There’s one aspect of the health care venture that Amazon (NASDAQ:AMZN), JPMorgan (NYSE:JPM) and Berkshire Hathaway (NYSE:BRKA) announced last week that could be especially revolutionary.
The three companies said the effort, which aims to reduce health care costs for employees, is “free from profit-making incentives and constraints.”
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This means they will likely set up their health care venture as a benefit corporation, which is not solely driven by maximizing profits, though profits are welcome. Maximizing the health of patients becomes as important as fiduciary concerns, according to David Friend, managing director of BDO’s Center for Healthcare Excellence and Innovation.
“That’s a big competitive advantage over [United Health] or the other guys who, by corporate setup, have to focus on [maximizing profits],” Friend said. “I think [Amazon, JPMorgan and Berkshire] can actually create shareholder wealth [and] make it better for their [consumers].”
Filing as a benefit corporation means that the stated social responsibility becomes part of the organization’s duty to stakeholders.
Structuring the initiative in this way produces more innovation, Friend said. It could also allow the three corporate giants to cut expenses by providing discounted health care for their own employees, which in turn would likely contribute more to shareholder wealth.
One of the big transformations taking place in health care is developing more patient-focused care and services. Health care has lagged behind other sectors in shifting to the widely adopted consumer-centric model. In December, retail pharmacy CVS (NYSE:CVS) agreed to buy health insurance giant Aetna (NYSE:AET) for $69 billion in an effort to streamline services and improve transparency for patients.
Meanwhile, some experts believe Amazon, known for unparalleled customer service, has the ability to disrupt the entire health care ecosystem.
But all three companies have value to add to an initiative that aims to ease the burdens of health care on employees.
“Until you change the focus of [the health care industry] ... we’re never going to solve the problem,” Friend said.
Friend also envisions that other frontline innovators such as Google (NASDAQ:GOOGL) could follow the lead of Amazon, JPMorgan and Berkshire Hathaway.
The recent announcement came just weeks after BlackRock (NYSE:BLK) CEO Larry Fink made headlines by writing a letter to companies urging them to do more for their communities. He indicated that future prosperity relied on making a “positive contribution to society.”