- Harvard Business Review Editorial on Amazon Healthcare Venture
- New York Times Article Announcing Amazon Berkshire JP Morgan Joint Effort
- Amazon Healthcare Venture Upset Healthcare Executives
In January of 2016, Amazon, Berkshire Hathaway and Chase announced the formation of a new ‘Amazon healthcare’ company aimed at lowering the cost of healthcare and increasing value to their employees. Conceived as a joint idea between CEOs Jeff Bezos (Amazon), Warren Buffett (Berkshire Hathaway) and Jamie Diamond (Chase), the venture is aimed at bringing healthcare spending under control internally after the failure of the US government to find a meaningful solution to unsustainable healthcare inflation. In this episode, Dr Roussel provides his reflections on the potential disruption of such a venture for healthcare delivery in the US, including its potential to separate primary care from fee for service healthcare, to disrupt the current healthcare networks that dominate the market with a reference-based payment system and to push down prices for prescription drugs that have been inflated by multiple layers of intermediaries. Furthermore, Dr Roussel provides some reflections on the importance an ‘Amazon healthcare’ venture could have on the DPC community.
Last January Amazon, Berkshire and Chase announce the formation of a new ‘Amazon healthcare’ company to provide healthcare to its employees. I learned about this project from talking with Dr Garrison Bliss, and while at first the venture’s importance wasn’t quite clear to me, the more I’ve learned about it, the more that the venture has the potential to affect healthcare in a transformative way. The project is an effort by CEO’s Jeff Bezos, Warren Buffet and Jamie Diamond to approach healthcare the ‘Amazon healthcare’ way, lowering cost and improving value, in the wake of our government’s failure to accomplish any meaningful healthcare reform. Certainly many details are TBD, however the combined efforts of three talented companies—Amazon, who specializes in logistics; Berkshire Hathaway, who specializes in insurance; and Chase, who specializes in finance—along with the capital they have access to has potential to foster disruption on a large scale with a customer orientation not heretofore seen in healthcare.
While the project is early on, there are several likely outcomes of the project so far.
- To start, the ‘Amazon healthcare’ venture is likely to have a heavy up-front investment in primary care. This is evidenced by the fact that they hired a doctor from Iora Healthcare to head the project. Also, these companies are likely well aware that heavy investment in primary care leads to better outcomes. Finally, in Bezos’ own words, they want the venture to be free from “profit-making incentives” that currently is the status quo of the present-day healthcare market.
- The venture also has the potential to dramatically alter the way that claims are paid for healthcare services. Whether or not they will construct healthcare facilities is unknown, but they will have to handle paying for services outside of their system. It is not inconceivable that they could create a reference based payment scheme that forces a degree of transparency not currently witnessed in our healthcare system.
- Finally, the venture has within it the potential to dramatically reduce the price of prescription drugs available to employees. Bezos has indicated his interest in selling pharmaceuticals independent of the venture, and certainly Amazon’s expertise in creating transparency in the retail market is likely to be exercised in cutting out much of the waste in prescription drug prices.
What this means for DPC is in some ways TBD but there are several potential outcomes.
- A major ‘Amazon healthcare’ plan that pays for primary care separate from the fee-for-service based payment could create a more favorable environment for primary care payment totally independent from the rest of healthcare services.
- This project has the potential to create a network-free means of payment for healthcare services. With a large company that pays for healthcare services independent of a network this could force other suppliers of services (eg mainly hospitals) to be far more transparent about their price for services as opposed to their current inflationary and protectionist modus operandi.
- There is much potential to cut out waste when it comes to prescription drug pricing. This can help lower premium cost and make payment for prescription drugs outside of premiums far more reasonable. PBMs and Retail pharmacies have much to fear in this venture.
I certainly recognize that these projections are quite speculative, but I do think the companies are onto something and their joint venture has the potential to have a substantive impact on DPC.