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How Amazon, JPMorgan Chase, Berkshire Hathaway Could Reshape Health Care Industry

Jan 30, 2018
Originally published on January 30, 2018 10:20 pm
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ARI SHAPIRO, HOST:

Amazon founder Jeff Bezos transformed retail. He got into media buying The Washington Post and took on supermarkets with the purchase of Whole Foods. Now this disruptor is taking on health care. His partners on the project have their own histories of redrawing maps. Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan Chase are working with Jeff Bezos to create a new company to focus on improving health care and making it cheaper for their U.S. employees.

To talk about how this could reshape the health care industry in the U.S., Steven Halper of the financial services firm Cantor Fitzgerald joins us now. Hi there.

STEVEN HALPER: Hi. How are you?

SHAPIRO: All right. So health care stocks plunged on this announcement. What does that tell you?

HALPER: You know, I think that given the announcement today investors are concerned perhaps about the long-term growth possibilities as there's a potential new entrant into the market.

SHAPIRO: What does that mean?

HALPER: So basically, Amazon, Berkshire and JPMorgan have announced a health care initiative where the first focus is going to bring technology solutions that will, quote, "provide their U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost." We assume that that means that they will develop applications to help in the health care delivery process. Many insurance companies and health care information technology companies already do this. It's our view that the market opportunity is large. And the road ahead for this combined entity, you know, will - it will take a very long time for them to develop this market.

SHAPIRO: The market opportunity is large, you say. What do you think made these three very successful businesspeople think there was a massive opportunity for them in health care?

HALPER: Right. So in general, there are two major problems within the health care delivery service environment that we see today. We - as a country we spend too much on health care. And number two, the quality might not be as high as it should be. So the goal is to bend the cost curve while improving quality. Many organizations in the health care landscape are pursuing that today.

SHAPIRO: What specifically do these three companies bring to the table that makes them uniquely qualified to tackle this problem?

HALPER: Well, I think Amazon wants to take advantage of its consumer experience. Berkshire Hathaway obviously is very focused on insurance, not necessarily health care. And JPMorgan is a very large financial services and does a lot of things well. And I'm assuming they want to take advantage of a lot of those, you know, capabilities. However, health care is a different market. Clearly there is a consumer component to it. But the managed care companies do a very good job of patient engagement, and that's really, you know, a key ingredient to a successful strategy.

SHAPIRO: What do you think their biggest obstacles are?

HALPER: Well, I think the inherent challenges within health care - number one, it's very fragmented. Number two, employers as well as providers are very set in their ways. It's very difficult to disrupt the status quo. Health care is a very local business. More often than not large national solutions don't necessarily work in local markets.

SHAPIRO: You describe these big problems that I think everybody who's worked on health care is familiar with. Why hasn't anyone solved these problems until now?

HALPER: Well, some problems have been solved. There are numerous examples of how health care providers and payers have successfully bent the cost curve. There's a lot more to do. Typically these come from local, well-established, integrated delivery networks working together with established managed care plans in their local markets. So again, there's no national player on the scene to speak of, but there are a lot of local success stories. Again, health care is a local business. And these large companies or these large - national approaches to change health care delivery may not always work.

SHAPIRO: Steven Halper is a managing director at Cantor Fitzgerald. Thanks so much for joining us.

HALPER: Thank you. You're welcome. Transcript provided by NPR, Copyright NPR.