Amazon—one of the largest American e-commerce companies—has disrupted several industries in the past. Most recently, it attempted to get into one of the country’s most complex and biggest industries around: healthcare. In a bold move, the tech conglomerate’s push into the world of health insurance and pharmaceutics cost a combined whopping $30 billion in just 2 hours of trading. Without a doubt, the idea of an Amazon Healthcare proves bold as the company joins the hunt for affordable healthcare.
Based in Seattle, Washington, Amazon has created a reputation of shaking up industries—including books, cloud computing, food, fashion, furniture and countless others—even before. It teamed up with Berkshire Hathaway and JPMorgan Chase, creating an alliance that will attempt to succeed at what many others have failed to do—provide reliable, affordable or free healthcare for the American people. However, it still proves to be quite challenging. After their official announcement on January 30, the trio’s vague yet market-moving bold idea of launching an independent and more affordable healthcare company immediately backfired within the industry.
The Idea of Amazon Healthcare: Facing Challenges Since Day 1
Critics are already nitpicking the move. However, many others think Amazon’s strengths may help their nonprofit approach to healthcare. Jeff Bezos, Amazon’s founder and Forbes Magazine’s wealthiest person as of November 2017, acknowledged that his company’s most recent collaboration might face many challenges. In a statement, Bezos said, “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
Warren Buffett, chairman and Chief Executive Officer (CEO) of Berkshire Hathaway also noted, “The ballooning cost of healthcare acts as a hungry tapeworm on the American economy.”
With a projection by a Willis Towers Watson that U.S. employers expect healthcare costs to rise 5.5 percent this year—an upsurge from last year’s 4.6 percent increase—the average national cost per employee is now around $12,850. Clearly, the trio led by Bezos, Buffett, and JPMorgan CEO Jamie Dimon wants healthcare to not be a burden to both employers and employees.
With a union composed of three top global companies, why is Amazon getting all the beef? While all three can supply both employees and resources, some see Amazon as the one in the group with particularly relevant technological competence and bravery, as well as a history of disrupting industries.
Starting from Scratch
In essence, Amazon and its partners are starting with a clean slate. New York Times best-selling author Chunka Mui noted that compared to those already inside the current healthcare industry, Amazon does not have legacy systems to update or business models to protect. Also, most especially, it does not have any existing healthcare customers to please. Its experimental Amazon healthcare approach can leverage their existing connections and technologies, without the need to make money—a freedom and flexibility only their alliance with Berkshire and JPMorgan can offer.
Harvard Business School professor Robert Huckman looked at Amazon’s current strong points that may lead them to become an Amazon healthcare giant. For one, their expertise in things such as one-click ordering may help streamline certain healthcare processes. He suggested, “(It) could be used to improve health care delivery by addressing the administrative hassle and scheduling challenges faced by patients seeking routine services in a one-stop setting.”
Amazon’s Willingness to Experiment
Among many other ideas Huckman pointed out, he also mentioned Amazon is willing to experiment. While the company does not yet have a full solution—as affirmed by Buffett—its joint venture with Berkshire and JPMorgan allowed them a new space to play around with bold ideas and innovations. “Amazon may be able to play a key role in allocating resources to solutions that show themselves, over time, to be promising,” he said.
While the debate over the trio’s attempt at transforming healthcare goes on, it’s important to realize and acknowledge its path is a challenging one—one where Amazon may find a way to become a leader once more in an industry it disrupts.
