With a new CEO for their joint healthcare venture, Amazon, Berkshire Hathaway, and JPMorgan Chase are one step closer to reducing costs for their teams.
After announcing their intention to form a joint healthcare company earlier this year, Amazon, Berkshire Hathaway, and JPMorgan Chase have recently tapped the first CEO to head the venture. Dr. Atul Gawande, a surgeon at Brigham and Women’s Hospital in Boston and a professor at Harvard Medical School, will step into the role on July 9.
Dr. Gawande comes with a wealth of healthcare experience. He’s founded two medical companies, including Ariadne Labs, which researches ways to improve healthcare delivery, and Lifebox, a nonprofit entity that promotes safer surgical techniques in low-income countries. On top of his physician and teaching duties, Dr. Gawande is a frequent contributor to leading publications.
Even as the head of this new healthcare company, Dr. Gawande plans to continue his surgical practice and his responsibilities at Harvard. And although the partners have named their chief executive, they’ve released few other details about the venture — save that it will be separate from the founding partners’ firms and would be “free from profit-making incentives and constraints.”
For insurance professionals wondering just what this venture will look like, recent comments from Dr. Gawande provide insight into what direction the healthcare company might take.
Cutting Out the Middleman
In a 2015 article, Dr. Gawande endorsed a healthcare delivery system that emphasizes patient outcomes rather than medical profit — a model that’s gaining traction in the health insurance industry. He also favors the elimination of the middleman in the healthcare chain, making him a natural fit for Amazon, Berkshire Hathaway, and JPMorgan Chase’s healthcare vision.
Speaking at a recent Aspen Institute event reported in Bloomberg, Dr. Gawande said he aims to cut wasteful spending by reducing administrative costs, bringing down prices, and eliminating what he termed “improper” healthcare usage. When addressing high administrative costs, Dr. Gawande explained, “There are a lot of middlemen in the system, and there have to be solutions that simplify that.”
Dr. Gawande’s position has attracted support within the healthcare industry in recent months. In fact, a similar objective helped to motivate the merger between CVS and Aetna. Cigna embarked on a similar deal when it set out to acquire Express Scripts.
Overcoming Key Challenges
Despite his extensive medical knowledge, Dr. Gawande will be in relatively new corporate territory as the CEO of this joint venture. Accordingly, many industry experts expect him to bring leading figures from across the healthcare space into the company.
The newly appointed executive will also need to figure out how to address rising health insurance premiums, a key issue for the industry and one of the key factors behind Amazon, Berkshire Hathaway, and JPMorgan Chase’s decision to take matters into their own hands. Indeed, the average premium for employer-sponsored family coverage has risen 19% since 2012, according to a 2017 study from the Kaiser Family Foundation.
In its early stages, this joint venture may not have the market clout to command the lowest prices from providers. With the three companies having a total of 1.1 million employees altogether, there may only be about 4 million potential members and dependents. As the new company takes shape, providers will likely treat it as a small national carrier or a large regional one.To say that industry professionals will be keeping an eye on this joint venture would be an understatement. With Amazon's history of market disruption, experts will be waiting to see what the e-commerce giant has up its sleeve next.