Amazon vs. Traditional Healthcare: Who Will Win?

It’s hard to think back to Amazon’s origin story, a website launched in the summer of 1995 that only sold books. Now that bookseller has 200 million Prime members globally buying not just books but food, clothing, appliances and most anything else that can fit in a warehouse. The company rakes in $50 billion a year from Amazon Web Services (AWS), quietly storing data, including medical records. Its 2021 first-quarter earnings were $8.1 billion. And if Amazon’s latest venture works, companies will soon be contracting with the retailer for telehealth and primary care services as well.

From books to in-home checkup: Why?

If Amazon wants to continue growing at 25% to 30% per year, as it has done the past few years, it needs to generate large revenues, says Robin Gaster, a visiting public policy scholar at George Washington University and the author of “Behemoth, Amazon Rising: Power and Seduction in the Age of Amazon.”

“Some can see Amazon casting around for a business that will get really big really quick for them. I’m sure this is the reason they’re in groceries,” Gaster says, adding that groceries are a low-margin, high-capital business and there’s no evidence Amazon will do better than others in this space. “That brings us to healthcare, which of course is much bigger than groceries. One can imagine them looking at healthcare and seeing a far bigger opportunity to be disruptive. Amazon thinks on an entirely different scale. Healthcare is their biggest opportunity.”

Amazon Care launched as a pilot project in September 2019, a virtual health program for some of the company’s Seattle-area employees. Along with its ownership of PillPack, Alexa’s use in healthcare, and its Haven collaboration, Amazon seemed to be connecting the healthcare dots last summer, says Bryan Niehaus, a vice president with the healthcare consulting firm Advis in suburban Chicago.

“We thought Haven may be a large piece of that puzzle. But with Haven not moving forward, and then finally folding, we’re seeing the new directions Amazon is taking,” Niehaus says. “Amazon is pushing into direct-care delivery more aggressively and combining some of those disparate elements.”

The push for increased telehealth acceptance because of the COVID-19 pandemic may have accelerated this move, and Amazon Care is a natural extension of the current in-house pilot. The company plans to offer it to its 1.2 million employees nationwide and to other companies as well.

A different model of healthcare

Although there have been a few announcements about Amazon Care, details are scant. The app-based care platform is designed to provide primary care through telehealth and pharmacy, with some in-home visits. Although Amazon’s legions of warehouse workers may have access to on-site clinics, “Amazon is preparing for this voice-driven health future by creating a primary care system that is not bricks and mortar,” says Gaster, who also has a consulting business called Incumetrics that measures and assesses innovation. “Our phone is our gateway into healthcare in the future, and it doesn’t mean going to the doctor.”

Established healthcare institutions might be worried about Amazon targeting them; however, Gaster thinks Amazon won’t be coming at them directly but rather from below: “There’s a huge subprimary area of healthcare where we don’t actually go to a primary care physician.” The subprimary area is wellness and chronic disease management, as well as minor or preliminary healthcare initial diagnostics, he says, and these increasingly can be done at home. For example, some cellphones can do electrocardiogram testing and diabetes monitoring. In late 2020, Amazon piloted its health-tracking Halo Band that can monitor physical activity, sleep, temperature and even body fat composition.

“We’ll see this pretty drastic change in which people are not tied to the healthcare their job provides, and it’s a radical opportunity for a disruptive entrant,” Gaster says. AWS is already used for healthcare; PillPack’s at-home prescription delivery relies on Amazon’s established logistics network; and Alexa can order supplies, refill prescriptions and answer insurance-related questions. “I believe Amazon will eat healthcare from below, not above,” he says.

Niehaus envisions Amazon targeting companies that are contracting directly with healthcare systems to provide comprehensive coverage. It may focus on core services to increase access to appointments. He doesn’t anticipate all healthcare organizations feeling an immediate Amazon presence, especially if their core services are inpatient and outpatient services, along with specialty care.

Amazon is coming into the home-based health scene at a time when President Joe Biden’s American Jobs Plan is proposing $400 billion for home or community-based care over eight years. Amazon, like other companies, will need additional workforce to execute a national presence, says Niehaus. Although there’s an opportunity, there’s competition as well. Existing telehealth companies built up a telehealth presence during the pandemic.

There are legacy home-health companies too. Amazon could build on its own or buy up existing companies, but rapid scaling can be difficult. The country has a shortage of providers, including physicians, nurses and advanced care practitioners, observes Niehaus. Amazon would be facing stiff competition for qualified providers who are in an entirely different segment of the labor market than the people it hires to pack and deliver boxes.

Amazon’s business and labor practices have plenty of critics, but it has won over American consumers with a buying/delivery experience that is fast, easy and reliable. Would that reputation — and its scale — help in the delivery of healthcare? “There’s a big opportunity to continue to use omnichannel to curate in a way that’s customized, but I don’t think you’re going to see Amazon disrupt the health system as much as people may think,” says Bird Blitch, co-founder and CEO of Patientco, a payment technology company in Atlanta. One reason is that many people still trust the existing healthcare system as a way to get much of their care.

Alexa, check on my mother

Alexa is connected to more than 100 million smart home devices, according to CEO Jeff Bezos’ 2020 letter to shareholders. Providers can already build HIPAA-compliant tools to schedule appointments, find nearby providers, answer health questions and refill prescriptions. Gaster envisions a future where people ask Alexa what to do for a sprained knee, and Alexa will ask a few questions and give advice like wrapping and elevating it.

“There’s a huge subcritical area that is just wide open,” he says. Healthcare systems are traditionally set up to focus on what happens after the patient enters the office, because that’s where they get paid. “Before that is where most healthcare concerns exist,” Gaster says. “I think Amazon is incredibly well positioned, and it will acquire enormous amounts of data through (Alexa) and its Amazon Care projects, through PillPack and through AWS.”

Digital health company Sharecare partnered with Amazon to add 80,000 health and wellness questions to its Alexa database, along with medical-vetted content. Given its HIPAA compliance, “Amazon has the potential to change how patients navigate their care,” says Blitch. A 2019 survey showed that 52% of people were interested in using voice assistants for healthcare. “I think we’ll see more providers rolling out voice assistant experiences,” something that Blitch says his company’s customers use with their payment system.

Alexa Care Hub allows the device to monitor the activity of older relatives. It can be set up so the caregiver knows whether the relative asked a question about the weather, watched a movie or went outside. “Because it can be connected to Ring, you can get a lot of information,” says Gaster. “This is obviously with consent at both ends, and this is far beyond traditional healthcare, but it’s clearly about health.”

Amazon already has a presence in the majority of U.S. homes. Around 62% of U.S. households hold a Prime membership, according to 2019 data. “They have a massive loyal customer base,” says Blitch. “They have a lot of data they can identify and respond to, including the consumers’ latest preferences and demands.”

These factors may allow Amazon to leverage their technology and their ability to remove customer obstacles to give people more control over their healthcare.

Insurance and regulation

After Amazon Care rolls out and presuming it is successful, Niehaus anticipates that the next step would be to layer on services. That could be expanding a physical healthcare footprint or developing or acquiring insurance products. Consider CVS Health, which is a drugstore chain, an insurer, a PBM and a provider (the MinuteClinics and the HealthHUBs). From what’s known publicly, Niehaus says, Amazon Care isn’t set up to bill insurers. It’s possible that employers will directly contract with them or they’ll offer a self-pay consumer option.

But Amazon may also need to step gingerly. If the company’s healthcare profile grows, there will be pushback against the “Amazonification” of healthcare from current stakeholders. It may invite scrutiny and oversight about whether additional regulations are needed and what those might look like, though. That includes the home health space, which the Biden administration has highlighted for additional funding through the infrastructure bill, even if details are not yet available. “Regulations are our checks and balances working as intended,” observes Niehaus.

Another way Amazon insinuates itself into healthcare could occur behind the scenes. Amazon has launched HealthLake, which aggregates healthcare data and standardizes it into required interoperability formats, with “HIPAA-eligible service that enables healthcare providers, health insurance companies, and pharmaceutical companies to store, transform, query, and analyze health data at scale,” says the website. Given the CMS mandate for interoperability and patient access, this will likely be a growth area.

Gaster spins an extended metaphor to explain Amazon’s perspective and possible role in health: The existing healthcare systems are formidable castles with enormous moats and cannons pointing in all directions. There are lots of lawyers at the battlements ready to take on the company, but Amazon is spreading out over the countryside, taking areas the castle can’t protect. In the end, castles will surrender when they don’t have supplies.

The search for areas of opportunity may allow Amazon to expand into other areas of healthcare, with almost no recognition or interest in the collateral damage the company sometimes causes, says Gaster. “That’s true in ware-houses. It’s true on the Marketplace platform. It’s true in AWS,” he says. “Being obsessive is dangerous. They don’t care about the impact of what they do. They just focus on the customers.”

Deborah Ann Kaplan writes about medical and practice management topics.