Amazon, JP Morgan, and Berkshire Hathaway announced they are planning to get more involved with healthcare, particularly to lower costs. This partnership is initially focusing on reinventing healthcare for their employees, as the three firms form an independent healthcare company for their employees in the United States.
As healthcare costs for employers and employees continue to rise, as do profits for healthcare companies, many people speculate that healthcare companies are taking advantage of the current market dynamics to increase their own profits. Jeff Bezos, CEO of Amazon, has been on record saying pharmaceutical costs are too high. With large corporations experiencing a 70-80% increase in healthcare costs, it’s no surprise that these companies would want to induce change. Take a look at the graph below showing how many people are employed by these companies and you can imagine the massive healthcare costs.
Although these companies are huge in their own industries, many are not familiar with what specifically they are doing in the healthcare space. Amazon’s Alexa, known for its smart home digital capabilities, has also proven its healthcare practicality. Nurses and doctors can, for example, use Alexa to log and request information hands-free while working in emergency care.
JP Morgan, known for their investment services, has also hosted healthcare conferences for years, recently holding the 36th Annual Healthcare Conference that was expected to have over 400 companies and 8,000 attendees.
Berkshire Hathaway has most recently made news in the healthcare industry by selling its dialysis company Davita to United HealthCare for $250 million.
What Does This Partnership Mean for Laboratories?
The partnership announcement was seen as disruptive to traditional insurers and the initial announcement caused significant drops in stock prices of healthcare and insurance companies. What might the long-term impact be for laboratories?
The focus of the healthcare industry is two-fold:
To bring down costs
To improve patient outcomes
This partnership could affect the lab Industry by impacting utilization (number of lab tests run) and outcomes. There is a perception that one way to lower healthcare system costs is to reduce the number of lab tests covered by payors. Currently there are more than 6 billion lab tests performed every year. We know, that rising costs are even more attributable to not running necessary tests or inappropriate test orders and lack of incorporating results correctly into patient management. Perhaps we will see additional focus on correlating which tests are necessary to improve outcomes within any new cost/payor structure.
Undoubtedly this partnership is also an attempt to change the power mix from the commercial payors to the employers, which can impact coverage. For example, there are certain pharmacogenetic tests, such as for mental health disorders, that commercial payors will not cover in their belief that this non-coverage keeps costs down. Employers may see value in covering these tests for their employees, as they realize the “pain” of potential absences and risks to lessened productivity that these disorders may cause, especially when “trial and error” is used to identify the best pharmaceutical management for their employees. The different perspective of the employer from the commercial payor may change coverage policies long-term.
We are eagerly watching how this partnership develops and the potential advent of the employer as an even more significant driver of health care policy.
1. CNBC:Employers to spend about $10,000 on health care for each worker
2. The New York Times: Amazon, Berkshire Hathaway and JPMorgan Team Up to Try to Disrupt Health Care