Welcome to my firm's website.  I like to share with you my thoughts on

Strategy, Business Planning, Innovation, and Execution here on a

monthly basis.

 

To access previous columns, hover your pointer over "Mario's Corner" in

the navigation bar and select the column you would like to read.  In a mobile

device browser, these are listed under "Mario's Corner" in the menu.

-------------------------------------------------------------------------------------------​-----------------

 

Amazon has joined with Berkshire Hathaway and JPMorgan to create a new venture.  According to the Wall Street Journal, the purpose of this new company will be to reduce health care costs for their U.S. employees.  They also stated that they might expand the services to other companies in the U.S.


​For a long time, it has been rumored that Amazon is planning to enter the Health Care system.  According to many publications, it is trying to disrupt this industry just like it has disrupted many others - book selling, web services, and consumer products.


Warren Buffett, Berkshire Hathaway's CEO and the world's most famous investor, has been a harsh critic of the current U.S. Health System and is a strong supporter of the single-payer model.  He is also a close friend of James Dimons, the JPMorgan CEO, as is Amazon CEO Jeff Bezos.


I believe there are three very good reasons why this venture could succeed, but one key reason why it will not.  The reasons why it could succeed are:


1.  RESOURCES - All three companies are behemoths in terms of their financial resources.  Jeff is the wealthiest man in the world and JPMorgan and Berkshire Hathaway are very strong financially.  


Additionally, these three companies combined have more than 1 Million employees, although not all of these are based in the U.S. Thus, they can leverage large numbers to obtain lower costs due to their combined size.  They could certainly demand discounts and other benefits for their employees.  If any three companies can do it, these three should be able to make it happen!


2.  QUALITY AND ABILITY OF PARTNERS - These CEO's have driven personalities and success records.  All three have reached the pinnacle of their respective industries due to their management and leadership skills.  Their companies also have been able to focus and succeed in multiple industries.  Warren probably brings great insights on what works and does not work from an insurance perspective, since Berkshire Hathaway owns Geico and many other insurance companies.  Jeff has been rumored to be interested in lowering health costs, especially since Amazon has more than 500,000 workers.  The same is true of JPMorgan. 


3.  JEFF BEZOS - As mentioned above, Jeff has been interested in entering the health business for a long time.  According to multiple sources, he is the main reason why CVS is acquiring Aetna.  Many other pharmaceutical and health companies are concerned that if Amazon enters the health care business, it will be able to use its tremendous buying power to influence pricing.


So, why do I believe that they will ultimately not be successful?  One word - complexity. 


1.  COMPLEXITY OF HEALTH SYSTEM - The Health Care system, unlike many other industries, is very complex and has multiple stakeholders that have tremendous power over it.  Among these are physicians, hospitals, insurance companies, pharmaceutical companies, U.S. and state governments, and patient advocacy organizations (e.g., American Cancer Society and American Diabetes Association).  Each of these has a large stake AND influence in the business of making and keeping people healthy.  It will be difficult for these three companies to convince all of these stakeholders to move in one direction.


There is also a large amount of opaqueness in the purchasing process.  An example is a medical procedure.  Have you ever tried to break down the costs of one?  It's impossible.  Even if it wasn't, you cannot shop around for each individual component since you are buying "the package" when you have one.  This package includes physician, hospital staff. hospital location, medical equipment to be used, drugs to be given, etc.


What is more likely to happen is that this venture will be a joint purchasing organization that can negotiate on behalf of the employees of these three companies.


Unfortunately, if you expect this venture to lower the overall health costs in the U.S. for everyone, you are setting yourself up for disillusionment.


​------------------------------------------------------------------------------------------------------------------------------------------​​


Please do not hesitate to call me at 1 (617) 391-0347 or e-mail me at mariocastaneda@bluesailconsulting.com to talk about this or any other subject.  I always like to hear from clients and readers.  


Also, please don't forget to read my interview with BostonVoyager magazine.  To read it, click here.

 

Please contact us if you want to find out how we can help you and your organization leverage your strengths and succeed in a changing business environment.

 

I look forward to seeing you again here in March!

 

Warm Regards,

 

​Mario

Mario's Corner - February 2018.  

Can Amazon, Berkshire Hathaway, and JPMorgan Partner to Lower Health Costs?

3 Reasons Why They Should and One Key Reason Why They Won't!