On January 30, three corporate tycoons — Amazon, JPMorgan Chase & Co., and Berkshire Hathaway — announced that they were joining forces to create an independent healthcare company for their employees, with the goal of providing more transparency at a lower cost.
The timing and resources backed by these new players illustrate the growing frustration amongst American businesses concerning the rapidly spiraling cost of medical treatment. By providing a unique avenue for health care reform, this deal could create a disruptive new model that benefits employers and patients alike.
Healthcare’s Current Obstacles
From the myriad of problems associated with today’s healthcare system, perhaps the most prominent concerns delivery systems, as they appear more focused on the provider rather than the patient, and tend to be somewhat fragmented. Employers and patients both face exorbitant costs and high deductibles; with financial fears overpowering the necessity for care, many patients are putting off tests, procedures, and general visits. For providers, patient avoidance has created lower retention rates and shaky revenue streams, forcing them to increase prices even more. Those with chronic illnesses or who have incurred a significant amount of cost due to treatment are often unable to afford to pay.
Employers become frustrated due to the fact that insurance plans continue to increase in price. As they back a majority of the costs associated with their employee’s premiums, many face a difficult decision: watch profit margins dwindle due to the increase in health insurance or change the coverage plans they offer, which could result in employee turnover.
There are signs that the industry is going to change. Neither the fee-for-service model nor the insurer dynamic are sustainable, and employers and employees are both demanding more for their money. This is something even the CMS has had to face as those on Medicare and Medicaid seek more services.
What is the Amazon Deal?
How does the new alliance between Amazon, JPMorgan, and Berkshire Hathaway handle things such as insurance and alternative payment models? The three companies have a large number of resources, robust infrastructures, secure consumer platforms, and are all at the forefront of innovative technology integration. This collaboration looks to provide employees in the U.S. with healthcare that is high quality, simplified, and reasonably priced.
While employers will notice that the deal offers lower costs and opportunities to grow, their employees will likewise benefit from lower costs, removing one of the most substantial barriers to healthcare.
This collaboration does threaten insurers and other traditional providers. The three corporations all bring a large amount of funding, resources, and data to the table. By joining forces, they could truly lower healthcare costs, buy out some traditional care providers, and eventually even eliminate insurers from the process altogether. Ultimately, this diversion away from a traditional, multi-party payment structure would allow more high-risk patients to receive quality care.
By bending the overall cost curve even more through Amazon’s infrastructure, the collaboration could create a new type of pharmaceutical resource. Consumers could quickly and affordably receive medication that they may not be able to afford otherwise.
How this Deal Could Disrupt Today’s Healthcare Model
There are four different ways this new alliance could potentially disrupt healthcare:
1 – It Removes The Middleman. Insurers feel particularly threatened by the Amazon Deal because it could remove them from the process completely; similar to how Amazon’s low prices and convenience led to a number of traditional retailers going out of business. Some of the healthcare system’s layers could be removed, lowering costs. The deal already eliminates insurers from providing coverage for the more than one million employees of the three corporations. According to a spokesperson from JPMorgan, the bank has already received inquiries from hundreds of providers, administrators, and CEOs asking for more information in working with the collaboration.
2 – The deal will create a more efficient way of administering medication. Amazon has built a reliable infrastructure based on product affordability, availability, shipments, and customer service. Amazon is in an ideal position to create a mail order pharmacy. Customers will be able to receive medications at low cost and, for those who are a part of the Amazon Prime service, without paying shipping fees.
3 – Amazon and its partners will be able to utilize a massive amount of data to improve overall patient care. Amazon’s web services team understands how to effectively use data analytics to create a more efficient method of delivering healthcare services.
4 –Finally, the coalition will also create a new type of insurer. This insurer will be independent and free from the profit-making model that current insurers use. It will be a self-funded insurer that will begin by serving employees of the three companies. This will allow the collaboration to work out any issues with this type of captive insurer first before expanding it to provide healthcare funding nationwide. If it works as intended, this type of insurer will transform the insurance industry.
While the Amazon Deal is fairly new, the way its approach could transform healthcare as a whole is revolutionary. Only time will tell if this alliance can disrupt the healthcare industry in a positive, lasting way.