When giants partner, the markets react. That was the case with the newly announced partnership between Amazon, Berkshire Hathaway and JPMorgan Chase & Co. which want to address healthcare costs and quality of care for their U.S. employees. Following the announcement, health company stocks plummeted.
The three giants will bring their "scale and complementary expertise" to this long-term effort, and will pursue this objective through an independent company that is free from profit-making incentives and constraints. Initially, that new — still unnamed — company will focus on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost. The group hopes to take a fresh approach to healthcare, while drawing on the combined capabilities of the three companies.
"The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country's best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes," Berkshire Hathaway Chairman and CEO, Warren Buffett, said in a statement.
Amazon founder and CEO Jeff Bezos and JPMorgan Chase Chairman and CEO Jamie Dimon share this sentiment, acknowledging that while healthcare is complex it is worth the effort to make it more affordable and more efficient.
Perhaps most interest is what Dimon 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."
That last part ("all Americans") is what have prompted health companies' stock to plummet. Once these guys come up with a solution for their own employees, chances are they will want to offer it to the rest of the country. And with their negotiating power, prices will undoubtedly go south. Which is a good thing, when you think about it.
However, it is worth adding that this joint effort is in its early planning stages; the initial formation of the new company is jointly spearheaded 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 at Amazon. The longer-term management team, headquarters location and key operational details will be communicated in due course.
Or we'll see cities across the U.S. competing to host the new company's headquarters, Amazon-style?