Todd Combs, who helps oversee investments at Berkshire; Marvelle Sullivan Berchtold, a managing director of JPMorgan; and Beth Galetti, a senior vice president for human resources at Amazon.
Sullivan Berchtold joined JPMorgan in August after eight years at the Swiss pharmaceutical company Novartis AG, where she was most recently the global head of mergers and acquisitions, according to her LinkedIn. The management team, location of the headquarters and other operational details will be announced later, the companies said.
Buffett has long bemoaned the cost of U.S. healthcare. Last year, he came out in favor of drastic changes in the U.S. health system, telling PBS New Hour last year that government-run healthcare is probably the best approach and would bring down costs.