JPM JP Morgan Chase and Co

By Anna Wilde Mathews 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 21, 2018).

Berkshire Hathaway Inc., Amazon.com Inc. and JPMorgan Chase & Co. named prominent surgeon and researcher Atul Gawande as chief executive of their new venture that aims to overhaul workers' health care.

The appointment of Dr. Gawande is effective July 9, and the still-unnamed health-care initiative will be based in Boston, the companies said.

The selection of Dr. Gawande, a best-selling author known for his work on health-care quality, ensures the effort will remain under a spotlight, and provides the most concrete signal so far that the partners' ambitions go beyond conventional tweaks to employer health-benefit plans. Dr. Gawande has little background in the nitty-gritty of health insurance or running a major corporate operation, but he is well-regarded across the health industry and has moved his ideas forward through nonprofits he founded.

The leaders of the three partner companies, including Warren Buffett at Berkshire Hathaway and JPMorgan CEO James Dimon, have spoken about the need to rein in health-care costs and improve care using new approaches. "We said at the outset that the degree of difficulty is high and success is going to require an expert's knowledge, a beginner's mind, and a long-term orientation," said Jeff Bezos, founder and CEO of Amazon, in prepared remarks Wednesday. "Atul embodies all three, and we're starting strong as we move forward in this challenging and worthwhile endeavor."

Dr. Gawande practices general and endocrine surgery at Brigham and Women's Hospital in Boston and is a professor at the Harvard T.H. Chan School of Public Health and Harvard Medical School, as well as a writer for the New Yorker magazine. He founded Ariadne Labs and has been executive director of the nonprofit center, which focuses on efforts to improve care and reduce medical errors, for six years.

In addition to running the new venture, Dr. Gawande will continue to practice surgery and keep his position as a professor at Harvard, as well as retain a role at Ariadne Labs as chairman, according to Ariadne Labs.

In January, Amazon, Berkshire and JPMorgan announced they teamed up to figure out how to reduce health-care costs and improve care for their hundreds of thousands of U.S. employees. The companies said the entity would operate independently and be free from profit-making incentives and constraints. Together, Amazon, Berkshire and JPMorgan have more than one million employees, though not all of them in the U.S.

The three partners in the joint venture had an in-depth process to select the new CEO. Todd Combs, an investment officer at Berkshire and a JPMorgan board member, did initial interviews with CEO candidates by phone in February, according to people familiar with the discussions. Candidates later were asked to deliver a white paper on how they would create a model for the way employers buy health benefits, what team the CEO would need to execute that strategy and how the new enterprise would use data analytics, the people said.

The new model should lower costs and serve as a template for other employers, but interviewers set few other criteria for the enterprise, the people said. However, CEO candidate interviews did focus on the use of data analytics, the cost of prescription drugs and chronic care management, they said.

Executives from the three companies were interested in Dr. Gawande based on his experience at Ariadne Labs, as well as his role as a surgeon witnessing the successes and failures of the medical system, a person familiar with the matter said. Ariadne Labs has about 100 employees and about $20 million revenue projected for fiscal 2018, according to Ariadne Labs. Dr. Gawande is also chairman of Lifebox, another nonprofit he founded, which focuses on making surgery safer globally, particularly in low-income countries.

The son of physicians, Dr. Gawande grew up in Athens, Ohio. Much of his prominence stems from his New Yorker articles and books, which have focused on a range of topics including care for those with very serious illnesses, the complexity of the health-care system, and practical efforts to improve treatment such as checklists for physicians. "He is clearly a big thinker," said Ashish Jha, director of the Harvard Global Health Institute, who praised his research colleague's ability to identify trends and patterns in health care and articulate them clearly.

In a 2010 interview with CNBC, Mr. Buffett said that Dr. Gawande's writing in the New Yorker about health care in Texas was "absolutely magnificent." He added that his business partner, Berkshire vice chairman Charlie Munger, mailed Dr. Gawande a check for $20,000 after reading the article.

Dr. Gawande is still a surprise choice. The decision signals the partners "are looking at how care is delivered to patients as a starting point, not the benefits infrastructure," said Jim Winkler, a senior vice president at consulting firm Aon PLC.

Experts said it would be a steep challenge to build a venture from scratch to address the broadest challenges in the American health-care system. Years of efforts by employers and others have had only limited impact. "The proof will be in the pudding to see if it works," said Tom Giella, chairman of the health-care services practice at recruiting firm Korn Ferry International. "He'd have to build a team around the things he doesn't know as well, like operations."

Peter Costa, an analyst with Wells Fargo, wrote in a research note that the selection signals that the new health-care venture will aim for "more advanced, further-reaching goals than we believe a health care industry veteran would likely seek." The upshot, he suggested, might be "bigger headlines, but an even longer time frame for any real changes to result from this venture in our view."

Brian Marcotte, CEO of the National Business Group on Health, said employers will be closely watching and likely eager to work with Dr. Gawande. "Employers welcome disruption," he said. They are "anxious to see where it's going to go."

--Emily Glazer, Melanie Evans, Aisha Al-Muslim and Nicole Friedman contributed to this article.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

(END) Dow Jones Newswires

June 21, 2018 02:47 ET (06:47 GMT)

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