Incumbents Disrupting Incumbents: Why Tech Giants Are Ready To Take On Provider Territory

In previous articles, we outlined why tech giants would enter the healthcare market and some of the implications for insurance companies. Now, let’s pivot our focus to another set of incumbents in the healthcare ecosystem ripe for disruption: providers. 

Today’s providers face a complex list of challenges, necessitating a very deliberate and thoughtful reexamination of essentially all aspects of care-giving. Navigating the frenetic pace of digital innovation, handling the growing financial pressures from insurers and the government, and managing the ever-increasing patient expectations for transparency, education, information and personalization are just a few of the major headaches keeping provider executives up at night. Many providers are acknowledging that they simply do not possess the capabilities required to address these issues, such as artificial intelligence, user experience and platform engineering. Additionally, transforming these deeply entrenched organizations to focus on these areas is a herculean effort in its own right. That being said, achieving a credible value proposition in healthcare, specifically on the provider side, can be very daunting given the industry depth required, complex regulatory environment, and the fact that the public is extremely risk-adverse when it comes to the healthcare industry. So, how will tech giants make a realistic foray into this territory? They will buy their way in.

Let's start by understanding why tech giants would enter the provider space. First, it provides direct access to a clinical setting, and therefore, to end users. The direct connection itself to patients isn't as much of a concern, as tech giants already have well-established relationships with end users through phones, tablets, platforms, services and more. Rather, tech giants are more so interested in gaining insight around the unique stresses, challenges, logistics and emotions to deliver far superior experiences.  Apple, an icon of product design, has clearly signaled its interest in leveraging its expertise to deliver engaging user experiences in healthcare by creating their first FDA-approved medical device, the Apple Watch 4.  Apple’s new product shows that not only can medical devices be dramatically improved, but there’s also an opportunity to enhance the entire process from identification to diagnosis to treatment and monitoring. 

Second, there is immense value for tech giants to extend their platforms and increase product stickiness. To better illustrate this point, let's take a simplistic look at the potential with Amazon's platform. As a Prime member, users would take comfort in a more seamless experience. A ‘Prime hospital,’ for example, would have patient medical records and prescription information, and medications could be delivered by Amazon via PillPack along with their medical devices. Patients would have full visibility of all costs for upcoming appointments or hospital stays, which would be covered by Prime insurance that’s bundled into a Prime account. Alexa can follow patients to the hospital, which is great because she is wonderful at reminding people to take the right amount of medications at the right time. Alexa also knows user preferences for entertainment on Prime video, so users can catch up on their favorite shows while they recover. Additionally, many hospitals currently run services on AWS, which reduces IT spend and increases interoperability across physicians, specialists, nurses and caregivers.

Finally, having the ability to combine clinical data with artificial intelligence will be a game changer. With this expertise already baked in, tech giants can take advantage of the vast opportunities for new services and products not only in healthcare, but with many ancillary and supporting industries as well. Google, whose mission is to organize the world’s information and make it universally accessible and useful, is extremely well-positioned to capitalize on this data explosion. In fact, we’ve already seen a small glimpse of this potential for clinical applications, from predictions of inpatient death to automating the diagnosis of eye scans for over 50 eye diseases. As more provider data is collected, the possibilities to revolutionize healthcare are almost limitless.

So what could the healthcare landscape look like? Are tech giants considering investment or acquisition? The answer is both. Investments and partnerships with name brands in medicine, such as Cleveland Clinic, Mayo Clinic and Memorial Sloan Kettering, make sense for tech giants as those organizations have credible brands with a long history in the industry. However, with over 6,000 hospitals in the US, there is a significant amount of care being delivered by lesser-known providers, many of which are operating at losses or barely breaking even. For these hospitals, it may make sense for an outright purchase to provide complete control for the tech giant. With the possibility of investing and partnering between tech giants and existing providers, we can expect to jumpstart to the next significant phase of healthcare disruption – combining payers and providers.  While there are a few notable payer/provider combinations already (like Kaiser Permanente and Geisinger), the tech giants will have great advantages, not the least of which is their almost endless (and patient) capital.