The next Big Tech battle: Amazon’s bet on healthcare begins to take shape

Millions talk to Amazon’s voice assistant every day with mostly mundane commands, like “play music” or “set timer 11 minutes for pasta”. At Houston Methodist hospital the very same technology instead hears: “Start surgery.”

Over the past year, a tie-up between the network of eight hospitals and its cloud computing arm Amazon Web Services has led to voice activation being built into an experimental operating theatre, powered by much of the same technology as found in the Alexa assistant. The commands start running through vital steps in the operation, allowing the surgeon to verbally confirm when he or she has taken certain actions, such as administering anaesthesia.

“It’s using my voice to complete those activities, so there’s never a step that’s missed,” says Dr Nicholas Desai, a foot and ankle surgeon and chief medical information officer at Houston Methodist. “Once it’s completed, [the assistant] writes it back to the electronic medical record as a completed activity, so if there’s ever an issue, or something doesn’t get done, there’s going to be a notification.”

In the physician consulting rooms at the hospital, Amazon’s technology is also listening intently — with the patient’s full prior consent, the hospital says — for details that can be added to health records and analysed for more informed treatment options. “My digital voice assistant is listening, partnering with me in the room, managing the care of that patient,” says Desai, calling it a “second set of ears”. He says any time spent talking to the patient, instead of tapping at a keyboard, equates to better overall care.

The system represents just one slice of Amazon’s plans to become just as ubiquitous in healthcare as it is in other markets, producing the tools and platforms to underpin an industry on the cusp of dramatic modernisation.

The company is in the process of unveiling a flurry of consumer-facing healthcare services, such as an online pharmacy and telehealth. At the same time, it is steadily developing its capabilities with AWS — an effort to create a new operating system for care that ranges from managing healthcare records to applying AI to predict when a person may become ill.

Amazon, long assumed to be a sleeping giant in healthcare, is finally awakening. Its target audience is striking in its breadth: the company is at once selling its healthcare credentials directly to consumers, to employers frustrated with costs, and to the hospitals and health networks responsible for administering care.

There is plenty of competition. It is up against fellow tech giants such as Google and Microsoft, with their own cloud and AI offerings, as well as a familiar foe in Walmart. The retail giant recently opened a number of clinics across the country offering “urgent care, labs, X-ray and diagnostics, counselling, dental, optical and hearing services”.

But if Amazon can navigate the competition — and a political landscape increasingly fearful of Amazon’s power — healthcare is set to be one of the biggest opportunities for the company’s new chief executive Andy Jassy, as he picks up after the departure of founder Jeff Bezos.

“They don’t need to crack the code overnight,” says Brent Thill, a Jefferies analyst. “But if they can figure this out, it’s like . . . ‘look out’.”

Big Tech push

In the US, the cost of healthcare has spiralled out of control. The US Centers for Medicare and Medicaid Services (CMS) projects expenditure in healthcare in 2021 to reach $4.2tn — around 18 per cent of gross domestic product — and $5tn by 2025. Much of the cost is saddled by employers. According to a survey carried out by the Kaiser Family Foundation, an overwhelming majority of executives — 87 per cent — said paying for the healthcare of employees would become unsustainable within the next five-10 years.

But at the same time, new trends are emerging. Devices that track our health are becoming smarter and more widely used. Improved and cheaper connectivity has made remote care not only possible but, for a growing number, a preference. Artificial intelligence, aided by the crunching of big data, has opened greater avenues for creating new treatments or care plans.

Big Tech companies believe they sit at the crossroads of these tantalising trends. On top of the businesses they are building internally, the collective healthcare investments of Facebook, Amazon, Microsoft, Google and Apple surged in 2020 to $3.7bn. Midway through this year, according to CB Insights, a further $3.1bn had been funnelled into the sector.

Where Amazon differs — and where it captures the attention of people like Desai — is its moves to launch what almost amounts to a healthcare service of its own, making use of Amazon’s existing infrastructure, not least its vast empire of warehouses and delivery drivers, to do for healthcare what it did for online shopping.

Desai outlines his vision for how the high-tech service could work: “I’ve got a medication delivery service, I’ve got Prime that can deliver the medications to you immediately. I’ve got voice driven activities with Alexa that can make your appointments, I can have you see your doctor visually, verbally and digitally.”

Employees first

Despite the obvious potential, there have been a number of false starts for Amazon in healthcare.

One headline grabbing moment came in 2018, when the company announced — in partnership with JPMorgan and Berkshire Hathaway — a joint healthcare venture named Haven, intended to reduce the costs and improve outcomes for the employees of the three groups.

The announcement immediately sent rival healthcare stocks tumbling — tens of billions of dollars worth knocked off competitors such as Walgreens Boots Alliance — but it proved premature. The initiative failed to get off the ground and, after three years, was closed down in January 2021. The companies said “good progress” had been made on the issue of improving employee healthcare and that they would continue to talk “informally”.

But postmortems from outsiders at the time concluded that even with the three company’s collective heft, it was still not enough to pressure established health providers into cheaper care.

Haven’s end also signalled something else: that Amazon was ready and able to go it alone in its goal of reducing the cost of care for its own workers. After all, its base of employees, now more than 1m in the US alone, has provided ample opportunity to roll out initiatives at great scale. One of which, a partnership with California-based Crossover Health, provides access to a network of health centres for Amazon’s employees, their spouses and their children. So far, it is available in five regions, with more expected to be announced imminently.

Amazon caused another market spasm in 2018 when it acquired PillPack, the New Hampshire-based mail order prescription service, only to leave it to operate almost entirely independently. Late last year, however, Amazon made the move everyone had expected, launching Amazon Pharmacy, which offers both delivery and discounts in brick-and-mortar locations such as CVS.

In July this year, Amazon launched Amazon Dx, a service that offers at-home testing for Covid-19, where people order a kit off Amazon.com and send it back for testing and results within 24 hours. It is likely to be just the beginning: job advertisements point to further ambition to roll out a number of different tests. One posting recently sought a person with “the skills and savvy to chart ambiguous or new territory with local, state and national regulators for clinical diagnostics”.

Analysts recognise a familiar pattern. Solutions created for Amazon’s own needs, such as having to test its warehouse workers for Covid, are now being retooled for use by others. As had been the case with AWS, which began as an internal computing system to power Amazon’s infrastructure, Amazon-powered healthcare is gradually being opened up to all.

“There are many large self-funded employers that are hungry for meaningful medical cost reduction,” says Jeff Becker, principal analyst for healthcare at CB Insights. “If Amazon can get that right, they will have another lucrative line of business on their hands. Right now they seem to be moving very quickly down that path.”

In March it announced its telehealth product Amazon Care would be offered to companies across the US. The service — which offers video chats with a doctor or nurse, 24 hours a day, as well as in-person visits in some regions — has been available to Amazon’s employees near its Seattle headquarters as part of a pilot since 2019. The service is administered via Care Medical, a third-party contractor.

Amazon has said “multiple” companies have signed up to use Amazon Care and the company has reportedly been in talks with major insurers, according to a Business Insider report in July, in an effort to become a benefit for tens of millions more patients. Amazon said it would not comment on speculation about its plans.

“We have to approach this with a sense of humility,” said Amazon executive Babak Parviz, speaking about Amazon’s health ambitions at a Wall Street Journal event in June. “We know that there is a lot we don’t know. But also with a sense of optimism. We do intend to do something good.”

The timing is ideal. According to McKinsey, use of telehealth services in the US was 38 times higher in February this year than it had been pre-pandemic, helped by a loosening of regulations relating to what kinds of care can be administered through an internet connection.

“Amazon will make the industry nervous,” says Arielle Trzcinski, a principal analyst with Forrester. “They have the flexibility to meet that consumer wherever they are, with whatever they need.”

An American public long frustrated by the complex web of the country’s healthcare system will be ready to welcome the “Amazonification” of care, suggests Glen Tullman, chief executive of Chicago-based health tech company Transcarent. Tullman previously founded Livongo, a health device company that partnered with Amazon on a number of initiatives, including the development of a voice-controlled blood pressure monitor.

“The industry has spent the last 20 years telling us they were going to make healthcare less confusing, less complex, less costly . . . and that hasn’t happened,” he says.

“Because [Amazon] doesn’t own hospitals, because they don’t have an existing structure, they can approach this de novo, which is they can say ‘We can do whatever is best for you’ . . . and there’s plenty of money in healthcare to make a profit.”

‘Land grab’

Jeff Bezos once described AWS as the “greatest piece of business luck in the history of business”, because it “faced no like-minded competition for seven years”.

Yet despite that head start, Amazon’s rivals in Big Tech were quicker off the mark when it came to providing cloud tools tailored specifically to healthcare providers. Microsoft and Google both currently have more publicly disclosed healthcare clients than Amazon, according to CB Insights.

“It’s not that the pace of innovation at AWS is lagging,” Becker says, “but that they started late. AWS was the last to get some key healthcare specific features that Microsoft and Google came out with first. One was high trust certification, so that hospitals trusted their infrastructure truly was safe.”

This is acknowledged within AWS, where efforts to make up for lost ground have stepped up over the past year. To bolster its credentials, in July the company launched AWS for Health, a selection of services tailored to healthcare providers. They included AWS Healthlake, a tool that uses machine learning to ingest and standardise health data.

“It’s a land grab right now,” says one person on AWS’s healthcare team, who has asked not to be named as they are not authorised to speak with the press. “A lot of hospital systems are basically making a decision: do we want to move our data from physical servers to Microsoft, or Google or AWS.”

In search of more applications to integrate, later this month Amazon will unveil 10 start-ups that form the first cohort in its AWS healthcare incubator program, a four-week intensive course intended to help prepare established but relatively small health tech companies for listing on AWS.

“It’s like the App Store,” the AWS employee explains. “They review the stability of your application, make sure you’re not doing anything illegal, meeting all the regulations.”

Among those enrolled to take part, according to three people with knowledge of the programme, are Pieces, a Texas-based company that uses AI to predict a patient’s condition over time. Another, Gyant, is a digital assistant designed to reduce the load on hospital call centres by directing patients to a chatbot instead. And Giblib — a start-up which produces Netflix-quality videos and virtual reality experiences for doctors. The clips contribute to the minimum requirements demanded by states in order for a practitioner to renew his or her licence.

Competitive market

The accelerator programme partly demonstrates the breadth of Amazon’s intended role in healthcare. But this is a position that may not be welcomed at a time of heightened political tensions surrounding the ecommerce giant — including calls from the likes of senator Elizabeth Warren for the company to be broken up.

“Amazon is facing significant concerns regarding how big it has become,” says Professor Robert Huckman, faculty chair of Harvard Business School’s healthcare initiative. “Adding healthcare into the mix, it’s yet another critical service. That would raise concerns from a consolidation perspective.”

Of particular worry might be the degree to which Amazon may look to play an even more pivotal role by owning its own clinics, or perhaps becoming an insurer, itself.

“If Amazon is able to bring more patients in directly under Amazon’s name, then they too will begin to get [medical records],” says Huckman. “The question that regulators will ask is, ‘How far are we willing to let these retail and technology companies go?’”

But Amazon’s defence in other industries — that it has a number of capable competitors — would ring particularly true in healthcare, where Amazon would be jostling against insurance companies like Cigna, as well as other retailers such as Walmart.

And for its front-line services, Amazon’s strategy depends on convincing consumers — many of whom will be older than the average ecommerce customer — to choose online services over physical locations they already use and trust. That’s a bigger leap than convincing people to try a new bookstore, argues Moody’s analyst Charlie O’Shea.

“It’s going to be a long slog, let’s put it that way,” he says. “If someone is comfortable with their pharmacy, and usually it’s close to the house, why would you switch?

“It’s going to take a lot longer, and be a lot more competitive, I think, than almost anything else Amazon’s tried so far.”