Amazon Takes Aim at Disrupting the Healthcare Industry

Consumer Reports reports:

“The e-commerce giant becomes the latest corporation trying to tackle the high cost of employee medical care

Can Amazon, which transformed the way many Americans shop, do the same thing for medical care?

That’s the question many are asking after news that the online retail giant is partnering with Berkshire Hathaway and JPMorgan Chase in a venture aimed at cutting healthcare costs for its employees—and possibly a wider swath of Americans.

While it’s too soon tell what they may develop, other companies have already made radical moves to contain runaway healthcare costs and improve quality. Some big-name companies, including Whole Foods, Boeing, Lowe’s, and Walmart, have cut out insurance companies entirely and are contracting directly with healthcare providers to offer some medical services to workers.

“We’re seeing a lot of different players trying to change the healthcare system,” says Thomas Dennison, a professor at Syracuse University and director of the Lerner Center for Public Health Promotion.

But when a rock star trio of super-powerful business execs—Amazon’s CEO, Jeff Bezos; Berkshire’s chief, Warren Buffett; and JPMorgan Chase’s CEO, Jamie Dimon—team up, expectations are especially high.

Details are scarce as to what, exactly, the Amazon/Berkshire/JPMorgan Chase venture might entail. The joint press statement merely said the goal is to “develop technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

And they say their venture will serve only employees of the three firms—about 1 million workers—at least initially. That’s fewer than 1 percent of workers in the U.S. who have commercial health insurance.

“The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families, and, potentially, all Americans,” Dimon said.

Some observers are skeptical. For one thing, at least at first, the group won’t be big enough to have a lot of leverage to negotiate prices.

“These are big companies with big brands,” says Rosemarie Day, who runs a healthcare consulting firm and was one of the founders of the Massachusetts Health Insurance Exchange. “But in terms of actually moving the needle on healthcare costs, their size won’t be hugely impactful at this stage of the game.”

She believes they will have to innovate to find better solutions.
The Disruptors
The Amazon/Berkshire/J.P Morgan partnership is just the latest group of big-name firms to take on the issue of the rising cost of healthcare.

Two years ago IBM, Berkshire’s BNSF Railway subsidiary, and American Express founded a nonprofit organization called the Health Transformation Alliance, which now counts 40 big companies as members. The group says its combined heft, with more than 6 million workers, gives it leverage to negotiate lower prices. For example, members can participate in group contracts for prescription drug coverage.

Similar to Whole Foods, Boeing, Lowe’s, and Walmart, Intel decided to work directly with healthcare providers, and it has found some success in reducing costs.

In 2009, Intel created what it called a healthcare collaborative, teaming with a healthcare provider group near its Portland, Ore., headquarters to directly offer healthcare services to employees. By developing new processes for treating a half-dozen medical conditions, such as diabetes and back pain, treatment costs fell 24 percent to 49 percent, patient satisfaction with treatment increased, and people returned to work faster, according to an analysis of the project in Harvard Business Review.

And 73 Fortune 100 companies, with more than 50 million employees, are members of the National Business Group on Health, a nonprofit focused on helping large employers reduce healthcare costs and helping employees better manage their healthcare.

The National Business Group on Health says its members are increasingly turning to telemedicine and opening their own health centers to curb costs. More than half of large employers will offer onsite or near-site health centers this year, and that number could increase to nearly two-thirds by 2020, according to a recent survey by the group.