Healthcare Has Been Screaming for a Disruptor

Someone heard. Rumors have been swirling that Amazon, the market status quo killer, was setting its sights on healthcare – one of the least transparent and most inefficient markets – which accounts for almost 20% of U.S. Gross Domestic Product (GDP). Today Amazon joined with market-savvy Berkshire Hathaway and JPMorgan Chase to announce that a new insurance joint venture would be created, initially to cover the domestic employees of these three entities. The announcement was thin on details, only representing that they would use data and bargaining power to bring transparency into the system to lower costs and improve outcomes.

These goals are certainly the key to improving the healthcare experience, as we have been writing about for as long as this blog has been in existence. I am intrigued by the assertion that Amazon, Berkshire and JP would remove profits from the system, as all three entities have a long-term profits focus. No doubt that they mean to squeeze excess profits and areas where little value is added – and if they read through these blog pages they can find a lot of ideas, including low-hanging fruit like:

  1. Drug price transparency (read here, here and here)
  2. Focus on the healthcare gateway to ensure that efficient care is delivered (more to see here, here and here)
  3. Incentives for healthy behavior and disincentives for inattention to health status (read here)
  4. Electronic medical records (see here)

I believe a lot can be learned from the healthcare startup Oscar, that had similar objectives but went astray by focusing on the individual public exchange and small group markets, which are too influenced by the legislative process. As self-insured employers, many of Oscar’s missteps can be avoided.

Judging by the stock market’s reaction, the announcement has resonated very well on Wall Street and I agree. This will take a while, but they are on the right track.

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  1. avatarNicos Mamatos says

    With the large reach of Amazon do you anticipate they could be a major direct provider of health benefits in the near future?

    • avatarCraig Hasday says

      Perhaps eventually. I don’t think they will enter the provider space in the near term until and unless they figure it out.

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