Health IT

Strange bedfellows? Amazon launches healthcare venture with JPMorgan Chase, Berkshire Hathaway

The companies want to build technology solutions that will cut healthcare costs but even though it is early days for the joint venture, the news has rattled the market and sent health insurer share prices tumbling.

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In a move that has rattled publicly traded healthcare companies this morning, especially insurers, Amazon is forming a joint venture in healthcare aimed at employees with J.P. Morgan and Berkshire Hathaway, according to a company press release.

The initial focus of 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,” the statement said.

Although in the early planning stages, the company’s formation is being led by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a Managing Director of JPMorgan Chase; and Beth Galetti, a Senior Vice President of Human Resources at Amazon, according to the statement.

There’s been plenty of speculation about Amazon’s healthcare plans, particularly that Amazon was making a move into the pharmacy space, using its enormous supply chain network to deliver drugs more rapidly to customers. Others pointed to its cloud computing operation Late last year, Amazon Web Services and Cerner were reported to be discussing a partnership. That report was followed by news that Amazon was searching for a HIPAA compliance lead. Could these have just amounted to red herrings?

The collaboration between such titans of retail and finance should cause some concern for small and midsized companies in the value-based care space, depending on the direction it takes. Such a large entity poses a significant threat to current healthcare giants. United Health Group’s share price had fallen roughly 4 percent, Cigna was down more than 5.8 percent as this story went to press. Castlight Health fell 2.7 percent.

Could this venture evolve into a new insurer? Will Amazon use its financial partners to form a consolidation vehicle to buy up health IT businesses? Will this venture play a role in determining where Amazon opens its new headquarters? It’s tough to say given that there’s so little information available. But the deal illustrates the theme that companies that would have made strange bedfellows in healthcare just a few years ago make more sense partnering up now, especially if they have shared goals, much like the acquisition of Aetna by CVS Health and Maestro Health’s recent acquisition by French insurer and asset manager AXA Group.

Jamie Dimon, JPMorgan Chase CEO and chairman echoed that theme in the release.

“Our people want transparency, knowledge and control when it comes to managing their healthcare,” he said. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”

Illustration: Ceneri, Getty Images