CORPORATE TRIO SEEKS TO DISRUPT HEALTH-CARE SYSTEM

Texas health policy watchers say that if anyone can blow up the status quo in U.S. health care, it just might be the trio of corporate heavyweights who took aim on Tuesday.

Amazon, Berkshire Hathaway and JP Morgan Chase made a joint announcement that they would use their collective heft to form an independent company designed to bring down health-care costs while increasing medical quality for their hundreds of thousands of U.S. employees.

"Within health care, size does matter," said Michael Williams, a Houston-based partner with Mercer, a worldwide human resources firm.

He applauded the move - details of which remained scant - saying that the three corporations were vast enough with the well of resources needed to bring about real change.

"We believe it is employers who should lead the transformation," Williams said about health-care reform to curb not only skyrocketing costs but also address waste. By some estimates, as much as 30 percent of current medical spending is unnecessary.

What such an ambitious venture could look like remains unknown. There is no proposed name, no location, no real announced plan other than to say the new company would strive to be "free from profit-making incentives and constraints."

The initial priority, the announcement said, will be to bring technological solutions for more transparency and quality to employees. Presumably it would also hasten a change in the nation's current business model of fee-for-service where quantity of care can supercede quality.

"My gut reaction is, it's about time," said Vivian Ho, a health economist at Rice University's Baker Institute of Public Policy.

"Employers have passively accepted the rising costs passed onto them from providers for much too long," she said. "Large corporations have the negotiating power to insist on a better system."

The number of U.S. employees of the three companies is estimated to be around a half million.

In Houston, the plan could have a big impact. Chase, for instance, employs about 6,400, while Amazon has hired or plans to hire at least 3,000 in its two new fulfilment centers in the region.

Many on Tuesday speculated that Amazon was well positioned as the largest online retailer in the world for the technological change needed to increase cost transparency. That leg-up would then be paired with the deep pockets of billionaire investor Warren Buffett's Berkshire Hathaway, and Jamie Dimon's JPMorgan Chase, the largest bank by assets in the nation.

"We were buzzing throughout Mercer this morning," said Bruce Lee, U.S. head of public relations for the firm, who said employers have been clamoring for some kind of new model to latch onto.

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The potential for upending business-as-usual was seen as further evidence of the experimentation going on throughout the health-care industry as traditional roles are becoming blurred.

"Today's announcement is precisely why health system across the country, including Memorial Hermann, have been innovating from within," Chuck Stokes, president and CEO of Memorial Hermann Health System, said in a statement. "Our industry has a lot to learn from these three powerhouse institutions that have transformed their consumer experiences."

He pointed to the recent agreement between Walmart, the nation's largest employer, and a collection of top-flight hospitals across the country, including Memorial Hermann Texas Medical Center, to fly employees to "centers of excellence" for specific treatment and then pay a negotiated bundled payment for all of their care.

The discount retailer said it is more efficient and often less expensive than the traditional insurance model.

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Experts caution, though, that any new health-care model must include quality as part of the equation. Cost savings alone are not enough.

Also, health economists tempered their enthusiasm about the corporate proposal with a history lesson.

"Large employers and coalitions of large employers have tried to do this on and off for 30 years," said Michael Morrisey, head of Texas A&M's Health Policy and Management department.

Other efforts have stumbled, he said, as the trade-off of reining in costs were met with unhappy work forces and complaints about not getting the same doctors or treatments they had before.

"It's hard to drop enough money to the bottom line to make it worthwhile as many of the gains get eaten away in an effort to satisfy employees," he said.

Another unknown would be how this new model would work with the existing insurance structure and whether carriers could be edged out. News of the proposal sent insurance and some pharmacy stocks tumbling on Tuesday.

Blue Cross and Blue Shield of Texas said in a statement that it "supports a competitive marketplace for health insurance and efforts to make a broad range of health care services more affordable, more available and easier to use for people in Texas and nationwide."

Buffett, in his statement, colorfully likened health ballooning health-care costs to a "hungry tapeworm on the American economy."

"Our group does not come to this problem with answers," he said of such costs. "But we also do not accept it as inevitable."