Three of the country's most powerful companies coming together to use technology to improve the health-care system — and lower the system's costs along the way — sounds like a great idea.
But turning that idea into reality will be tough, experts said Tuesday.
But the trio was light on the details beyond saying the new independent company's initial focus would be on developing "technology solutions" and that the firm would be "free from profit-making incentives and constraints."
"The ballooning costs of healthcare act as a hungry tapeworm on the American economy," Berkshire CEO Warren Buffett said in a statement. "Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country's best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes."
Gregg Slager, group leader of Ernst & Young's global health transaction advisory services division, said the three companies' desire to control health costs makes sense, given the fact that those costs are increasing, along with the patients' direct responsibility for health bills. But banding together may not be sufficient to change the health-care system's costliest components.
Health spending equals 18 percent of the nation's gross domestic product and is expected to reach 20 percent by 2025. The bulk of health-care expenses are hospitals and physicians, according to National Health Expenditure data compiled by Evercore ISI.
Evercore health-care analyst Ross Muken told CNBC that bending the overall health-cost curve "isn't about controlling drug prices, modernizing the supply chain or improving devices."
"Those are all relatively small parts of spending and some of those parts are deflationary already," Muken said. "This is about getting to the guts of the system and where the inefficiency lies, which is physicians and hospitals."
In a note to clients published Tuesday, Muken said the stated mission of the companies' venture "seems remarkably well placed as the government has failed at managing costs in healthcare for decades."
"However, despite all the money and brain power likely devoted to what is going to be a seemingly [not-for-profit] effort the challenge here is massive. The reality is that a majority of the costs in the system sit within organizations that are difficult to reform and currently borderline profitable (providers)," he said.
"Furthermore, trying to tackle physician compensation also seems like a heroic effort and one that is likely to cause massive uproar, particularly amongst the senior population."