Amazon, Berkshire, JPMorgan Link Up to Form New Health-Care Company

It’s no secret Jeff Bezos has been looking to crack health care. But no one expected him to pull in Warren Buffett and Jamie Dimon, too.

News Tuesday that Bezos’s Amazon.com Inc., Buffett’s Berkshire Hathaway Inc. and JPMorgan Chase & Co., led by Dimon, plan to join forces to change how health care is provided to their combined 1 million U.S. employees sent shock waves through the health-care industry.

The plan, while in early stages and focused solely on the three giants’ staff for now, seems almost certain to set its sights on disrupting the broader industry. It’s the first big move by Amazon in the sector after months of speculation that the internet behemoth might make an entry. The Amazon-Berkshire-JPMorgan collaboration will likely pressure profits for middlemen in the health-care supply chain.

Details were scant in a short joint statement on Tuesday. The three companies said they plan to set up a new independent company “that is free from profit-making incentives and constraints.”

It was enough to sink health-care stocks. Express Scripts Holding Co. and CVS Health Corp., which manage pharmacy benefits, slumped 6.9 percent and 4.9 percent, respectively. Health insurers such as Cigna Corp. and Anthem Inc. and biotechnology companies also dropped.

The group announced the news in the very early stages because it plans to hire a CEO and start partnering with other organizations, according to a person familiar with the matter. The effort would be focused internally first, and the companies would bring their data and bargaining power to bear on lowering health-care costs, the person said. Potential ways to bring down costs include providing more transparency over the prices for doctor visits and lab tests, as well as by enabling direct purchasing of some medical items, the person said.

“I’m in favor of anything that helps move the markets a bit, incentivizes competition and puts pressure on the big insurance carriers,” said Ashraf Shehata, a partner in KPMG LLP’s health care and life sciences advisory practice in the U.S. “An employer coalition can do a lot of things. You can encourage reimbursement models and provide incentives for the use of technology.”

“Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort,” Bezos said in the statement. “Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable costs. In the statement, JPMorgan CEO Dimon said the initiative could ultimately expand beyond the three companies.

“Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he said.

HTA Alliance

Amazon, Berkshire and JPMorgan are among the largest private employers in the U.S. And they’re among the most valuable, with a combined market capitalization of $1.6 trillion, according to data compiled by Bloomberg.

This isn’t the first time big companies have teamed up in an effort to tackle health-care costs. International Business Machines Corp., Berkshire’s BNSF Railway and American Express Co. were among the founding members of the Health Transformation Alliance, which now includes about 40 big companies that want to transform health care. The group ultimately partnered with existing industry players including CVS and UnitedHealth Group Inc.’s OptumRx.

Top Team

The latest effort is being spearheaded by Todd Combs, who helps oversee investments at Berkshire; Marvelle Sullivan Berchtold, a managing director of JPMorgan; and Beth Galetti, a senior vice president for human resources at Amazon.

Buffett handpicked Combs in 2010 as one of his two key stockpickers. Combs, 47, has been taking on a larger role at Berkshire in recent years, and Buffett has said that Combs and Ted Weschler, who also helps oversee investments, will eventually manage the company’s whole portfolio. Combs also joined JPMorgan’s board in 2016.

Sullivan Berchtold joined JPMorgan in August after eight years at the Swiss pharmaceutical company Novartis AG, where she was most recently the global head of mergers and acquisitions, according to her LinkedIn profile.

One of the highest ranking women at Amazon, Galetti has worked in human resources at the e-commerce giant since mid-2013, becoming senior vice president almost two years ago, according to her LinkedIn profile. As of late 2017 she was the only woman on Amazon’s elite S-team, a group of just over a dozen senior executives who meet regularly with Bezos, according to published reports. Previously Galetti worked in planning, engineering and operations at FedEx Express, the cargo airline of FedEx Corp. She has a degree in electrical engineering from Lehigh University and an MBA from Colorado Technical University.

The management team, location of the headquarters and other operational details will be announced later, the companies said.

Health-care spending was estimated to account for about 18 percent of the U.S. economy last year, far more than in other developed nations. Buffett has long bemoaned the cost of U.S. health care. Last year, he came out in favor of drastic changes in the U.S. health system, telling PBS NewsHour that government-run health care is probably the best approach and would bring down costs.

“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Buffett said in Tuesday’s statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

    Read more: http://www.bloomberg.com/news/articles/2018-01-30/amazon-berkshire-jpmorgan-to-set-up-a-health-company-for-staff

    Amazons new healthcare company could give smaller healthtech players a boost

    JPMorgan Chase and Berkshire Hathaway have joined forces with Amazon to form a new healthcare company for all U.S. employees. Right now details are so sparse there’s not even a name associated with the new company. However, this is big news for the industry, and it could possibly have ramifications not only for health insurance giants, but also smaller tech companies that are open to either partnering with the company — or even being acquired by it.

    The decision didn’t come overnight. According to reports, the heads of each company — Jamie Dimon, Warren Buffet and Jeff Bezos — have chatted for years about how to fix the problem of high costs and a broken healthcare system.

    “The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” Buffet said in a statement out this morning. “We share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”

    But others in tech have tried to jump into healthcare only to get bogged down with regulatory hurdles. Theranos founder Elizabeth Holmes, who did not have a medical background, ran into regulatory issues and was ultimately banned from operating in her own labs due to health and safety concerns.

    Google parent company Alphabet is known for dipping its toe in the healthcare waters, with Calico and Verily Life Sciences. However, Google shut down its health management platform Google Health after it failed to gain traction.

    “When [tech companies] start to understand the complexity, even just the idea of an electronic health record, they pull out,” says health consultant and CEO of Avalere Health Dan Mendelson.

    Bezos has acknowledged the difficulties for tech companies in the space, saying the healthcare system is “complex” and that the three “. . . enter into this challenge open-eyed about the degree of difficulty.”

    Companies that have succeeded in healthcare have largely been those with a background in the industry, Mendelson points out. However, the allure to get into the space has fueled plenty of tech company attempts, especially in the last year. Apple recently launched a feature with its iOS update to allow users to upload medical records and Amazon has already been rumored to be in talks with drug makers.

    And stronger technological chops is something the industry needs going forward. Amazon is in a position to provide these measures with machine learning, AI, online communications and other tools needed to make a more efficient and effective system. But it will likely need outside help from health experts, and it remains to be seen how these three iconic companies plan to move the ball forward without industry understanding.

    Collective Health founder Ali Diab has one, perhaps unsurprising suggestion: that the new company that’s being formed work with Collective Health.

    Collective Health offers companies healthcare coverage through a cloud-based, integrated health benefits platform for self-insured employers and, as Diab points out, has been providing that solution for the last five years to large companies like eBay and Restoration Hardware.

    “I would suggest they focus exactly on what we are already doing, which is build infrastructure that knits everything together,” Diab says. “It’s not stuff that people see. It’s all the infrastructure to ingest data from various sources, process claims, to make that data analyzable, to build machine learning and AI-based systems on top of it that help identify people that need care way before they might even know.”

    JPMorgan Chase, Berkshire Hathaway and Amazon could potentially snap up smaller tech companies like Collective Health that are working on these types of solutions, as well.

    “It would not surprise me to see them start to acquire some of the technology that makes their goals possible,” says Mendelson. “This team is very capable from a mergers and acquisitions standpoint. That’s not an accident.”

    Read more: https://techcrunch.com/2018/01/30/amazons-new-healthcare-company-could-give-smaller-health-tech-players-a-boost/

    Trump Takes On Amazon Again, Urging Much More in Postage Fees

    President Donald Trump said the U.S. Postal Service should charge Amazon.com Inc. more to deliver packages, the latest in a series of public criticisms of the online retailer and its billionaire founder.

    The post office “should be charging MUCH MORE” for package delivery, the president tweeted Friday from his Mar-a-Lago estate in Florida, where he’s spending the holidays.

    “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer?” Trump told his 45 million followers.

    Trump regularly criticizes Amazon and its chief executive officer, Jeff Bezos, who also owns the Washington Post newspaper and is currently the world’s richest man. In August, Trump accused the company of causing “great damage to tax paying retailers,” even though the internet giant began collecting sales tax on products it sells directly in April.

    As with prior missives targeting the company, Trump’s message appeared to concern investors. Amazon’s stock had gained the past three days, but dropped 0.6 percent to $1,178.68 at 12:41 p.m. in New York.

    A sudden increase in postal service rates would cost Amazon about $2.6 billion a year, according to an April report by Citigroup. That report predicted United Parcel Service Inc. and FedEx Corp. would also raise rates in response to a postal service hike.

    Amazon didn’t respond to requests for comment.

    ‘Last Mile’

    Amazon regularly uses the Postal Service to complete what’s called the “last mile” of delivery, with letter carriers dropping off packages at some 150 million residences and businesses daily. It has a network of more than 20 “sort centers” where customer packages are sorted by zip code, stacked on pallets and delivered to post offices for the final leg of delivery.

    While full details of the agreement between Amazon and the Postal Service are unknown — the mail service is independently operated and strikes confidential deals with retailers — David Vernon, an analyst at Bernstein Research who tracks the shipping industry, estimated in 2015 that the USPS handled 40 percent of Amazon’s volume the previous year. He estimated at the time that Amazon pays the Postal Service $2 per package, which is about half what it would pay UPS or FedEx.

    Both shippers were up less than 1 percent Friday. Higher postal service rates would benefit private carriers by making their rates more competitive.

    But the postal service’s losses have little to do with Amazon and more to do with its large health-care obligations and the dwindling use of first-class mail. USPS charges some of the world’s lowest stamp prices.

    The president’s tweet also assumes that Amazon would be forced to pay if the Postal Service increased its rates for packages. But Amazon has been setting up its own shipping operations in the U.S. and elsewhere in the world to minimize costs.

    For more on Trump’s Twitter storms, check out this podcast:

     

    $62 Billion Loss

    The Postal Service reported a net loss of $2.1 billion in the third quarter of 2017 and has $15 billion in outstanding debt. The service has lost $62 billion over the last decade.

    USPS’s chief financial officer, Joseph Corbett, wrote in a post for PostalReporter.com in August that the service is required by law to charge retailers at least enough to cover its delivery costs.

    “The reason we continue to attract e-commerce customers and business partners is because our customers see the value of our predictable service, enhanced visibility, and competitive pricing,” he wrote.

    He said Congress should pass provisions of legislation introduced last year by former Representative Jason Chaffetz, a Utah Republican, that would allow the postal service to raise some rates and discontinue direct delivery to business customers’ doors.

    Amazon is experimenting with a new delivery service of its own that is expected to see a broader roll-out in the coming year. Under the program, Amazon would oversee the pickup of packages from warehouses of third-party merchants and delivery to home addresses.

    Despite the occasional anti-Amazon tweet, Trump is unlikely to target Amazon with any action because the company is creating jobs by building new warehouses around the country. It’s also expected to generate 50,000 new positions with its second headquarters, said James Cakmak, analyst at Monness Crespi Hardt & Co.

    “The interests of Amazon and the administration are largely aligned – even factoring the dislocation to retail – given the positive headline potential around new job creation with fulfillment centers and HQ2,” he said.

      Read more: http://www.bloomberg.com/news/articles/2017-12-29/trump-says-u-s-post-office-should-charge-amazon-much-more