Warren Buffett: Healthcare venture with Amazon, JPMorgan not aimed at small savings

In an interview on CNBC, billionaire Warren Buffett said the healthcare-focused venture formed by his Berkshire Hathaway along with Amazon and JPMorgan has greater aims than trimmed some healthcare costs or cutting out middlemen.

The venture’s announcement attracted plenty of attention in the stock market, but some financial analysts gave it a lukewarm response, citing both the complexity of the healthcare system and the chance the partnership was just another group purchasing organization to lower costs for the three companies’ employees.

Buffett, who has called healthcare costs “the hungry tapeworm” on the U.S. economy, said the goal is to deliver better care and take costs out of the system to at least halt the industry’s growing share of gross domestic product (GDP).

“It would be very easy I think to go in and shave off 3 or 4 percent just by negotiating power. We’re looking for something much bigger than that,” he said.

Buffett did reveal a few more details about the venture in the interview:

• The venture’s first priority is to get the right CEO to lead it, a position Buffett predicted would be filled within the next year. He said the three partners “probably will” form a new healthcare company, but for now, it’s just a joint effort.
• Buffet said there’s been a lot of interest from other companies wanting to join the initiative, but the venture is “not remotely there.”
• When asked if the venture would buy General Electric or Siemens’s health care units, Buffett said “We wouldn’t buy a health care business to tie it in with the healthcare initiative.”

Buffett also wasn’t entirely critical of the current healthcare system in the interview. For one, he did say he believes the private sector is in a better situation than the government to fix its problems. He also said the industry is made up of “good people,” but it’s not cost conscious.

“The outstanding medical minds are functioning, in many cases, much more on the results, which they should be. But the cost really doesn't make much difference. It's very seldom that you read about some breakthrough on cost by anybody in this huge profession. So it's got a different set of incentives,” he said.