How Chase, Amazon tech could transform health care payments

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JPMorgan Chase and Amazon have demonstrated substantial power to digitize their industries, even influencing the strategy of others.

But automating and streamlining health care — as outlined in an announcement the companies jointly issued Tuesday — will be a particularly tough task. In the past, governments and corporations have at best made only tepid progress.

"The challenge in health care isn't the payment made by the patient," said Tim Sloane, vice president and director of the Emerging Technologies Advisory Service at Mercator. "Patients can utilize credit cards and bill payment systems once billed. The problem is the extremely convoluted and highly paper-based business process that exists between the health care giver and the insurance company."

Daniel Acker/Bloomberg

JPMorgan Chase and Amazon are collaborating with Warren Buffett's Berkshire Hathaway to improve access and the financing of health care. Beyond forming a distinct, "free from profit" organization, the terms of the collaboration are vague. It's not clear, for example, if the companies intend to offer health care services to other companies. Other than references to technology development, there's not much about a product road map. And the three parties would not provide additional details or comments beyond their press release.

But there is considerable power the three participants have to influence finance and alter retail strategies of other companies. Buffett's ability to drive narratives in the investment community is well known, and Amazon and Chase are both substantial brands with sizable merchant customer bases.

Amazon and Chase possess considerable tools that remove navigation, paper and labor from transactions, data management and processing.

Amazon's cashierless store is barely off the ground and it has already inspired a part of the fintech industry dedicated to supporting retailers' response. Amazon's moves into conversational commerce have spread to retailers and its low-navigation checkout has become a standard in e-commerce. Many merchants already rely on Amazon for payments and other e-commerce services; they may be just as welcoming to an Amazon-developed approach to offering health care.

JPMorgan Chase has a diverse mobile-driven strategy that is changing the way it, and other financial institutions, engage with consumers. Chase Pay has already won support among retailers, building on the foundation of the Merchant Customer Exchange, a retailer-focused mobile payment system. It's also built on ChaseNet, a collaboration between Chase and Visa to support transaction automation and other merchant services. ChaseNet serves as a merchant acquirer, the payment network and the payment card issuer.

The value of ChaseNet is that it streamlines workflow of processing payments, removing costs by removing several of the parties normally involved in handling a transaction. If this system is applied to health care, it could connect patients, medical care providers and insurance companies.

Combined with Amazon's e-commerce user experience, that would create a base for the two companies to approach health care providers and insurers with an e-commerce experience, mobile app and other merchant services that could be expanded with new technology, products and additional partners over time. Even if the three companies only served their own employees, there would still be a halo that could spark similar innovation elsewhere.

There's also a ready-made use case. Health care expenditures are 18% of the U.S. gross domestic product. And one in five U.S. households has health care debt.

"With the increased use of high-deductible plans, a greater portion of health care costs are now the responsibility of the individual patients, meaning that doctors and hospitals are invoicing and managing collections with consumers more frequently," said Sarah Grotta, the director of the debit and alternative products advisory service at Mercator.

But it won't be easy. The three companies' considerable range of digital transaction technology, payment delivery, CRM, data management and customer service operations still do not cover all of the pain points of the health care system.

"Speeding up the process won't be easy because the human body can't be documented so that every possible procedure has a cost," Sloane said.

Car manufacturers, for example, have a manual that identifies the cost associated with replacing every known part, which makes it easy for auto repair shops to know in advance what they will be paid for a repair that's under warranty, Sloane said. "When a surgeon starts a procedure it is impossible to know what complications might be found or how long it will take to address them."

The health care industry's chronic lack of a cohesive structure is also a challenge, according to Sloane, who adds the idea of large companies from different industries collaborating to streamline health care is not new. IBM, American Express and Verizon also recently formed a partnership to focus on health care.

"The other major contributor to delay is the structure of health care providers in the U.S, which ranges from a single doctor practice to corporate 'doc in the box' operations to small community-driven charitable operations, to small and large hospitals," Sloane said. "All of these entities select the technology they will acquire, if any, and then determine the process they will follow to interoperate with insurers."

The health care industry itself is tasked to define its own standards in a way that will bring efficiencies, or have regulators do that form them, Sloane said. "The problem preventing self-regulation are the entrenched positions the major players have in the existing ecosystem."

Even if the Amazon-Buffett-Chase collaboration doesn't revolutionize the health care industry, it can still make an impact on the economy, Grotta said. The transaction piece of health care alone is a huge opportunity that could attract clients and users to a joint e-commerce portal.

"The capabilities of Chase, Amazon and Berkshire Hathaway could bring some needed focus and resources to the issue, but will require a deep understanding of — and collaboration with — other participants in the value chain to make a difference," Grotta said.