The CEOs of Amazon.com Inc. (AMZN), Berkshire Hathaway Inc. (BRK-A, BRK-B) and JPMorgan Chase & Co. (JPM) announced via a joint press release the morning of Jan. 30 that the companies "are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs."
The partnership is to take the form of "an independent company that is free from profit-making incentives and constraints." Aside from an initial focus on "technology solutions," details are lacking, and the press release describes the project as "in its early planning stages."
The companies are giants in the e-commerce, insurance and banking industries, with a combined market capitalization of $1.6 trillion and over a million employees among them. The three CEOs – Jeff Bezos of Amazon, Warren Buffett of Berkshire and Jamie Dimon of JPMorgan – lend considerable public profiles to the project. (See also, Warren Buffett Biography.)
In statements published Tuesday, the CEOs described the strengths they see their three companies as bringing to the new effort: "extraordinary resources," in Dimon's words, and "talented experts, a beginner's mind, and a long-term orientation," in Bezos'. Buffett said, "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."
The initial management team will consist of Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a managing director of JPMorgan Chase; and Beth Galetti, a senior vice president at Amazon. Details including (because Amazon is involved) the location of the headquarters will be released "in due course."
"A Hungry Tapeworm"
While little is clear about the new project, besides the corporate heft behind it, the motivation for reducing healthcare costs and improving patients' experience is clear enough. American health outcomes are worse, measured by life expectancy and other factors, than those of other developed countries—
—despite spending considerably more per capita on healthcare. (See also, Why Healthcare Is Broken in the U.S.)
Buffett, always handy with a memorable turn of phrase, said, "The ballooning costs of healthcare act as a hungry tapeworm on the American economy." He and his new partners "do not come to this problem with answers," he added. "But we also do not accept it as inevitable."
Shares in insurers opened sharply lower Tuesday morning: UnitedHealth Group Inc. (UNH) is down 5.0% at the time of writing, Aetna Inc. (AET) by 2.9%, Cigna Corp. (CI) by 6.9% and Anthem Inc. (ATM) by 5.5%. Other healthcare incumbents have also been battered: CVS Health Corp. (CVS) is down by 5.6%, Express Scripts Holding Co. (ESRX) by 7.9%.