DTC in Perspective: Amazon Enters Health Care
Amazon, JP Morgan, and Warren Buffett’s Berkshire Hathaway have announced a joint venture to improve healthcare coverage for their three companies. There are a lot of unknowns as to what this means for the broader healthcare sector. Is this just the start of Amazon disrupting how insurance is provided? Or, is it more limited to squeezing company costs for their combined employee base of 1.2 million?
Perhaps this is the start of a massive transformation where employees are provided their own network of providers employed by the new venture. It is unlikely that Amazon will stop just with the three companies serving their own employees. Bezos, Buffett and Dimon are the A-list of CEOs and most likely think they can disrupt how insurance and delivery of medical services are done. While America is great at offering speedy service for any test or procedure needed, there is high cost of those services. Consumers are seeing rising deductibles, premiums and co-pays and we have an unsustainable trajectory. Companies do not want to accept the rapid growth of their healthcare costs and are looking for ways to get more for their money.
I am looking forward to seeing how these three leading companies find ways to provide services at lower cost. Some players may have to pay a price for that as many smaller provider companies may fall victim to being squeezed out of business by the new giant disrupter. Will we see Amazon Cancer Centers across the United States? Will our routine lab tests be available with Amazon Prime? Will Amazon be negotiating prices and supplying our drugs? Amazon should not be underrated for its ability to create value services that we love. Few of us love our current health insurance companies. Most of us like Amazon.
Changing a $1.4 trillion system is not going to happen quickly. There are so many complexities across the Byzantine American fee for service model. The lobbyists for insurance companies, drug makers, physician and hospital networks are very powerful and will defend their turfs aggressively. Lots of companies are making money in our inefficient system and anyone benefiting will fight to survive. Patients are the ones desperately in need of a break in cost. Amazon has the clout to challenge the status quo but even they will see how difficult major change will be.