Amazon, JPMorgan Chase & Co. and Berkshire Hathaway launched a partnership earlier this year to provide high-quality, low-cost healthcare to their U.S. employees. While specifics of the deal are unknown, Amazon's entrance into healthcare, along with its high-profile partners, has caused a stir.
PwC recently released a report on 2017 healthcare deals, showing the number of deals decreased 2.5 percent from 2016, but the value increased 145.8 percent to $175.2 billion last year. U.S. Partner and Health Services Sector Leader of PricewaterhouseCoopers Gurpreet Singh discusses the partnership's effect on future healthcare deals and where major industry players are looking to make their next moves.
Note: Responses have been edited for clarity and length.
Q: What is your reaction to the partnership?
Gurpreet Singh: Clearly it's very exciting; it's a move by three well-respected companies that potentially have the opportunity to disrupt healthcare, and whenever there is an announcement about Amazon, people look and see what they're investing in. Financial service companies — and a diverse company like Berkshire — have a wealth of information and data. Together, the companies have between them around 1 million covered lives; that's a large denominator that allows them to create markets for products and services for their employees.
Q: What does this move mean for healthcare? How are other companies reacting?
GS: Many of our clients are now thinking they should be part of a larger "greater good" organization that is part of the common denominator as well. They are looking at how large institutions can participate and create better access to care, and hopefully better prices. What this announcement doesn't do is affect the cost of care; what it does do is focus on developing a better understanding of the patient population and a better way to manage risk across the population, and potentially narrow networks within the payer landscape.
Q: How will this shape future deals?
GS: There are companies that aren't traditional healthcare companies that can participate in aspects of care such as financing or building diagnostics. Cross-sector collaboration is clearly critical to success and allows or creates the impetus to think about partnerships you may want to create beyond the traditional deals. A provider may think twice about buying another provider in the sector they are in; instead, they may think about vertical integration of a player in the same ecosystem. Those types of partnerships will be attractive, and I think vertical integration will be where these deals are headed in 2018.
Q: Do you think there will be more deals?
GS: In 2017, the number of deals was almost flat, but the deal value increased over 100 percent, according to our healthcare services deals report. What that tells us is that people are moving toward nontraditional deals of larger value, and that's where it could get interesting. As employers, our health services clients should then think about how to partner with other employers to serve a larger population. That would be a partnership that might not have financial implications, but it may have a positive effect on the industry.