The recently announced health care collaboration between Amazon, Berkshire Hathaway and JPMorgan Chase — three hugely rich, successful and totally different corporate behemoths — has become something of a Rorschach test for analysts and pundits. Since the companies themselves have said nothing about what their new venture will do, we are all free to spin scenarios to our hearts’ content, and to the public’s likely confusion.
The fact is, no one — probably including Jeff Bezos, Warren Buffett and Jamie Dimon — knows how Amazon and Company will provide their 1.1 million employees with “simplified, high-quality and transparent health care at a reasonable cost.” Conspiracy theorists might even wonder if three wily tycoons have just launched a brilliant ploy to get all of us to crowdsource ideas that will help them figure out how to remake health care.
{mosads}Conspiracies aside, what we do know is that their employees face the same health problems as all Americans: skyrocketing costs that strain their budgets and their insurers, whether public or private. We also know that it doesn’t have to be this way. Wealthy countries the world over have achieved comparable — or better — health outcomes at a fraction of what Americans pay. Our health care system desperately needs disruption, which is the reason for the extraordinary excitement that this new alliance has generated.
So what can we actually expect Amazon and its partners to accomplish?
Let’s begin by dispelling a misleading first impression: that the three companies have sufficient combined market power to bend the health system to their will. One million-plus employees may seem like a lot, but they are spread across scores of markets in the United States and abroad. All health care is local. The new venture may have sufficient market share in a few areas — maybe Seattle, or Omaha — to muscle better prices and service out of doctors and hospitals, but in most locales, that won’t be the case.
What sets these three companies apart are other assets: unparalleled technological brilliance, rare business acumen, deep understanding of financial markets, and deep pockets. Their most exciting opportunities may lie in Amazon’s technological edge.
Imagine a world in which Amazon’s Alexa became a health care hub dispensing a suite of health care services, from arranging doctors’ appointments, to refilling prescriptions, to providing cost and quality information about local providers or vetted advice on how to manage particular health care problems. With the availability of cloud-based electronic health records, all this could be informed by data unique to the patient, and massaged by artificial intelligence.
The results could be legions of newly empowered employees who could use health care services much more selectively and effectively — and perhaps, more cheaply as well.
But technological, regulatory, scientific and political challenges make the health care Alexa a risky, long-term play. In the shorter term, the new venture might offer joint purchasing services that would reduce somewhat the prices of key health care inputs such as drugs and devices, for which markets are national, not local. Amazon could create a virtual health care market through which doctors, hospitals and consumers would aggregate their purchasing power to extract price concessions from the bio-pharmaceutical industry. This would also cut out a raft of intermediaries — pharmacies, pharmaceutical benefit managers, group purchasing companies — all of which get a cut along the way.
A plus is that multiple employers, consumers and other stakeholders could use this new service. A limitation is that the majority of health care costs derive from labor, which this approach would not affect.
There is some speculation that the venture might create similar virtual markets for clinical care. Employees would go online to purchase doctor and hospital services, using the insurance dollars that the three companies (all self-insured) already set aside. Providers would compete for customers, driving down price. The problem would be gaining the cooperation of health professionals and institutions. Why would they lower their prices to compete for customers if they don’t need the business, which will be true in the majority of health care markets? Another question is how would this venture vet participating providers for quality, and what liability might they assume for malpractice?
As these examples make clear, transforming health care is hard. This private-sector venture faces significant known — and likely, unrecognized — obstacles, the kind of complexities that have frustrated past efforts to disrupt health care markets on behalf of particular employers, or on a national scale.
It is good to know that the best, most innovative minds in American business are taking on the challenge — because Americans need a transformed health system. But if companies this rich, smart and powerful don’t succeed, we may be forced to accept solutions that work quite well in most of the rest of the industrialized world, solutions that depend more on government and achieve better outcomes than the United States currently does at a fraction of the cost.
David Blumenthal, an academic physician and health care policy expert, is president of The Commonwealth Fund, a national philanthropy engaged in independent research on health and social policy issues.