Earlier this month, a triumvirate of corporate giants admitted that their healthcare venture wasn’t going to make it. Haven, a company backed by JPMorgan Chase, Warren Buffett’s Berkshire Hathaway and Amazon, called it quits after only a couple of years in business.
Their goal had been for the three companies to offer better healthcare services and insurance coverage at a lower cost to their workers – and eventually, perhaps, to other companies as well. However, their plans never came to fruition.
Amazon shows no signs of giving up on healthcare, though. In June 2018, the massive etailer spent $753 million to buy online pharmacy PillPack, and is engaged in characteristic trench warfare to expand its territory in the mind-bogglingly competitive retail pharmacy business.
Now, Amazon seems poised to make a move to capture a prize which any healthcare company would envy. According to reporting by Business Insider, the big A is building a telehealth business and has begun pitching its services to major employers.
The move follows on the Fall 2019 launch of Amazon Care, a small pilot program offering a mix of virtual and face-to-face care to its Seattle employees. Since then, Amazon Care has fallen off the radar, though it has continued to operate. There’s no question that Amazon’s leaders have taken the lessons of the pilot seriously, though, and have quietly begun making plans to establish a beachhead in the telemedicine business.
At first, it seems to have taken a wait-and-see posture when the pandemic generated an explosion of use. However, as it has become clear that the massive uptake in telehealth services has made permanent changes to the use of these technologies, Amazon seems to have found its moment., and if Business Insider has it right, is planning a full-scale big effort for a share of the telehealth services market.
Now comes the critical question. Is Amazon – confident, bloated with resources and king of all it can see – in a position to dominate the telemedicine space? Believe it or not, I’d argue that it isn’t. As I see it, there are some substantial obstacles to its success, obstacles so formidable that even a juggernaut like $1.6 T Amazon can’t readily overcome them.
For one thing, Amazon’s relationship with consumers differs from that of a telemedicine provider in important ways. While consumers obviously value Amazon’s ability to offer extremely convenient delivery services, it’s yet another thing to trust it with their health. Its extraordinarily powerful brand may not be as attractive to patients as it may think where healthcare is concerned.
Another reason its dominance isn’t assured is that the healthcare services niche is unlike any other retail business. While Amazon may have been able to dive straight into the grocery and retail pharmacy sectors by making big acquisitions, healthcare services often don’t work that way. Buying your groceries or filling a routine prescription seems like a low-risk transaction to most consumers, but getting your healthcare that way is another matter. My bet is that consumers will still be asking themselves (unconsciously, perhaps) whether they want to get their healthcare from the company that brings them their casserole dishes and garden gloves.
Then there’s the issue of scale. Even if Amazon were to acquire a massive telehealth player such as newly merged Livongo/Teladoc, it might struggle to find enough clinicians to handle the volume of business it could drive through corporate partners. It’s one thing to deliver urgent care, but another entirely to manage most of a patient’s health – and if all Amazon hoped to do was offer urgent care telemedicine it might not be worth the effort.
Then, and perhaps most importantly, there’s the issue of how Amazon would manage care over time. If it only handles urgent care issues, I don’t see why corporate entities would bother to go through the complexities of striking a deal with an entity (even Amazon) with no healthcare delivery history. On the other hand, if it intends to become a provider of choice for primary and specialty ambulatory care, that puts in the position of having to document care, track quality and regulatory compliance and wrestle with health insurance plans. Managing these processes can be immensely complex, especially for a company that has never managed them before.
What it comes down to is that mastering the culture, management, technology and strategy that govern a successful healthcare business is much harder than it looks. You can’t just buy into it and hope for the best.
Could Amazon ultimately overcome these challenges? Quite possibly, though it should be noted how many times fellow giants like Microsoft and Google have gotten their hands slapped when they tried to pry open the doors to the industry. Even so, I think it very unlikely that it will jump into the telehealth industry and immediately score itself a commanding position the way it has in other large, competitive markets. Even one of the world’s most visible companies won’t master its dynamics overnight.