Why Apple, Amazon & Google Are Making Big Health Care Moves

Amazon is setting up a mysterious new partnership with JPMorgan Chase and Warren Buffett…………..

Silicon Valley wants to disrupt your health care.

By Dylan Scott@dylanlscottdylan.scott@vox.com  Mar 6, 2018, 9:00am EST


Some of the biggest and most famous brands in America are making big bets on health care. The blue chips of Silicon Valley — Amazon, Apple, Google, Uber — have announced in the past few weeks they’re interested in disrupting an industry that has bedeviled us with rising costs and inefficiencies for decades.

Amazon is setting up a mysterious new partnership with JPMorgan Chase and Warren Buffett. Apple is planning a line of (surely sleek and minimalist) medical clinics. Google’s sibling under the umbrella company Alphabet, Verily, is looking at the Medicaid market. Uber wants to disrupt ambulances.

It is way, way, way too early to start imagining a world where health care is truly owned by Big Tech — you order prescription drugs with your Amazon Prime account, see a nurse at the Apple Clinic, get your benefits statements from Google, and call an Uber instead of an ambulance when you need to go to the hospital.

But something is happening here. The most proven, forward-thinking, and, dare I say, disruptive companies in our country have decided health care should be their next big move. They see a system rife with administrative inefficiencies, opaque prices, and customer dissatisfaction. In other words, a huge opportunity.

“Ultimately, nothing is gonna happen that quickly. But it definitely is something that we didn’t see a year ago,” Bob Schulz, a managing director at Standard & Poor’s, told me. “I think some of these nontraditional players are interested because it’s big. It’s attractive in that way. It’s opaque and complex. So maybe there’s a way that they can make it better.”

Big Tech’s current plans for health care, explained

Here’s a rundown of the big tech health care ventures announced over the past month:

  • Amazon-JPMorgan Chase-Berkshire Hathaway: reviewed the trio’s partnership at length in January. Their venture is the most opaque: They want to bring down health care costs for their employees. Experts think that will likely mean using Amazon’s software savvy to create a better technological platform for administering health care. But the long-term play for Amazon could be inserting itself into the health care distribution chain by selling medical devices and, perhaps eventually, becoming an online pharmacy. Amazon is a specialist in retail, handling payments and merchandise, so the thinking is the company could break into both health care administration and the distribution of equipment, drugs, and devices.
  • Apple: The iPhone maker is also focusing on its own workers, with plans to open two California clinics that would deliver “a world-class health care experience.” The company seems to be aiming for a holistic approach, with medical centers staffed by doctors and lab technicians but also exercise specialists and care navigators. Population health and preventive care will be the guiding principles, driving down costs by helping workers stay healthy rather than treating them once they get sick.
  • Verily, part of Alphabet, which also owns Google: The corporate structure has gotten muddled, but this is effectively Google as far as we laypeople are concerned. Verily is, CNBC reported, apparently looking for opportunities to break into the managed care space. It reportedly weighed entering a partnership with a private health insurer on a Medicaid managed care plan in Rhode Island. Under Medicaid managed care, insurers have a set dollar amount that they receive from the state. If they can administer their benefits more cheaply, they keep the savings. In other words, this would be a bet Verily can administer health insurance more efficiently.
  • Uber: The ride-hailing company is going all in with Uber Health. It allows health care providers to book rides for their patients to and from their appointments. As The Verge reported this week: “The company is positioning itself as a cheaper and more reliable option than most non-emergency medical transportation,” which is a $3 billion-a-year industry.

Notably, none of these companies appear to be competing directly with each other, at least not yet. Some are focusing, for now, exclusively on helping their own workers with better health care administration and their own clinics. Others are testing the waters to partner with existing health insurance companies. Another is diving headlong into its new venture, ready to go toe to toe with the current top dogs in their field.

But taken all together, these ventures span much of the health care food chain, from insurance to distribution to primary care, and even to transportation. They all share the goal of lowering costs, whether by more administrative efficiency, by encouraging better health, or by simply underselling the existing market.

Of course, as with anything in health care, it isn’t that simple.

Disrupting American health care won’t be simple

These are businesses with a proven history of disrupting existing business models: Amazon, for example, brought an unprecedented level of selection, price transparency, and convenience to retail shopping. Uber has — through, of course, some ethically questionable means — totally changed the landscape for hired driving and has its sights set even higher, on transportation in general.

But here, we have to confront a very familiar question: Is health care anything like other parts of the economy? Health care, one-sixth of the American economy, is governed by a hopelessly tangled mix of payers, administrators, providers, and manufacturers. Not to mention the patients, all 330 million of us, who have never proven very good at treating health care like any other commodity.

As Schulz put it: “It’s obviously much easier to disrupt retail than something like health care.”

The complexity, the opacity, the sheer scale — not to mention the existing $3 trillion industry and its many vested players, who aren’t going to stand idly by while the tech wunderkinds supplant them — are standing in Silicon Valley’s way.

“There are some good reasons why health care has resisted disruption from the outside,” Larry Levitt at the Kaiser Family Foundation said. “It operates in a highly regulatory environment. There are complex interactions between insurers, consumers, and health providers that you really don’t see in other industries.”

Given these companies’ track records, their ambitions, and the gaping need for seismic change in the American health care system, this will be one of the most closely watched health care stories of the next few years. But it does not follow that the companies will therefore succeed in the same way with health care.

Some policy experts would place their bets on a merger between CVS and Aetna over the latest headline grabber from Jeff Bezos.

“They’ve made a ton of money and done it in industries where it’s hard to make money. Now they want to go to the place where everybody seems to be struggling,” Craig Garthwaite, a conservative economist at Northwestern University, told me in January when the Amazon news was announced. “That rarely works for firms, trying to pick up wholesale and move to a new industry.”

Just take Amazon’s much-speculated interest in online pharmacies. In that universe, you currently have the Food and Drug Administration regulating drugs, you have pharmacy benefits managers that have carved out a cottage industry to coordinate between drugmakers and health insurers, you have the health insurers that want to rein in their drug costs, you have the drug manufacturers setting their own list prices, and then you have the customers who are trying to navigate all this and make sure they’re taking the right medicines.

Leemore Dafny, a Harvard Business School professor, told the New York Times’s Margot Sanger-Katz: “Just because you know an industry is underperforming and you have a lot of money doesn’t mean you have a successful strategy.”

That is, in a nutshell, the best reason to be skeptical of all these tech ventures.

Still, the health care field is one in desperate need of change

There could still be risks to the existing health care monoliths. Hospitals could be undercut by these forays into wellness and preventive care, which seem to be the focus of Apple and Amazon’s ventures in particular.

“Apple, Google, and Amazon are trying to lower the cost of health care for their employees by steering them toward outpatient clinics and wellness programs that they own or control. This theoretically cuts down on costs by circumventing expensive hospital care,” Joe Mielenhausen at the investor service Moody’s told me. “It’s a similar concept to what some large insurers are doing by buying up physician groups to take greater control of premiums and expenses, albeit for the patients they insure opposed to their employees.”

It isn’t a coincidence either that stocks for pharmacy benefits managers and health insurers fell when the Amazon news broke. And rapidly improving technologies could be positioning health care for the kind of disruption it has resisted in the past.

“Health care is incredibly backward in its use of information and consumer technologies, so it seems ripe for disruption. And, there’s just a lot of damn money in health care,” Levitt said. “There is a potential convergence going on now. Electronic medical records, mobile phones, and wearables have achieved widespread adoption, creating new opportunities.”

It’s way too soon to know where any of this is going. It could be nowhere: Google and Microsoft have talked for years about breaking into health care, with little to show for it so far. Some of these ventures are more theories than concrete plans at this point.

But it’s still worth watching. Because if any industry is in dire need of disruption, it’s American health care.