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There’s No Monster Under the Bed: Why Amazon, Berkshire Hathaway, JP Morgan Entity Won’t Upend the Healthcare Industry

Posted by | Fuld & Company

Amazon, among a few other enterprise giants, has garnered a reputation for disrupting every industry it’s entered. Its actions and intentions around the health industry have therefore created some buzz, particularly considering the unexpected coalition of Amazon, Berkshire Hathaway and JP Morgan. Many are wondering if Amazon is going to displace healthcare organizations, starting with payers. With its scale, extensive data about consumer purchases and behavior, and technological prowess, will it create a new model for the provision of care? What will the impact be?

There is no denying that Amazon is innovative, effectively mastering the use of a technology platform to customize buying experiences for its customers, but speculation that an individual company, or even a troika, can revolutionize the U.S. health industry is farfetched. Our payer and provider clients, as well as those in pharmaceuticals, medical devices, staffing, and other sectors conjure up apocalyptic projections – and I don’t pretend that dramatic change is necessary, hopefully likely. But Jeff Bezos, Warren Buffet, and Jamie Dimon are unable to unilaterally and immediately demolish the current industry in favor of a radical new approach. Others have offered doubts, below we offer our thoughts based upon our engagements with clients across the health spectrum.

Given the dysfunction of our political institutions to refine the system, our next best option are industry leaders, were they to act with a sense of compassionate capitalism. But several factors will hamper a fast and furious takeover:

1. The health industry is fragmented, frustrating Amazon’s ability to control or redefine it

Even with its scale, finding a lynchpin amid numerous sectors from payers and providers, to pharmaceuticals and medical devices, to bioscience and varied, scattered basic research will be a challenge. Insurtech firms are popping up with pioneering technologies that may not compete with Amazon on scale, but do so on innovation. Amazon could apply its technological platform to upend the relatively linear retail industry, but healthcare presents a significantly more multifaceted ecosystem. Wrangling an octopus poses challenges.

2. Change has begun, causing Amazon to deal with a moving target

Instituting changes to address complex care is not new and many of our clients in health and supplemental insurance, as well as in property, casualty, and life sectors, are already offering new policies and services to better serve their constituents. Major institutions are establishing footholds in new lines, insurtech firms are receiving billions in capital, and providers are consolidating, signaling coalescence in the industry and scale on the part of major health stakeholders.

We see more executives investing in an exploration of the external environment, applying evidence-based methodologies to understand who is a threat, who is a potential partner or acquisition, who is likely to act and in what way. We’ve been asked to conduct both targeted as well as open-ended studies for players across the industry, pointing to new offerings and value propositions that will have an impact. A number of major insurers brought together their national teams to conduct scenario-based planning programs that illuminated new and creative strategies for both the short and long-term. Understanding the external environment is readying players for change.

3. Transparency is a key foundation, limiting traditional disruption.

Actions undertaken in the closely intertwined health industry are subject to numerous reviews that result in transparency, including state insurance review, peer to peer review and commentary, physician collaboration, even intense media scrutiny. Even if they’re not positioned for political debate and votes, actions and strategies are likely to be known, limiting the first-mover advantage.

4. Globalization, yes, even in nationalist times.

Alibaba CEO Daniel Zhang, who recently invested $1.4 billion in a pharmacy entity, said in a statement that health care was a “strategically important” business area for his firm. Alibaba and Tencent, dominant Chinese e-commerce and mobile payments firms, are using artificial intelligence to reach their goal of building diagnostic tools that will make doctors more efficient. Despite current trade dynamics, Zhang met with the US President with the resulting rhetoric about job creation and trade surpluses. Whether Alibaba, Tencent, or other firms are able to move into the US is unknown, but it is a factor that would hamper Amazon’s goals. It’s also a factor that executives across the industry need to consider.

Wrangling the Octopus Takes Structured Investigation and Planning

Players within the healthcare market and frankly any industry should consider how companies like Amazon, Berkshire Hathaway, JP Morgan, Google or others may attempt to take advantage of product, service, and operational gaps and enter new markets. Today’s business environment favors data, scale, and technological know-how, particularly in the overburdened health industry. The likelihood of Amazon, Berkshire Hathaway and JP Morgan overturning the entire health industry is low, but they will have an impact, and it behooves executives in all sectors to analyze the environment in a structured manner and create evidence-based strategies and tactics to protect, and expand their value to the marketplace.

Fuld & Company’s Life Science Consulting practice spans pharmaceuticals, biotechnology, diagnostics, medical device, health IT, and healthcare payers and providers.

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