The joint foray by Amazon, J.P. Morgan and Berkshire Hathaway into health care isn’t the newest idea, it’s just the most recent, CVS Health’s chairman says.
The three corporate giants’ announcement they would create a not-for-profit company aimed at cutting their health-care costs and improving services sparked panic on Wall Street for what it would mean for existing players. The partnership of Amazon’s Jeff Bezos, J.P. Morgan’s Jamie Dimon and Berkshire’s Warren Buffett ignited excitement for what innovation they could bring to what’s often considered a bloated industry.
But industry experts have cautioned people to temper their excitement, especially since other companies have tried — and failed — similar ideas before. About 40 major companies, including names like American Express and Macy’s, have joined the Health Transformation Alliance to try to lower costs.
“I think the Buffett, Bezos, Dimon thing is ‘we’re mad as hell and not going to take it anymore,'” CVS Health’s Nonexecutive Chairman David Dorman told CNBC’s “Squawk Box” on Friday. “How they actually do it, the closer you get you realize that almost 60 percent of the cost is in the providers, so doctors and hospitals. That’s very disaggregated.”
Dorman thinks it will be a “very difficult effort” since the three can’t control the decisions their employees make or those of their workers’ doctors.
One way CVS is trying to lower provider costs is by adding walk-in medical clinics at more of its retail locations. The company currently has more than 1,100 MinuteClinics and 9,800 physical locations.
CVS is trying to leverage those physical locations with a proposed $69 billion acquisition of health insurer Aetna. They want to create an integrated health system that combines pharmacy and health benefits while delivering preventive care services through the retail clinics.
“So CVS with 10,000 (stores) — a store within three miles of 80 percent of the population, a clinic in the store combining with Aetna — we think we can bring more capabilities to bear at the local level and serve national organizations and small organizations, as well.”
The CVBS-Aetna deal is expected to close in the second half of the year.