Amazon’s Splash Hurt Healthcare on Wall Street, But the Long-Term Impact Remains Unclear

This week, Amazon, Berkshire Hathaway, and JPMorgan said they’re banding together to build an independent healthcare company. The aim is to do better by their U.S. employees and reduce costs. More:

The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus on the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.

Not a lot of detail in that snippet, which comes from the news release. Yet the announcement was enough to put a pretty significant hurt on public healthcare and insurance companies. UnitedHealth Group, Anthem, and MetLife each saw stocks fall by at least 5 percent, although Anthem has since rebounded. Aetna fell by about 4 percent. If it wasn’t clear already, the now-confirmed rumors of Amazon’s entry into healthcare appear to have had investors on edge.

Whether those fears are warranted, and whether Dallas’ healthcare market could eventually see an impact, remains to be seen—for now, the monster companies have said only that they’re interested in impacting their own employees and bottom lines. But in the meantime, I reached out to a Dallas voice for his take. Scott Fuzer, director of West Monroe’s Dallas-based mergers and acquisitions practice, says the newcomers that have been entering the space have often come to market with “promising products, but not solutions.”

“The products are built without a clear understanding of the complexities,” Fuzer says. “However, Amazon’s proven ability to take complex and disparate processes and interactions/experiences and create new models of service, combined with the level of financial precision that Chase brings and Berkshire’s insurance chops, is compelling. This is why the announcement immediately grabbed the attention of the market and CEOs across the country.”

Healthcare payers and providers everywhere should be paying attention to what comes of the partnership, but it’s not time to “sound the death knell,” adds Will Hinde, managing director of West Monroe’s national healthcare and life sciences practice. He reiterates that the announcement is light on specifics.

“They could be talking as small as employee clinics or as large as the largest integrated healthcare company,” Hinde says. “But as any CEO knows, the healthcare industry is ripe for disruption, and this group of companies has the money, leadership, and intelligence to succeed.”


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