A Disruption Disguised as a Disruption: Amazon, Berkshire Hathaway, and JPMorgan Chase in Healthcare
Right now, CVS and Aetna are saying, “I told you so!” Later this morning, Wall Street is likely to say something similar, though in a somewhat different manner. What happened? As breathlessly reported here in the New York Times, Amazon, Berkshire Hathaway, and JPMorgan Chase are teaming up to create an independent healthcare company to serve their employees (bold emphasis is mine).
The market and the healthcare industry have seemingly been waiting for the other shoe to drop since Amazon acquired Whole Foods last year (discussed/linked here). And while Amazon tends to be treated – deservedly so, for the most part – as a Midas that turns things to gold at a touch (Warren Buffet/Berkshire Hathaway might qualify similarly), one might well ask, “What gives this combination an edge”? In three words (and in no particular order): money, experience, and technology.
Clearly, all three have the capital not only to put together an organization to make things happen, but more importantly, the resulting entity will be under exactly zero pressure to make a profit. If there’s one persnickety thing that gets in the way of providing robust healthcare to anyone/everyone, it’s the need for publicly held insurance/healthcare companies to continue to increase profits. And like any lovable unicorn (or post-unicorn stage internet company – think Box, Salesforce, etc.) whose SG&A costs represent a majority % of their revenues, a company free from judgment based on financial results can be quite powerful in the market.
Berkshire Hathaway owns some 11 companies that offer some form of or are related directly to insurance and/or healthcare (GEICO perhaps being the most recognizable). All three are employers of significant size with a span of blue to white collar employees. Most people would characterize the three CEOs as “pretty darned smart.” If any trio has a shot at figuring out a way to provide and deliver healthcare effectively, this one would be a good bet (and I wouldn’t discount their having friends like Bill Gates to pitch in on occasion).
As for technology, well…Amazon. That’s not exactly the deep, derivative analysis one might expect from a Gartner research analyst, but I think Amazon’s reputation speaks for itself, both on the consumer and B2B sides. I daresay that the company (along with its friends, of course) might have a good shot at not only optimizing the information flows comprising what is often a convoluted healthcare delivery process but also putting a whole lot of tech to work on wellness, prevention, and other areas that are part of the value chain.
Now before everyone gets nutty about this, it is important to note that this partnership is focused on ONLY the three companies concerned. But as Jeff Bezos has written in the past, one must approach every day as if it is “Day One” if one wants to maintain a culture of innovation and disruption.
Today could be a big Day One in healthcare.
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