Sunday, February 04, 2018

The Hungry Tapeworm

This week, three American companies announced a joint venture to sort out healthcare for their own employees. Ambitious, huh?

This is not the first time large American companies have tried to challenge tho market power of healthcare providers. According to Warren Buffett, "the ballooning costs of healthcare act as a hungry tapeworm on the American economy". Intel and Walmart are among those that have previously ventured into this area. In 2016, 20 companies including Coca Cola, American Express, IBM and Macy’s joined the Health Transformation Alliance (HTA). So why should anyone take this latest attempt seriously? Only because the three companies are Amazon, Berkshire Hathaway and JPMorgan Chase. And Amazon (need I remind you?) eats everyone's lunch.

John Naughton sees this as a typical play for a data hungry tech giant, based on two hypotheses.
  • Transactional data will lead to transactional efficiencies. The joint venture starts with the three companies experimenting on their own employees, who will "tell Amazon and its algorithms what works and doesn’t work". 
  • "Mastery of big data might yield clinical benefit".
As Pressman and Lashinsky note, the experiment is based on a pretty good sample of Americans: "a diverse workforce spanning low-wage normal folk to the most elite of our society".

Amazon is obviously a major player in the data and analytics world, but so is IBM, which is playing an important role in the HTA. Not only is IBM a corporate member, but IBM Watson Health will do the data and analytics. According to Pharmaceutical Commerce, it will "aggregate participating HTA member companies' data, enabling insights both into outcomes of medical interventions, as well as wellness initiatives to improve employees’ health".

And what about Google? Google Health was discontinued in 2011, following a lack of widespread adoption. Perhaps data isn't the whole story.

But Amazon is not just about data. In an article published before this announcement, Zack Kanter attributes Amazon's strategic dominance to SOA. "Each piece of Amazon is being built with a service-oriented architecture, and Amazon is using that architecture to successively turn every single piece of the company into a separate platform — and thus opening each piece to outside competition."

Moazed and Johnson discuss the platform implications of the healthcare announcement. They argue that "platforms thrive with fragmentation, not consolidation", and that "the new platform needs to offer enough potential scale to outweigh those risks, otherwise manufacturers may be too afraid to join". Sarah Buhr sees this as an opportunity for smaller players, such as Collective Health.

Three employers, even large ones, probably won’t have enough muscle to negotiate fair prices for healthcare and pharma. But if Bezos can create the right expectations, and provide a flexible platform for smaller players ...

Health Transformation Alliance sets its 2017 agenda (Pharmaceutical Commerce, 9 March 2017)

Amazon alliance takes on ‘hungry tapeworm’ of healthcare costs (Pharmaceutical Technology, 1 February 2018)

Sarah Buhr, Collective Health Wants To Replace The Health Insurance Industry With A Software Program (TechCrunch, 11 Aug 2014)

Sarah Buhr, Amazon’s new healthcare company could give smaller healthtech players a boost (TechCrunch, 30 Jan 2018)

Paul Demko, Amazon's new health care business could shake up industry after others have failed (Politico, 30 January 2018)

Zack Kanter, Why Amazon is eating the world (TechCrunch, 14 May 2017)

Paul Martyn, Healthcare Consumerism: Taming The Hungry Tapeworm (Forbes, 30 January 2018)

Alex Moazed and Nicholas L Johnson, Amazon's Long-Awaited Health Care Platform (Inc, 30 January 2018)

John Naughton, Healthcare is a huge industry – no wonder Amazon is muscling in (Observer, 4 February 2018)

Aaron Pressman and Adam Lashinsky, Data Sheet—Why Jeff Bezos Just Might Crack the Health Care Challenge (Fortune, 31 January 2018)

Jordan Weissmann, Can Amazon, Berkshire Hathaway, and JPMorgan Revolutionize Health Care? (Slate, 30 Jan 2018)

Wikipedia: Google Health

Updated 5 February 2018

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