Will Amazon Disrupt the U.S. Health Care System?

The company joins forces with Berkshire Hathaway and JP Morgan to lower costs and improve care

22 August 2018

There’s much anticipation that Amazon will improve the U.S. health care industry once its venture with Berkshire Hathaway and JPMorgan Chase gets going. The online shopping giant has teamed up with the holding company and the largest bank in the United States to form a nonprofit company aimed at lowering health care costs for their combined 1.2 million employees.

The companies are providing the funding for the venture’s work, and they could devise models that would work for other employers and purchasers of health care, according to a Stat article.

The new company, announced in January, plans to develop technology solutions to simplify the health care system, according to a CNBC.com article, but details have not been released.

“I want to do a better job, and we’re going to put more brainpower, more capability to figure out how we can make you healthier and happier with better satisfaction,” JPMorgan CEO Jamie Dimon told CNBC. “We don’t expect progress in the immediate future, like a year or two, but if we come up with some great stuff, we’re going to share it with everybody.”

The venture doesn’t yet have a name, an office, or an organizational structure, but officials say the startup will operate free of profit-making incentives and constraints. Stat reported that several industry specialists said the new venture could make the greatest difference by rooting out excess costs and complexity in the supply chain. Spending on U.S. health care increased in several areas in 2016, according to the most recent National Health Expenditure fact sheet. Private health insurance spending went up by more than 5 percent, and out-of-pocket costs grew by almost 4 percent. The private-business share of health care spending accounted for about 20 percent of the total.

In a survey released this month by the National Business Group on Health (NBGH), a majority of employers said that virtual care and technology will play a major role in how health care is delivered and that new entrants will be necessary to disrupt the market in a positive way.

Some skeptics question whether the new venture will be able to do what other companies have tried, and failed, to do. But others anticipate that Amazon will disrupt the health care industry as it did with publishing, shopping, and space exploration and, along the way, cut costs for consumers.

Amazon announced in June that it will enter the pharmacy field by acquiring online business PillPack for a reported $1 billion. The startup manages prescription medications for customers—presorting doses, coordinating refills, and shipping the drugs by mail. Its pharmacy staff is available 24/7 online or by phone.

Although the NBGH survey didn’t specify Amazon by name, the business group’s CEO, Brian Marcotte, told Forbes “disruptors include innovators from Silicon Valley.”

Do you think the joint venture will succeed? Why, or why not?

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