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Amazon, Berkshire, JPMorgan health care venture will be based in Boston

June 20. 2018 9:11PM

NEW YORK — Well-regarded surgeon and author Atul Gawande, a critic of his industry’s medical practices, will lead the new company being formed by Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co. that aims to cut U.S. employee health care costs, the companies said on Wednesday.

Amazon, Berkshire and JPMorgan announced the joint venture in January, saying U.S. health care costs were rising too fast and holding back economic growth. The three companies said they would use big-data analysis and other high-tech tools to improve care and cut waste.

The choice of Gawande reflects the company’s plans to focus on the entire health care system, rather than just looking to curb prescription drug costs, as some investors had first thought, analysts said on Wednesday.

Gawande practices general and endocrine surgery at Brigham and Women’s Hospital and is a professor at the Harvard T.H. Chan School of Public Health and Harvard Medical School, both located in Boston, where the new company will be headquartered. He is set to start in the new role on July 9.

“The choice suggests that the ... coalition is looking not at the drug value chain in isolation, but more broadly at the overall health-care system across payers and providers of care delivery,” Leerink Partners analyst Ana Gupte said in a note.

KPMG principal Ash Shehata, who is focused on health care, said Gawande’s expertise would enable him to take a high-level view of how payers, providers and government agencies could do a better job to improve care and reduce costs.

When the joint venture was first announced, shares of companies in the health-care supply chain, including CVS Health Corp. and Express Scripts, fell on expectations that they and other “middlemen” could lose business. Amazon’s record of disrupting other industries, like retail, was a key concern.

The three companies have said they will focus first on new options for their own employees and dependents, which represent more than 1 million people, and then could open the venture up to outside companies.

Over the past few months, JP Morgan Chief Executive Jamie Dimon, who is working with Berkshire head Warren Buffett and Amazon’s Jeff Bezos, has laid out areas of particular concern.

In an investor meeting on June 1, Dimon pointed to fraud, administrative costs, and chronic care costs related to smoking and obesity. He also singled out end of life costs as being very expensive.

This is an area of expertise for Gawande. In his 2014 book “Being Mortal: Medicine and What Matters in the End,” Gawande argued against prolonging a poor quality of life for the elderly and terminally ill.

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