Home >Companies >News >Dimon, Bezos, Buffett tap Atul Gawande for new healthcare firm

New York/Mexico City: Atul Gawande, a surgeon and journalist who has written extensively about the US failure to grapple with rising healthcare spending, has been named to head a new health venture for Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co.

The new firm—meant to help the three companies improve care and lower costs—will be based in Boston and Gawande will start on 9 July. It will be independent from the three firms, whose leaders formed the group as a way of contending with what Berkshire chief executive officer Warren Buffett called a “tapeworm" eating the US economy.

“I have devoted my public health career to building scalable solutions for better healthcare delivery that are saving lives, reducing suffering, and eliminating wasteful spending both in the US and across the world," Gawande said in a statement from the group announcing his appointment. Along with his writing and medical practice, Gawande is a professor at the Harvard T.H. Chan School of Public Health and Harvard Medical School.

Gawande is a prominent name in healthcare policy circles, though hasn’t run a major business. Many details of the new venture—its name, size, budget and authority—weren’t immediately available. It will be an “independent entity that is free from profit-making incentives and constraints," the group said in the statement.

The companies announced in January that they were forming the venture to improve employee health care. JPMorgan CEO Jamie Dimon and Buffett have since said it could take years for the venture to show results.

Employers are the largest providers of health insurance in the US, giving more than 150 million people access to coverage. Insurance premiums have soared 55% over the past decade, according to the Kaiser Family Foundation, contributing to the growing dissatisfaction voiced by employers.

‘Cost Conundrum’

Gawande, 52, rose to prominence among healthcare policy experts with a 2009 New Yorker article, The Cost Conundrum, that examined why health care was vastly more expensive in some parts of the US than others, despite little difference in the sickness or health of people getting it. The piece focused on McAllen, Texas, and why the Medicare program spent $15,000 a year on the town’s older patients, thousands of dollars more than in other areas.

At the time, the article also attracted the attention of Buffett and his business partner Charlie Munger. Gawande “had an article last summer that was absolutely magnificent," Buffett told CNBC in 1 March 2010, according to a transcript of the appearance.

“You have these enormous variances around the country. And, you know, if you had some really smart people running it that knew a lot about medicine, they’re going to—they could do a lot about it," Buffett said in the appearance.

Munger thought the article was so socially useful that he blindly mailed Gawande a $20,000 check, Buffett told CNBC at the time. Gawande donated the money to an international project to improve surgical equipment in developing countries, according to the Huffington Post.

Broad Agenda

The choice of Gawande suggests that the venture will take a broad look at how to approach fixing health care, Ana Gupte, a health stocks analyst at Leerink Partners, said by email.

“The ABC coalition is looking not at the drug value chain in isolation, but more broadly at the overall health-care system across payors and providers of care delivery," Gupte said.

Fed up with the status quo, some major firms like Walmart Inc. have separately experimented with bypassing insurers entirely, instead buying health care for their workers directly from doctors and hospitals.

Meanwhile, healthcare companies are embarking on a wave of unconventional deals to broaden the services they offer. The drug-store chain and pharmacy benefits firm CVS Health Corp. is acquiring insurer Aetna Inc., while insurer Cigna Corp. agreed to buy the drug benefits firm Express Scripts Holding Corp.

The Amazon-Berkshire-JPMorgan venture could put pressure on those middlemen. Buffett has said his ambitions are larger.

Healthcare spending is taking up an increasing proportion of the US economy, and a goal of the venture is to “at least" halt that, Buffett said on CNBC in February. He added that he hopes “we could find a way where perhaps better care could be delivered even at somewhat lesser cost".

The companies have indicated a more modest initial goal, saying they want to use technology to reduce costs and improve care for workers.

Dimon, in his annual letter to his bank’s shareholders, also laid out a broader agenda: aligning incentives among doctors, insurers and patients; reducing fraud and waste; giving employees more access to tele-medicine and better wellness programs; and figuring out why so much money is spent on end-of-life care.

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