A lawsuit is giving us the first hints of how Amazon, Berkshire Hathaway, and JPMorgan are planning to upend the US healthcare system

Courtesy BusinessWire

Jack Stoddard, the chief operating officer of Amazon, Berkshire Hathaway, and JPMorgan's joint healthcare venture.

• JPMorgan, Amazon, and Berkshire Hathaway in 2018 launched a joint healthcare venture that's aimed at lowering healthcare costs for the companies' employees, but they haven't shared many details about their plans
• That's starting to change, thanks to a lawsuit filed in Massachusetts against a former Optum employee who was hired by the venture. Optum is the health services arm of healthcare giant UnitedHealth Group.
• In unsealed testimony, Jack Stoddard, the venture's chief operating officer, shared where the company's focus will be in 2019.

With one announcement, Amazon, Berkshire Hathaway, and JPMorgan got the $3.6 trillion US healthcare system worked up into a tizzy.

In January 2018, the three companies said they would strike up a joint healthcare venture that's aimed at lowering healthcare costs for the companies' employees. At the time, news of the partnership sent healthcare stocks plummeting, especially health insurers and members of the pharmaceutical supply chain that might be impacted by the three business giants getting into their lines of work.

Since then, we haven't learned much more about what shape the joint venture will take. Most of what we've learned about the yet-unnamed venture are some of the key hires, like Dr. Atul Gawande as CEO and Jack Stoddard as chief operating officer.

That's starting to change, thanks to a lawsuit filed in Massachusetts against a former Optum employee. Optum is the health services arm of healthcare giant UnitedHealth Group.

The lawsuit, filed on January 16, came out a day before David Smith, a former senior executive at Optum, was scheduled to start working at the joint venture as its director of product strategy and research. The complaint argues that by joining the health venture, Smith is in breach of contract and could reveal Optum's trade secrets.

A representative for the Amazon-Berkshire-JPMorgan venture declined to comment on the case.

Testimony in the case from Stoddard, who joined the venture in September, provides new information about the venture's plans. The testimony was unsealed after a motion brought by the parent companies of Stat News and The Wall Street Journal.

So far, the still-unnamed venture has hired fewer than 20 people, Stoddard said. The team that Smith joined is comprised of business school graduates who have backgrounds in consulting. Stoddard said his role has been to do a lot of hiring and recruiting.

Stoddard was most recently the general manager for digital health at Comcast before joining the venture. He'd previously worked as the COO at Accolade, a company that helps employees navigate their health benefits, and was on the executive team when Optum itself was founded.

The joint healthcare venture's mandate

The venture will oversee the $4 billion that Amazon, Berkshire Hathaway, and JPMorgan spend each year on healthcare for their roughly 1 million employees and dependents. Stoddard said the plan is to partner with existing companies when possible rather than build new products to improve the companies' healthcare.

"We've been asked to look at the full spectrum of what are the options, how can we crack the code, who can we have partner with, and how can we derive better outcomes, in the order of better experience, better quality and then lower costs," Stoddard said.

In particular, there are six areas Stoddard and his team have been asked to get to the bottom of: why getting primary care is a challenge, why it's hard to understand healthcare costs, why health insurance is complicated, why there's a disparity between how much employers spend on healthcare and the experience their employees have using it, why employees are frustrated, and why healthcare costs keep going up.

The venture's commitment, he said, is to employers over anything else. "We are not trying to create value for shareholders," Stoddard said. "We're trying to create value for families who are trying to use the health care system."

Where the venture's starting

Stoddard said that the venture's focus for 2019 will be to deploy tests of programs through partnerships with other companies. For example, one of the first tests the venture might run is to simplify health benefits for a select group of workers.

The test could knock out some of the complexity that exists in a traditional health plan, offer easier ways to get care, or make drugs prescribed to treat chronic conditions less expensive. If the tests are successful, JPMorgan, Berkshire Hathaway, and Amazon could expand them to more of their workers.

Beyond that, Stoddard said the venture is studying how pharmacies works to get to the bottom of what employers should actually be spending on a particular drug, which can be varied based on where their employee picks up a prescription.

"You can imagine our employers are - just given who supports us - are incredibly allergic to market inefficiencies," Stoddard said.

Stoddard also said he doesn't think the healthcare joint venture is a competitor to Optum or other existing healthcare companies, even if the initial announcement had caused healthcare stocks to plummet and rampant speculation about what the venture might address.

However, he said he understood why incumbent healthcare companies-many of which count Amazon, Berkshire Hathaway, and JPMorgan among their customers-might feel threatened.

"I can understand why, when their customers create our entity and put them on notice that the status quo is no longer good enough, that there is a fear of change. So I understand that," Stoddard said. "But that is not competitive to their business. It is about finding new solutions for our employees and their families."