Amazon’s healthcare play has nothing to do with technology.

A look inside the not-so-secret plan behind the Amazon-Berkshire-JP Morgan healthcare venture.

Here’s something you probably don’t need to be told: Apple, IBM, Microsoft, and Amazon are anxious to break into healthcare.

And not just because it’s an $8 trillion market that accounts for 17% of America’s GDP and 10% of all jobs in the country. It’s also one of the fastest growing sectors of the American economy, a quarter of all federal spending, and massively and reliably profitable.

Of course, it’s also proven to be tremendously difficult for non-healthcare companies to break into.

And all of this is why so much attention has been paid to the joint healthcare venture between Amazon, Berkshire Hathaway, and JP Morgan. Here are three companies with exceedingly deep pockets, one of which has had remarkable success at breaking into everything from publishing to home automation to enterprise hosting.

But if you’re looking for technology to be at the forefront of the still-mysterious “Berzerkshire Morgan” healthcare project, you’re likely to be disappointed – because the direction of this mysterious venture has been hiding in plain sight all along, and it’s got nothing to do with interoperability or digital health.

At least not at first.

Amazon, Berkshire, and JP Morgan want to self-insure

The cost of employer health insurance is immense – as much as $15K per person, as of 2018. With over 500,000 employees, that means Amazon is spending close to $7.5 billion a year on employee healthcare.

Add in Berkshire Hathaway (377,000 employees) and JP Morgan (167,000 employees) and you’re looking at 1.1 million employees and a combined cost of $16.5 BILLION.

The most obvious solution? Create their own health plan. This is already a tried and true strategy in the academic world, where institutions like the University of Pennsylvania and University of New Hampshire administer their own health insurance rather than farm it out to a large third-party insurer. And more and more business are getting in on the act, too.

This may sound like pie-in-the-sky, but the evidence is abundant: In their announcement press release, the trio of companies explicitly said their goal was to fix healthcare for their own employees first and foremost.

CEO Atul Gawande has also said that removing middlemen and slashing administrative costs is at the top of their priorities. It’s hard to read a statement like that as anything other than an attack on insurers – if not the healthcare billing ecosystem as a whole.

“If Amazon, Berkshire, and JPM self-insured, they would immediately
be one of the 20 largest health plans in the country.”

With Amazon’s focus on customer experience and complex logistics, there’s also a very real chance that they could succeed at streamlining the healthcare customer experience, from plan choice to billing. (For hints at where they could go, take a look at Oscar Health, which has explored similar territory and recently received a $375 million investment from Google.)

Here’s something else to consider: If Amazon, Berkshire, and JPM self-insured just their own employees, they would instantly be one of the 20 largest health plans in the country.

Amazon will take on providers next – starting with urgent care

If you want to reduce the cost of healthcare and you’ve already taken on the insurance angle, then urgent care and primary practice is the next frontier.

lack of preventive care is a key driver of healthcare costs, and providing a doctor’s office experience designed for the busy lives of employees would be a slam-dunk in terms of both reducing costs and improving the overall experience.

But there’s another reason this prediction is a no-brainer – Amazon is already doing it. They announced in August that they planned to open their own network of clinics, catering specifically to employees.

Having both a health insurance plan and a provider network would immediately place Amazon’s new venture on par with titans like CVS and Aetna, who are currently solidifying an upcoming merger. Throw Amazon’s acquisition of Whole Foods into the mix, and you’re looking at an earthshaking force for retail health.

(And do I need to point out how relevant it is that Amazon recently acquired the pharmaceutical packaging company PillPack?)

Capturing the healthcare castle

With a company like Amazon, nothing is ever a one-and-done – it’s safe to assume their healthcare aspirations are ultimately geared towards ownership of the entire healthcare vertical, just like they’ve done with content and retail. And once the Amazon-JP-Berkshire partnership has insurance and primary care under its belt, they’ll have the very thing that has eluded IBM, Microsoft, and Apple – the ability to drive innovation and directly shape the future of healthcare.

But what about Apple’s personal health records, you might ask? What about IBM Watson? The key difference is those projects were innovation from the outside in – Apple and IBM need someone to open the door into the healthcare world, and they can get pushed out if the winds shift or results don’t materialize fast enough, as was the case with Watson. While the tech world has been making a lot of noise about gadgets and limited interoperability, the real prize – electronic health records, payment processing, and patient experience – has remained out of reach.

“Amazon, Berkshire Hathaway, and JP Morgan might finally have
found a way to break into healthcare.”

But with its foot in the door at the provider (and maybe even the hospital) level, Amazon will have its own healthcare sandbox to play around in.

Want to deploy an EHR platform? Amazon could just move its own provider network onto it, and use it as a case study for other players. Want to reinvent patient experience? They can use their own employees.

To date, no tech company has had the leverage needed to really force the issue of innovation in America’s overly complex and internecine healthcare system. Together, Amazon, Berkshire Hathaway, and JP Morgan might finally have a way to break in. And that would be huge.

The biggest open secret in the healthtech world is that technology isn’t holding back healthcare innovation. Bureaucracy is. Telehealth, precision medicine, patient experience – the tech to solve these challenges has been around for years. The problem is getting them implemented in America’s fragmented, cross-purposed healthcare system.

Once Amazon (and friends) have the combined leverage of a Top 20 insurance plan, a potentially nationwide network of health clinics and pharmacies, and close hospital partnerships (if not outright acquisitions), this new healthcare partnership would be in the ideal position to throw its weight around and force the rest of the healthcare world to fall in line.