Professor Ira Wilson weighs in on Amazon, Berkshire Hathaway and JPMorgan Chase's proposed health care company

January 31, 2018

In response to an article in The New York Times about a new health care company proposed by Amazon, Berkshire Hathaway and JPMorgan Chase, Professor Ira Wilson:

"I would note two things. First, we tend to underestimate the power of 'purchasers' in the commercial insurance arena. The real buyers of health care in the commercial market are benefits managers in large companies, not individual patients. Historically, there have been some important efforts on the part of purchasers to band together to drive change (e.g., the Pacific Business Group on Health or PBGH), but in general, purchasers have not played as important a role as they might in controlling health care costs and improving quality. With this initiative, this may be changing. If purchasers band together to say to insurers and providers that they demand more value for their purchasing dollars, then that could be a very disruptive change. The impact that this announcement had on health care stocks yesterday is proof of this disruptive power.

"Second, the early reports say that this new organization will be 'free from profit making incentives and constraints.' Most start-ups in health care are able to raise money because of the possibility that they can capture some portion of the purchaser's health care dollar. If this entity is not trying to profit financially from the effort to improve the value proposition in the commercial market, that too could be disruptive. Stay tuned as we learn more about this very interesting initiative."