When Amazon, Berkshire Hathaway and JPMorgan Chase announced in January they would form an independent healthcare company for their U.S. employees, the news had some declaring it would be a gamechanger in healthcare. But nearly three months after the groups announced their venture, a majority of healthcare experts and large employers have their doubts.
A new report from venture capital firm Venrock finds that healthcare experts are dubious about the proposed company, worried the effort is going to “face substantial challenges and take lots of time.”
Of the 300 healthcare professionals, employers, investors and academics surveyed by Venrock, 73% said that the Amazon, Berkshire Hathaway and JPMorgan effort was going to take a lot longer than expected and endure many obstacles. Meanwhile, 25% said the companies “have no idea what they’re getting into.”
There are a number of reasons for the industry’s skepticism, say Venrock partners Bryan Roberts and Bob Kocher.
“[One is that] many new entrants have sought to dramatically improve healthcare for many years and nearly all have failed to produce any material impact. Remember Google Health and HealthVault?,” Roberts says. “While these are all large, successful companies, they do not have any real market power in healthcare, where all leverage is locally driven.”
Meanwhile, Kocher notes, the companies haven’t yet formed a leadership team.
While the three giants have not detailed what their new company would do, they did say in a statement that the entity’s focus will be on technology that will provide employees and their families with “simplified, high-quality and transparent healthcare at a reasonable cost.”
The collaboration will likely pressure profits for middlemen in the healthcare supply chain. Potential ways to bring down costs include providing more transparency in prices for doctor visits and lab tests, and enabling direct purchasing of some medical items.
Other benefits insiders have expressed doubts that the three behemoths would spur a widespread industry disruption. Some of their biggest doubts: that corporate America can successfully battle the nation’s largest healthcare players and, even if successful, that they can cut costs in a meaningful way.
“Most health costs are incurred by a small percent of the population with chronic conditions,” American Benefits Council president James Klein told EBN shortly after the companies’ announcement. “So if this initiative is just about how health costs are paid for, and does not promote ways to improve health itself, the impact will be minimal.”
Still, some benefits experts are optimistic about the companies’ venture, arguing that employers banding together for more control over a health system they see as wasteful and inefficient is a continuing — and disruptive — trend that has the potential to reshape how employees get care.
Just over a quarter (27%) of experts surveyed by Venrock said the three companies “just might pull this thing off.”
“When large and successful companies come together in this way, it’s potentially disruptive,” says Frank Easley, senior vice president of Aon’s health and benefits group. “The healthcare system is ripe for positive disruption and is in need of new solutions that improve employee satisfaction and reduce costs.”
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