How Amazon’s digital health moves could affect providers
Amazon this year has made a number of significant moves that are fueling speculation about what the online giant’s ambitions might be in the healthcare sector—and what impact such a push by the company might have on traditional providers.
Employers, federal and state governments and consumer groups have expressed frustration for years about the healthcare industry’s 18-percent-plus share of the GDP and the failure of myriad reform efforts to significantly change the industry’s cost structure or create a truly patient-focused approach to care. Many healthcare experts believe that Amazon might be getting ready to step in with alternative solutions.
Among Amazon’s recent healthcare announcements:
- In March, the company hired Taha Kass-Hout, MD, a former FDA chief informatics officer, according to reports from CNBC. He reports to Amazon vice president Babak Parviz, who is said to run a little-known operation—known as Grand Challenge or 1492—focusing on healthcare technologies, such as telemedicine, electronic health records and applications for the company’s digital voice assistant, Alexa. Parviz joined Amazon in 2014 from Google X, which also is an experimental laboratory, according to CNBC. While Amazon officials did not announce their decision to hire Kass-Hout, HIMSS listed him as a speaker associated with Amazon Web Services at the HIMSS 18 conference held in March.
- In February, Amazon increased efforts to become a major supplier of medical products and devices to hospitals and clinics, according to The Wall Street Journal. Launched in 2015, Amazon Business is modeled after the same marketplace concept and fast delivery of amazon.com, but it also offers features tailored to businesses, such as electronic dashboards that allow customers to track their spending patterns.
- In January, Amazon made another high-profile hire: Martin Levine, MD, a geriatrician who ran Iora Health’s primary-care clinics in Seattle. Iora, which assumes full financial risk for patients, is known for a primary-care model that emphasizes health coaching, a team-based approach to care, and integrating medical and behavioral health. On LinkedIn, Levine lists his current position as a consultant to Amazon.
- Also in January, Amazon made its most publicized health move, announcing an alliance with JPMorgan Chase and Berkshire Hathaway to improve the quality and reduce the cost of healthcare services provided to their combined pool of employees and dependents. The companies plan to create a new organization that would focus on applying technology to solve problems in healthcare service delivery.
The tech giant has also signed on a number of health-related organizations, including the Centers for Disease Control and Prevention, Cerner and GE Healthcare, for its Amazon Web Services.
What’s behind these moves?
“I think one of the big things to realize about Amazon: It is on a relentless search for growth, and healthcare is a $3 trillion spend,” says Chunka Mui, futurist, author and managing director of the Devil’s Advocate Group, a consulting firm that helps companies test their innovation strategies.
“It is a very entrepreneurial environment where they have lots of experiments—most of them don’t amount to anything, but some grow into multi-billion-dollar opportunities and get more investment and more investment,” Mui says.
And unlike startups seeking to introduce new products or services, Amazon has the luxury to work doggedly on a problem until it finds a solution. Amazon also has a history of turning solutions it develops to solve internal challenges into commercial products and services. A prominent example is its AWS cloud service, which now is aggressively marketing services to healthcare companies and organizations.
Amazon did not comment on what it might be doing in the healthcare sector beyond what it has announced publicly. But here’s a rundown of Amazon’s more significant moves, where they might lead, and how they could affect providers.
A major area of speculation is Amazon’s secretive skunkworks lab where Kass-Hout and Parviz reportedly work, according to CNBC. Amazon has not commented publicly on this lab, but CNBC has reported that the group is focused on healthcare technology, such as electronic heath records, telemedicine and new applications for Amazon’s intelligent digital assistant, Alexa.
Analysts expect many of the products or services emanating from this group to be consumer-facing, with the potential to play a significant role in population health management by helping people manage their health and personal medical information and become sophisticated purchasers of medical services.
Amazon’s efforts to help consumers also could impact providers directly. Some tools, such as applications for Alexa, could make it easier and cheaper for providers to communicate with and track the patients assigned to them through value-based reimbursement contracts. Other tools—such as a price transparency software—also could push providers to learn how to interact with more sophisticated and engaged consumers of medical services.
Take the example of electronic health records. Amazon and other tech giants “need to come up with a way for people to own their data. It can be shared, but only at the discretion of the rightful owner, which is the patient,” says Eric J. Topol, MD, executive vice president and professor of molecular medicine at the Scripps Research Institute, and founder and director of the Scripps Translational Science Institute.
He cites Apple’s recent work to integrate medical information from disparate electronic health records and provide it to customers on their iPhones as a step in the right direction.
Alexa is another technology where Amazon could apply a consumer-centric approach to helping patients live healthier lives.
“Alexa is interesting because it is a consumer technology that Amazon is trying to put into as many customers’ homes as possible as an intelligent assistant that knows customers very well and can interact with them. You can well imagine that it not only reminds you that you need more detergent but also reminds you to take your meds,” Mui says.
Indeed, the Mayo Clinic announced last fall that it had teamed up with Amazon to produce first-aid content for consumers through Alexa, such as how to treat a minor burn or fever.
Analysts also have speculated that Alexa could help patients book medical appointments or facilitate communication between consumers and clinicians.
Topol agrees. “I think voice may emerge as a major platform of interaction with people by getting rid of keyboards, and passwords and apps. It is a natural tool. It is very quick, very accurate, and it gets better all the time,” he says.
Robert Huckman, faculty chair of the Heath Care Initiative at Harvard Business School, says Amazon also could develop price transparency tools and recommendation engines for any number of healthcare products or services. But to do so, Amazon would need access to vast amounts of transaction data, which it could either accumulate over time through its online retail business or by purchasing data from outside sources.
Amazon, Apple and other tech titans are clearly interested in how to leverage their existing products to help consumers take an active and informed role in managing their health, he says.
As a result, he says, providers should be prepared to interact with consumers who will become increasingly sophisticated about how to manage their health. “All providers are going to need to be prepared to answer more questions about why they are recommending the approaches they suggest. They also will need to be aware that consumers may have increasing knowledge of the price of various options available for their treatment—that might be the price of one therapy versus another or the price of one provider versus a competing provider,” Huckman says.
While most of the speculation around Amazon’s plans in healthcare start with consumers, Amazon has been marketing to providers directly by selling medical supplies and devices through Amazon Business.
“The medical supply unit is a no-brainer in the sense that it is very compatible with the capabilities that they have right now. Medical supply is another aspect that builds on all the things they do very well. They are very good at supply chain management, they are very good at delivery, and they are very good a quick turnaround. It is an incremental extension to their current business,” the Devil’s Advocate Group’s Mui says.
Amazon currently is licensed to sell medical supplies and devices in nearly all states, according to the Amazon Business website. Examples of some of those supplies include gloves, masks, gowns and bandages, while examples of devices and equipment include bathroom safety aids, thermometers, stethoscopes and vital sign monitors.
One large Midwestern health system has been evaluating how Amazon’s approach to procurement and logistics could help it reduce costs and streamline the process of getting routine medical and office supplies to its ambulatory clinics, according to a senior leader of supply chain management at the system. The senior leader declined to be named publicly because the work is at an early stage.
The idea would be to set up an electronic Amazon marketplace customized for the health system, enabling clinic employees to compare the health system’s contracted price for a given item to what other sellers are offering.
Because of Amazon’s expertise in the quick delivery of small packages, this senior leader believes Amazon could serve the supply needs of the clinics less expensively on a per-unit basis than what the health system is able to do with existing contracts, which are geared toward the large volume of supplies necessary to run a hospital.
Amazon-Berkshire-JP Morgan partnership
Amazon, JPMorgan Chase and Berkshire Hathaway have released few specifics about their plans.
However, Warren Buffet, chairman of Berkshire Hathaway, told shareholders at the company’s annual meeting in May that he expects the joint venture to hire a CEO within a few months.
And Jamie Dimon, chairman and CEO of JPMorgan Chase, outlined some of the venture’s goals in his annual letter to shareholders, which was released April 5.
Dimon wrote that the venture will empower employees to make good choices about their health by providing them with “better wellness programs,” such as to address smoking and obesity; and access to their personal electronic healthcare data and telemedicine options.
The venture also plans to analyze the problem of misaligned incentives in the healthcare system; money spent on waste, administration, fraud and end-of-life care; and why specialized and expensive medications often are not used appropriately, Dimon wrote.
In addressing misaligned incentives and other systemic problems, the new company could spur changes in the way purchasers interact with incumbents in the healthcare system, including providers, observers speculated.
For example, the company could negotiate contracts directly with healthcare providers. “You could essentially jump over the insurance companies and negotiate directly with a hospital or large physician network.” says Brian Tanquilut, healthcare services equity analyst for Jefferies, an investment banking firm.
The new company may start such a direct-negotiation process with risk-taking primary care providers, speculates Farzad Mostashari, MD, former national coordinator for health information technology at Health and Human Services and CEO and co-founder of Aledade, which operates an ACO network of independent primary-care medical practices in 18 states.
Mostashari points to Amazon’s decision to hire Levine from Iora as evidence that Amazon and its partners might focus first on negotiating contracts directly with primary care networks in the cities in which they have employees. Primary care providers in risk-based contracts could then direct patient traffic, managing costs and quality.
The “promise” of this strategy would be to develop enough expertise and scale to create high-performing narrow networks of providers, including hospitals and specialists, Mostashari says.
That would change the dynamic in some local markets in which large health systems have over-sized bargaining power in contract negotiations, he says. “Right now, if you are big, you don’t have to be good. You become the must-have provider,” he says. “This would break that monopoly, and it would force health systems to really focus on getting better, instead of just relying on their market power.”
This type of disruption would not be easy for Amazon and its partners to accomplish, Tanquilut notes, because “there is the cultural entrenchment of the benefits. It is not easy to change what you are giving your employees.”
In his letter to shareholders, Dimon hinted at the threesome’s dissatisfaction with the way healthcare benefits are designed currently, saying they want to improve the “creation of customer choice (high deductibles have barely worked).”
Mui is optimistic that Amazon, Berkshire Hathaway and JPMorgan Chase will find providers willing to work with them “to come up with new solutions and maybe profit from those new solutions as well.”
Barriers to success
Whether in medical supplies or consumer-facing solutions, making significant headway in the healthcare industry, and particularly with providers, isn’t a slam dunk—even for Amazon.
Richard Sullivan, chief government and revenue officer at Medsphere Systems, which sells EHR and population health solutions, expects Amazon to confront three major challenges in its interactions with providers.
“It is really tough to break in if you don’t come from the healthcare space. It is very difficult to drop your name in a hat and be credible,” he says.
Secondly, “It just takes a long time for anybody—individual, division, or department to come up to speed with all the intricacies of the healthcare industry,” he says.
The third issue is the learning curve Amazon’s employees are likely to face when confronted with a corporate culture that is so different than their own, he says. The tech titan’s entrepreneurially minded employees are accustomed to having access to money for new projects, giving them the freedom to embrace experimentation. The opposite tends to be true for employees of provider organizations—they are much more likely to approach change cautiously because of the lean financial circumstances of many of their organizations. As Sullivan explains, “A lot of hospitals aren’t rich … they struggle to keep the doors open.”
In a recent case study that he wrote for the Harvard Business Review, Huckman, the faculty chair of the Heath Care Initiative at Harvard Business School, also noted the steep learning curve Amazon faces in healthcare, but also suggested that Amazon could rely on its strengths to overcome barriers.
“If, however, the key to success lies in greater attention to operational execution, data analysis and customer service, Amazon may find a significant opportunity,” Huckman wrote.