Amazon, Berkshire and JP Morgan health-care plan will offer big cost savings and innovation, Barclays says

Key Points
  • Barclays is optimistic about the Amazon, Berkshire and J.P. Morgan health-care partnership.
  • The firm's analysts say the companies will be able to save a lot of money and innovate using their respective strengths in technology and payments.
Jeff Bezos, Amazon
Amy Harris | Invision | AP

Amazon, Berkshire Hathaway and J.P. Morgan Chase have much to gain from their landmark health-care partnership, according to one Wall Street firm.

The three companies revealed Tuesday a plan to partner on ways to cut health-care costs and improve services for their U.S. employees. The firms will launch an independent outfit initially targeting technology solutions, with the intention of being an umbrella firm that would be "free from profit-making incentives."

"Initial details are minimal although we view this as a long-term opportunity for these major employers to drive down the rate of increase of healthcare costs and therefore improve their bottom lines," Barclays research team wrote in a note to clients Tuesday.

Insurance analyst Jay Gelb said Berkshire Hathaway could save a lot of money due to the size of its workforce — 367,000 — and ability to consolidate coverage.

Internet analyst Ross Sandler expressed admiration for Amazon's technology capabilities and track record of disruption.

"Generally, we don't view the consortium approach as the right one … but we are never dismissive of anything disruptive that Amazon is involved in," he wrote. "Amazon arguably has the best technical abilities of any company we cover, hence this is a development we will be watching closely."

Bank analyst Jason Goldberg said J.P. Morgan will be able to contribute its industry expertise to the project.

"We believe JPM can help this consortium tackle payment related issues, leveraging its technology in the space," he wrote.

Goldberg said the bank could offer such innovative features as real-time balances, plan information and mobile payments.