Amazon-Berkshire-JP Morgan Health Initiative Makes An Out-of-the-box Choice For CEO

Dr. Atul Gawande, an accomplished surgeon, writer and Harvard professor, has been named the chief executive officer of a new health-care initiative started by Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co.

The new independent venture has as its goal improving health care for the three companies’ more than a million combined U.S. employees, as well as making it more cost-effective. It will be headquartered in Boston and be “free from profit-making incentives and constraints,” according to the Wednesday announcement. Gawande will start July 9.

“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,” Amazon Chief Executive Jeff Bezos said in the Wednesday release. “Atul embodies all three, and we’re starting strong as we move forward in this challenging and worthwhile endeavor.”

Read: Here’s what we actually know about the Amazon, Berkshire and J.P. Morgan health initiative (hint: very little)

Gawande is a surprising choice in many respects, as he is best known for his empathetic approach to medicine, rather than for financial or health-care management credentials.

Previous reports pegged David Feinberg, the chief executive of Geisinger Health System, as the top candidate.

But Gawande does have plenty of experience when it comes to health care costs and working to innovate.

He is perhaps best known for a 2009 New Yorker magazine article, “The Cost Conundrum,” that found excessive care was being used in a Texas town, on Medicare’s dime.

Described by some as “the most influential magazine article of the past decade,” the piece created shock waves. Gawande went on to report, years later, that costs had dramatically dropped in the town, saving taxpayers about half a billion dollars.

Related: The Amazon-Berkshire-JPMorgan health initiative can work — if doctors go along

Gawande has also led Ariadne Labs, which looks for simple ways to improve health care, since he founded it in 2012. The project has developed various checklists that can be used to reduce risks in various medical settings, including in the operating room and during childbirth.

Gawande famously wrote about the approach in the 2009 book “The Checklist Manifesto,” which had as its premise that the simple checklist can be used to reduce risks and make the world better, both in health care and other settings. Other books he has authored look at how medicine addresses death, complications and how doctors can provide better care.

Reducing the cost of U.S. health care has been the ambition of many for a long time, but it’s an extremely difficult goal. Many critics have asked whether this new, admittedly high-profile, venture can really make substantive change. Those questions are likely to linger, even after Gawande’s appointment.

“Let’s face it, you have the largest bank in the world, the largest company in the world and the greatest investor in the world, and have now hired the smartest health-care policy person in the world,” said Spencer Perlman, director of health-care research at policy analysis firm Veda Partners. “I just wonder if they have the appropriate firepower, even with that, to actually implement dramatic wholesale change in the U.S.”

The surgeon-writer’s appointment may lend some credibility to the idea that any discoveries made by the health-care initiative may be shared beyond the three companies, as J.P. Morgan Chief Executive Jamie Dimon suggested in the original announcement.

“Now I have the backing of these remarkable organizations to pursue this mission with even greater impact for more than a million people, and in doing so incubate better models of care for all,” Gawande said. “This work will take time but must be done. The system is broken, and better is possible.”

Yet solutions developed for the Amazon AMZN, +1.57%  /Berkshire BRK.A, -0.27%  / BRK.B, -0.14%  /J.P. Morgan JPM, +0.44% workforces also may not be applicable to the U.S. health system writ large, as “the demographics are fairly narrow,” Perlman noted.

So while other employers or health-care payors might be able to adopt new strategies, for example, those wouldn’t necessarily translate to Medicare, the health-insurance program for older Americans that is run by the federal government.

Despite these questions, the new initiative sent shares of companies across the health care industry tumbling after the late January announcement.

See: Amazon, Berkshire Hathaway and JPMorgan health initiative sends industry shares plummeting

Many of the same companies had shares decline slightly in Wednesday morning trade, including CVS Health Corp. CVS, +1.38% Express Scripts Holding Co. ESRX, -0.25% Anthem Inc. ANTM, +0.32% and UnitedHealth Group Inc. UNH, -0.08% though all the moves were under 1%.

Walgreens Boots Alliance Inc. WBA, +4.90% which had one of the bigger share drops in late January, saw shares rise 2.8% after the news that it has been added to the Dow Jones Industrial Average to replace General Electric Co.

The Health Care Select Sector SPDR XLV, +0.42%  has surged 1% over the last three months, compared with a 2% rise in the S&P 500 SPX, +0.41% and a 0.1% rise in the Dow Jones Industrial Average.