Investor Communication Plan Discussing Healthcare

Lindsey Birchfield
Emma Clauson
Ki Huang
Ryan McCurry
March 1, 2018
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Table of Contents

Executive Summary……………………………………………………………………………………………..3
Introduction to the Issue of Healthcare……………………………………………………………….4
Investor Concerns with the Healthcare Industry
Forecast
Internal Narrative: The Customer Connection
External Narrative: Public Fears Pierce Inward
Background & Analysis……………………………………………………………………………………..4-6
Key Challenge Identification
Current Investors
Future Potential Investors
Recommendations……………………………………………………………………………………………6-7
Recommendation #1: Partner with Healthcare Professionals/Hospitals
Recommendation #2: Quarterly Meetings with Investors
Response…………………………………………………………………………………………………………..7-9
Next Steps
Projected Budget
Return on Investment
Timeline
Conclusion……………………………………………………………………………………………………………9
References…………………………………………………………………………………………………………10
Appendix……………………………………………………………………………………………………………11
Figure 1
Figure 2
Figure 3
Figure 4
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Executive Summary
As a team, we have explored Amazon’s internal and external narratives which guides our
decision-making process. Once Amazon entered the e-commerce industry, the company
actively worked to make technological innovations that changed the way consumers purchased
products. Supporters have recognized our customer-centric view and Amazon aims to maintain
this perspective by positioning itself as the one of the world’s most influential companies.

Identifying the Key Challenge

After analyzing Amazon’s current operations and future projects, the most alarming challenge is
our push into the healthcare industry alongside Berkshire Hathaway and JP Morgan Chase.
Although our collective resources will provide a great opportunity for long-term success, this
partnership enters into an extremely complex industry without proof of concept. As a result of
being a very risky project, we as a company must communicate our goals and strategies to our
investors to continue our rise as one of the most profitable companies in the United States.

Recommendations to Bridge the Gap

Amazon has many aspects to consider when making decisions for success in this healthcare
venture. As interns, one of our first recommendations for the company is to specifically partner
up with Seattle's number one hospital, University of Washington Medical Center. This will help
us to gain the proper knowledge and resources we need to further delve into the healthcare
industry. Reaching out and networking with the right people in the industry will allow us to
make smarter and lower risk decisions as we take on this healthcare task.

After partnering with this specific hospital, we recommend holding quarterly meetings with
these investors in order to create a clear communication channel. This will keep the company
connected with our investors by keeping them informed, showing them that they are
important, and allowing them to give their opinions throughout the next steps.

Next Steps
By following our next steps, Amazon will have a positive ROI of a minimum of 5% on their $3
billion budget within the next 5-7 years. Noticeable changes will be made within 6 months
through the partnership with the University of Washington Medical Center. This will help guide
Amazon in the right direction by establishing credibility in the decision-making process by
potentially cutting costs in our budget, providing a higher ROI, and satisfying our investor’s
needs. Our quarterly meetings will also lower our investors’ perceived risks as they will have
the opportunity to voice their opinion and stay updated about their investments.

Amazon’s central issues in the health care market stem from entering this high-risk industry. By
implementing the recommendations of partnering with the University of Washington Medical
Center and holding quarterly meetings, this venture will prove to be successful. With the
provided background information, recommendations, next steps, and responses, Amazon will
bridge the gap of securing our investors when entering the healthcare industry.
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Introduction to the Issue of Healthcare

Investor Concerns with Healthcare Industry
Our team has explored Amazon’s internal and external narratives which has led to the
identification of a central issue regarding the potential for our company to lose primary
investors. Since Amazon has announced its partnership to enter the healthcare industry,
investors have approached the new project with fear due to the high-risk market. As a
definitive stakeholder, we recognize the disconnect between our investors as a top priority.
Being interns, we hope that we can create solutions that you can directly implement for a
positive change, as the Chief Financial Officer of Amazon.

Forecast
Our team will address the concerns from Amazon’s investors on entering the healthcare
industry while providing recommendations to align our company’s values and narratives with
that of differentiating perspectives. In the past several years, Amazon has grown to take over
many sectors of the e-commerce industry. However, by moving forward with the healthcare
initiative, our company will be taking part in a risky business venture where many companies
have failed to make headway in the past.

This case will provide our team with an opportunity to integrate Amazon’s core values with
larger audiences to strengthen both our internal and external narratives. This report will
contain background and analysis, recommendations, and responses in order to create a plan to
secure our investors with low risk.

Internal Narrative: The Customer Connection

Amazon continues to place customers as an internal focal point within the company which has
played a role in creating the disconnect between investors. Since our company looks to ease
the burden of healthcare costs for customers and employees through a non-profit partnership,
our investors raise concerns about future profitability. Moving forward with the new plan, our
company needs to align with our customers and investors to improve our stakeholders’
uncertainty.

External Narrative: Public Fears Pierce Inward

In terms of public opinion, many business owners view Amazon’s growth with caution. Now
that we have decided to expand into a new sector, even more companies worry Amazon will
have a disruptive effect on the industry. The external perspective plays a large role in how
investors will support the company moving forward.

Background & Analysis

Key Challenge Identification
By priding ourselves as a flexible, risk-taking company, we are continuing to broaden our
industry’s spectrum with this recent partnership alongside Berkshire Hathaway and JP Morgan
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Chase. Although multiple companies in the past such as Walmart and Caterpillar have tried to
solve the high costs and complexity of healthcare with no concrete solution, Amazon believes
that this endeavor will prove to be effective. The following quotes are statements made by the
chief executive officers of Amazon, Berkshire Hathaway, and JP Morgan Chase announcing their
partnership entering the healthcare industry.

“The healthcare system is complex, and we enter into this challenge open-eyed about the
degree of difficulty” – Jeff Bezos

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our
group does not come to this problem with answers” – Warren Buffett

“The three of our companies have extraordinary resources, and our goal is to create solutions
that benefit our U.S. employees, their families and, potentially, all Americans” – Jamie Dixon

Amazon is known for its innovative culture and its ability to broaden the industry portfolio.
While many facets of this partnership may feel similar to previous ventures, we are stepping
into unfamiliar ground. Displayed above, the CEO’s of the three companies offered their initial
statements on the partnership. They explained that while the companies have “extraordinary
resources” and lofty goals, there is not a straightforward solution. Although Amazon has an
astonishing track record when entering new markets, the healthcare industry offers a long-term
challenge and greatly increases the risk for current and future potential investors.

As discussed previously, this push into the healthcare industry to create an alternative to
traditional services has been met with many challenges that have yet to be overcome. Walmart,
one of our largest competitors, has tried a similar approach to solving healthcare by eliminating
the insurance middle man with no success. Since there is no proof of concept, Amazon must
allocate funds early on in our timeline towards research and development to produce the best
possible solution. By planning to incorporate technology in an unspecified way at the moment,
our company looks to break the trend of increasingly high healthcare coverage.

In the upcoming sections, we will provide context so that our company can clearly
communicate to one of the most important stakeholders in this process being the investors. As
this partnership will require a large amount of funding to be successful, we will need to have a
large community of investors to keep the company in good standing overall. Although
Amazon’s stock is in a great position at the moment, we believe that honest and transparent
communication to current and future investors will be imperative to the future success of this
new venture into the healthcare industry.

Current Investors
It is necessary to Amazon’s success to provide resources to our current investors at a moment’s
notice so that the company’s morale remains at an all-time high. Specifically, this partnership
which aligns three of the most successful companies in the United States in their respective
fields, will complement each other’s expertise to achieve this long-term effort. We believe by
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developing a fresh approach to this critical matter and combining our capabilities with other
industry leaders, this partnership can lead to a great return on investment.

To prove to our current investors that Amazon is in a great position to succeed, we have
outlined three key points to help communicate this new endeavor. Most importantly, our stock
has consistently been on the rise in the past years. In addition, there was no negative impact
following the press release announcing the partnership, which shows that our investors believe
in Amazon’s strategy. Although this partnership is a long-term project, we expect that it will not
interfere with any of Amazon’s current operations. Further, we expect Amazon will effectively
cut into the $3.2 trillion market share of the healthcare industry.

No Interference Will Result in

Amazon Stock
with Current Large Return on
at a Record High
Operations Investment

Potential Future Investors

Being known for successfully disrupting major industries, Amazon has influenced healthcare
investors to quickly sell off stocks of reputable firms in the wake of the announcement. Despite
providing very few details of the partnership’s agenda, UnitedHealth and Anthem saw their
stocks fall by more than 5% following the recent news (Figure 1). Another example of Amazon’s
influence came from reports stating that the company was positioning itself to enter the
prescription drug industry. As a result, established pharmaceutical companies such as CVS and
Walgreens witnessed their respective stocks sharply drop in early October 2017 (Figure 2).

Despite Amazon’s brief and somewhat vague press release announcing the healthcare
partnership on January 30th, investors in the healthcare sector have already made clear their
reverence of our company. Following the announcement, stocks dropped by $69 billion, or 2%,
across the entire healthcare industry. Although healthcare investors throughout the United
States have an understanding of the impact Amazon makes to each industry it enters, it is
important that we publicize our strategy in the coming months so that other competing firms
cannot find time to recover their losses.

Recommendations
Recommendation #1: Partner with Healthcare Professionals/Hospitals
As interns, our main recommendation for Amazon to is to partner with Seattle’s number one
hospital, University of Washington Medical Center. Our company has reached out directly to
investors, like hospital executives, to see first-hand the needs of the healthcare industry. This is
a smart move as Amazon plans to enter the industry with ease, with the sale of medical
supplies.
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However, partnering with a specific hospital will allow for us to learn about and properly
explore the complexities of the industry with a low risk, before jumping right in. This will also
create a direct connection between investors as we will have a reliable means of pursuing the
sale of medical supplies with low costs.

Recommendation #2: Quarterly Meetings with Investors

Second, we recommend that our company holds meetings at the end of each fiscal quarter with
these investors to create a clear communication channel and keep them informed during this
long process. In doing this, we can communicate our goals, messages, and timeline with our
investors while hearing their perspectives as well. Our investors will be experts in the industry
and will be able to provide us with the valuable feedback we should implement for our success.
This will allow Amazon to secure our investors, to stay connected, and to show our investors
that they are both important and powerful stakeholders in our venture.

Response
Next Steps
By following our recommendations, it will assist Amazon’s understanding towards cutting
healthcare premium and deductible costs per employee. Health care professionals will provide
us with guidance when entering this market to strengthen our process. Currently, the average
healthcare premium for employees was $6,700 in 2017, and to cover a family was nearly
$18,800, according to the Kaiser/HRET Survey. Healthcare premiums continue to rise making it
costlier for companies and employees (Figure 3). These costs are split by the employer, and if
Amazon were to follow our recommendation it will cut costs drastically.

Additionally, the average employee pays about $1,500 on deductibles for co-pays and
prescription medication. This will be reduced with the help of Amazon’s implementation
because employees will have less health care costs, leaving more room to to help pay for other
medical expenses. Amazon’s partner JP Morgan has spent $1.25 billion on United States
medical benefits last year, and between these three companies over 4 billion dollars has been
spent. These examples show that there are clear areas within these companies where
healthcare costs need to be reduced.

Managing our investors closely and reaching out to the right investors and health care
professionals now, will give the company the knowledge and connections to tackle all areas of
the industry in the future. Once the company is ready and has a better grasp of the industry’s
needs as a whole, the process will move smoothly. Partnering up with a hospital will establish
credibility, and help decrease the risk to have investors feel confident in their investment with
us.

In reference to our communication recommendations, our quarterly meetings for investors will
provide support and feedback to our decision-making process. We will take collaborative
surveys after every other meeting to evaluate investors on their positions and their desired
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direction for the healthcare initiative. In conclusion, Amazon will use this feedback to keep
investors satisfied during the process by allowing them to incorporate their opinions.

Projected Budget
As the healthcare industry has been constantly growing in the past three decades, Amazon is
now implementing a system that will revolutionize healthcare costs. Amazon is expected to
spend approximately 2-3 billion dollars throughout this project. Currently, there are no
constraints in budget because Amazon is operating with no monetary incentives, but will
attempt to remain within this range. Within this $3.2 trillion health care industry, Amazon is
hoping to have a powerful effect by providing not only cheaper health care costs, but having
control over costs in the future.

With guidance of healthcare professionals from University of Washington Medical Center, we

may be able to use less of our expected budget by moving slowly to make the right decisions
that benefit our growth. For example, general hospitals attempt to control spending by
sourcing 23% of drugs from alternate suppliers. By being a part of the alternate suppliers,
Amazon will be able to cut supplying and distribution costs with similar margins. Saving money
in our budget will provide less capital needed from investors, making their investments lower
risk.

Return on Investment
By partnering with the University of Washington Medical Center, our stock prices are expected
to increase by about a minimum of 5%. After the announcement of Amazon, JP Morgan Chase,
and Berkshire Hathaway’s health care partnership, stock prices for Amazon increased by 8% on
January 30th (Figure 4). Since there was a large increase in stock price on the day of announcing
our partnership, we believe that our stock will also increase with the announcement of our
partnership with the medical center. The stock price is expected to only increase for the
duration of this project based on the increase we noted on the day of the announcement.

This process will allow investors to watch their stock grow as the company succeeds in cutting
healthcare costs. Healthcare insurance premiums have outpaced employee’s wage growth
throughout the past two decades (Figure 3). If Amazon is able to succeed in this project, it will
potentially drop the premium rates for health care. If a consumer is spending less of their
paycheck on health care, they are more likely to spend it on other healthcare needs not
covered by their premiums.

Timeline
Amazon is projecting that this overall project will take approximately 5-7 years. It is expected to
take several years in order to completely change and provide a direct effect to employees and
consumers. Although this is an enduring process, we plan to accomplish building tools for
customers to help them find available doctors, book appointments, and get advice on their
medical financial status from our partnering hospital, University of Washington Medical Center.
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Throughout the next 6 months to a year, investors will noticeably see progress in their
investment although the final product will take much longer.

6 Months 1 Year 5-7 Years

UW Medical Investor Implemented
Center Partnership Conferences Project

Conclusion
After analyzing Amazon’s central issues of the healthcare industry, we have acknowledged our
investors to be a top priority when entering this high-risk market. Amazon hopes to financially
make a disruptive entrance in the health care market by supporting the interests of many
companies, employees, general consumers, and most importantly investors.

We hope that you implement our recommendations of partnering with University of

Washington Medical Center as well as holding quarterly meetings with these investors. With
provided background information, recommendations, and responses to the project, investors
should feel confident in deciding to invest. By following our recommendations in the projected
timeline, we believe the company will see results of entering the industry with low risk, low
costs and secured investors, providing us with a successful healthcare venture.
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References
Amazon, Berkshire Hathaway and JPMorgan Chase & Co. to partner on U.S. employee
healthcare. (2018, January 30). Retrieved from
https://www.businesswire.com/news/home/20180130005676/en/Amazon-Berkshire-
Hathaway-JPMorgan-Chase-partner-U.S.
Dafny, L., & Lee, T. H. (2017, June 07). Differing Opinions on How to Reduce Health Care
Spending. Retrieved from https://catalyst.nejm.org/new-marketplace-report-physicians-
and-hospitals-differ-on-how-to-reduce-costs/
Fiscal Times Staff. (2018, January 30). One Chart That Explains Why Jeff Bezos and Warren
Buffett Are Getting into Health Care. Retrieved from
http://www.thefiscaltimes.com/2018/01/30/One-Chart-Explains-Why-Jeff-Bezos-and-
Warren-Buffett-Are-Getting-Health-Care
Isidore, C. (2018, January 30). Jeff Bezos, Warren Buffett and Jamie Dimon want to fix health
care. Retrieved from http://money.cnn.com/2018/01/30/news/companies/amazon-
berkshire-jpmorgan-health-insurance/index.html
Johnson, C. Y. (2018, February 13). Amazon's entry into health care starts with gloves, dental
bonding agents and syringes. Retrieved from
https://www.washingtonpost.com/news/wonk/wp/2018/02/13/amazons-entry-into-
health-care-starts-with-gloves-dental-bonding-agents-and-
syringes/?utm_term=.3c209b40f8e9
LaVito, A., & Mangan, D. (2018, January 30). Tougher than it looks: Amazon, Berkshire
Hathaway and JP Morgan Chase's big plan to cut health costs. Retrieved from
https://www.cnbc.com/2018/01/30/amazon-berkshire-hathaway-and-jpmorgan-chase-
plan-to-cut-health-costs.html
Mui, C. (2018, February 08). Here's how Amazon could disrupt health care (Part 1). Retrieved
from https://www.forbes.com/sites/chunkamui/2018/02/07/heres-how-amazon-could-
disrupt-healthcare-part-1/#70e322402ab7
Russell, K., & Wingfield, N. (2017, December 29). How Amazon rattles other companies.
Retrieved from https://www.nytimes.com/interactive/2017/12/22/business/amazon-
stocks.html
Wingfield, N., Thomas, K., & Abelson, R. (2018, January 30). Amazon, Berkshire Hathaway and
JPMorgan team up to try to disrupt health care. Retrieved from
https://www.nytimes.com/2018/01/30/technology/amazon-berkshire-hathaway-
jpmorgan-health-care.html
Wyse, R. (2017, August 2). U.S. employers expect health care costs to rise by 5.5% in 2018, up
from 4.6% in 2017. Retrieved from
https://www.willistowerswatson.com/en/press/2017/08/us-employers-expect-health-
care-costs-to-rise-in-2018
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Appendix
Figure 1.
This graph shows the percentage change is stock market prices for health care businesses and
Amazon’s industry influence.

Figure 2.
This graph shows the percentage change in stock market prices for pharmaceutical businesses
and Amazon’s industry influence.
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Figure 3.
This graph shows the relationship between cumulative growth of Family Premiums, Worker
Contributions to Premiums, Inflation, and Workers’ Earnings through 1999-2017.

Figure 4.
This graph shows Amazon’s stock over the past three months, and highlights the 8% increase in
stock price over January 30th, the day the partnership was announced.