“Your margin is my opportunity.”
Health Care Aggregation. Source: Strategery
That’s how Amazon’s CEO Jeff Bezos sees the world. When a company tries to optimize its operations to satisfy an arbitrary Wall Street ratio, that creates space for someone else to disrupt their enterprise. And health care is full of high-margin businesses ripe for disruption.
Amazon, Berkshire, and JP Morgan have launched a long-term initiative to provide health care for their employees. In many ways, their initiative is an ideal platform for fundamental health care reform. Together, the companies have almost a million employees who are generally affluent and healthy. That’s a great test population. Amazon can build out a technology interface for the insured that is both convenient and secure, then require healthcare suppliers to serve patients using this interface. Berkshire reinsures the process, establishing pricing. And JP Morgan arranges long-term financing for the entire venture.
In this way, Amazon doesn’t have to create an insurance company. They can facilitate a direct connection between patients and providers, the same way Amazon Marketplace or Amazon Web Services connects buyers and sellers. Of course, a million patients isn’t that many, compared to the footprint of major insurers line Aetna, Cigna, and United Health. But it’s enough to get started. And once the system works for employees, “Amazon Health” can be rolled out to employers and individuals across the country. Then they can aggregate information on how the service is used, using machine learning and AI to become more convenient and efficient for everyone. Amazon is nothing if not convenient.
Of course, the graveyards are filled with failed attempts to reform health care – from Kaiser Permanente’s HMOs in the ‘80s to technology solutions like Google Health to assorted political initiatives. Each foundered on the rocks of our health care system’s Byzantine complexity. But Byzantium fell when confronted by a patient disruptor who was willing to use new technology to break down its massive walls.
Walls of Constantinople. Photo: Bigdaddy1204. Source: Wikimedia
And Bezos is one of the most patient – and disruptive – CEOs in the world.
Douglas R. Tengdin, CFA