This blog post is the first in a two-part series on Amazon’s potential impact on the delivery of healthcare. Zachary Alexander co-wrote this blog post with Florent Moise.
I was an early adopter of Amazon in 1998. Months after its launch in the U.K., I placed an order online, and a Calvin and Hobbes book magically arrived at my doorstep in Paris a few days later. It enabled a transaction that, until then, had seemed impossible.
For the next two decades, Amazon focused on putting the customer at the center of its operations and driving down costs through efficiency. With this model, it moved into many industries, gobbled up market share and disrupted incumbents. It also proved that a significant segment of the population did not enjoy the “shopping experience” in traditional stores, preferring Cyber Mondays to Black Fridays. In fact, 50% of U.S. households now contain at least one Amazon Prime member.
Is Amazon poised to do the same thing to healthcare?
At a recent healthcare conference I attended, it sure sounded like it. I heard healthcare professionals using “Amazoning” as a verb referring to the rapid delivery of products and services, relentless focus on customer experience and cost optimization, and threat to various industries like retail, computing and entertainment.
Let’s review what we know so far. Last year it announced a collaboration (later named Haven) with Berkshire Hathaway and JPMorgan Chase to reduce healthcare costs and increase satisfaction among its U.S. employees and their families.
With more than 600,000 employees, Amazon offers its warehouse workers the same medical benefits as its executives. Berkshire Hathaway and its subsidiaries employ roughly 400,000 people. JPMorgan Chase adds another 250,000. Collectively, this means the three companies insure more than 1.2 million people, with a total annual spend of more than $5 billion (assuming $4,000 per person per year, given the average age of their employees).
Amazon, Berkshire Hathaway and JPMorgan Chase have already made in-roads in the health and wellness sector, including:
- Acquiring PillPack, a full-service online pharmacy that delivers prescriptions in pre-sorted packets
- Hiring noted surgeon and author Dr. Atul Gawande as Haven CEO and Dr. Sandhya Rao, a former Partners Healthcare executive with great value-based care experience, as vice president of clinical strategy
- Obtaining HIPAA eligibility for its Amazon Comprehend, Transcribe and Translate functions
- Signing an exclusive medical device sales contract with Arcadia focused on diabetes and cardiovascular disease
- Developing a machine learning tool to sort large amounts of medical text
- Piloting primary care clinics operated by Amazon in its Seattle HQ office
- Acquiring Whole Foods
- Investing in Deliveroo in the U.K. for meal delivery
A Haven Health Plan for Employees
Employer-based healthcare is not new. Most large corporations, including Amazon, many of Berkshire Hathaway’s subsidiaries and JPMorgan Chase are self-insured. Companies such as Walmart have signed value-based deals directly with providers to reduce costs, even transporting employees long distances to get lower-cost, higher-quality care. Having full control over a person’s healthcare journey is difficult but can result in significant cost savings. Kaiser Permanente has demonstrated this model successfully for over 70 years.
Being able to build from scratch and targeting specific populations without regulatory constraints makes the healthcare problem much more manageable. A Haven health plan for its employees could:
- Revisit and simplify benefit design to match better to employee needs and enhance understanding
- Focus on primary care as a preventive measure and run local onsite primary care programs in areas of high member-concentration areas
- Supplement traditional care with telehealth and mobile clinics for home rounds
- Contract directly with health systems through value-based agreements for specialized care*
- Plug gaps in national networks by using a silent preferred provider organization (PPO) such as Healthfirst, ideally with physicians using easy-to-access cloud electronic health records (EHRs)
- Enhance patient adherence by contracting with specialized intervention providers to manage chronic conditions*
- Leverage enhanced analytics, artificial intelligence and cloud computing and make connections between EHRs, claims, and other data sources to identify optimal journeys, market inefficiencies and price-value disconnects*
- Build an employee portal to enhance the care journey and create a seamless transition between sites of care
- Reduce the cost of prescription drugs through direct contracting or stimulation of competition*
Some have hypothesized that people will not trust their employer to provide their healthcare. However, this model existed many years ago. While a minority of employees are concerned with privacy, Google, Apple, Facebook and Amazon have demonstrated that most Americans are ready to trade privacy for customer experience. Besides, Amazon, Berkshire Hathaway and JPMorgan are trusted brands. And HIPAA regulations may provide enough of a safeguard.
The steps described above are not science fiction. They are available today in the marketplace and can be bolted together, just as the internet, logistics, books and catalogs were available to all back in the early ’90s. And that seems like what Amazon and its partners are perfectly positioned to do.
Healthcare as an industry is far too large of an opportunity for Amazon to ignore. As Haven ex-COO Jack Stoddard said: “If you come up with a great solution, why wouldn’t you make it available?”
Stay tuned for our next blog post in this series, which will explore the potential next steps for this venture, and why health plans should pay attention and take action.