The Digital Revolution and the Future of Healthcare

By Ama Sefa-Dapaah, Customer Engagement Analyst:  ama.sefadapaah@slalom.com
Slalom is a CHEF Platinum Sponsor

Traditional healthcare providers, payers, and technology vendors are rapidly being replaced by more non-traditional players who place a more consumer-focused view on their patients. A recent survey suggests that 81% of consumers are dissatisfied with their healthcare experiences and want their experiences to be individualized, seamless, and easy.

As a result of the healthcare industry being slower to evolve technologically, non-traditional entrants in the market are disrupting the way traditional players contribute to the industry. This leaves a door open for technology giants – who are already consumer-focused – to be effective disruptors of healthcare. Today we’ll investigate the major tech players disrupting healthcare and the impact on the industry as a whole. 

Major tech players in healthcare 

• Amazon, JPMorgan Chase, and Berkshire Hathaway

In 2018, Amazon, JPMorgan Chase, and Berkshire Hathaway announced that they will be forming an independent healthcare company, Haven, that will be assisting employees with finding healthcare. Although Haven is still a work in progress, it will be analyzing data that will direct employees to proper and cost saving care based on their conditions. They also announced a new machine learning service, Amazon Comprehend Medical, that will “mine data from electronic health records”. The service is a “HIPAA-eligible machine learning service that allows developers to process unstructured medical text and identify information such as patient diagnosis, treatment, dosages, symptoms and signs, and more.”

•  Amazon

Additionally, Amazon recently obtained a wholesale pharmaceutical distribution license and purchased online pharmacy startup PillPack. PillPack “delivers most of the medications consumers can get from their local drugstore packaged in convenient white packets so people will remember to take them, along with automatic refills and 24/7 customer support.”

Amazon could prove a formidable challenger, given their technology strengths and physical distribution networks, both of which could provide the a strong value proposition to their customer base. The U.S. spends about $500 billion annually on prescriptions – and the number is only growing. The drug market for prescription has mainly been dominated by CVS, Walgreens, and independent pharmacies. Amazon plans to increase their offerings to tap into a multi-billion-dollar industry. In addition, Amazon already has a relationship with millions of customers and a supply chain network that differs from current pharmaceutical companies. Their mastery of supply chain strategy includes warehousing, delivery, technology, and manufacturing. Pharmacies have some aspect of Amazon’s supply chain strategy, but face many challenges in order to match up to Amazon.

Delivery options may also set Amazon and PillPack apart. Amazon has partnerships with delivery companies such as FedEx and UPS, in addition to Amazon delivery vans and drones. This makes it possible for Amazon to quickly and effectively delivery to customers regardless of the location. As Amazon sets to enter the pharmaceutical distribution industry, traditional pharmacies will creating an advanced supply chain strategy, which should include technology and delivery.

• Alibaba

By 2020 the Chinese healthcare spending should reach $1 trillion. Alibaba, an e-commerce company, recently acquired Ali JK Nutritional Products, which sells medical devices, healthcare products, adult products, and healthcare services. This is a step in Alibaba’s “Double H” strategy, which aims to promote “Health” and “Happiness” and turns this transaction into the tightly integrated ecosystem in China. Alibaba Health – Alibaba’s joint venture/investment holding company that these transactions will be absorbed in – will now be able to leverage its analytics and product tracking platform and engage in healthcare e-commerce backed by intelligent technology.

Alibaba hopes to increase their revenue by offering omni-channel services to merchants on Tmall Pharmacy. Tmall is an online marketplace for Chinese consumers that offers a marketplace with trusted vetted brands and wholesalers. Integrating into the marketplace and leveraging strong analytical capabilities will help merchants be more closely connected with consumers. In addition, this move increased the overall consumer experience through targeted engagement and better healthcare product offerings. Consequently, Alibaba’s strategy has completely rearranged the Chinese healthcare industry where pharmaceutical companies work with doctors and pharmacy benefit managers for rebates, through Alibaba’s pharmacy arm, rebates all go away.

• Apple

Apple has also been investing heavily in the healthcare sector. Within the last year, Apple announced that they will incorporate electronic health record (EHR) data into health records on the iPhone. They announced the launch of HealthKit, a health record API that will allow patients to connect their phone health record to other apps that could use the data. The development of HealthKit helps support the idea of accessible health data. HealthKit can be incorporated into hospitals by monitoring health data “for meaningful variations and intervene via a home care visit or telemedicine connections when appropriate.” Disease management solutions is seen to be impactful in the healthcare industry. HealthKit does that by tracking and analyzing health data.

Apple’s access to various devices such as the iPhone, iPad, and Apple watch gives them an advantage compared to other EHR companies. HealthKit may augment an individual’s EHR and give patients the ability to access their EHR conveniently from their Apple devices. Other EHR companies such as Epic and Athena Health do not have personal devices like Apple to make EHR portable. Some more traditional healthcare providers, like UnitedHealth Group, hope to launch a version of a portable personal device for their payers, though they may find it hard to catch up with Apple in this space.

The future of patient experience

Technology companies have also been investing and innovating in areas such as smart devices, smart learning, and advanced analytics. They recognize that the traditional model of patients waiting to be diagnosed by a medical professional is being transformed due to the increased access to information, knowledge, and consumer data. Patients have more agency and higher expectations courtesy of the increasing availability of healthcare delivery models like telemedicine, home health, concierge care, and online self-help. Healthcare is now putting more focus on its user experience through more options for remote and home care delivery while reducing costs to the patients.

According to Forbes, “As consumers gain more choices over the way their healthcare is delivered, they will also increasingly be able to access treatments that are specifically tailored to their genetic makeup and health history.” With health solutions like HealthKit, patients will now be able to have their health and activity data integrated with other health applications like telehealth app MDLive. When patients use their MDLive app to interact with physicians remotely, those physicians can recommend a more personalized treatment plan thanks to the increased access to the patient’s data.

New entrants to the digital health ecosystem have additionally bolstered the revolution. The industry is now placing higher value on high-quality and cost-effective care. The revolution benefits the patients because they will be receiving high quality care for an affordable price. According to Business Insider,

“Digital health innovation offers market incumbents new opportunities to combat constricting margins, labor shortages, and rising costs. But it also poses a threat to slow movers, as new entrants lean on their digital prowess and lack legacy infrastructure to cut costs and remain nimble. As such, incumbents are turning to acquisitions, partnerships, and new investments to strengthen their digital health services.”

Common barriers to disruption

Established companies may be able to quickly strengthen their digital health services. New companies would have a higher product costs and longer product development due to the lack of legacy infrastructure compared to established companies. In addition, some traditional companies are resistant to change or not willing to collaborate with the emerging, non-traditional companies. Traditional healthcare companies fear that non-traditional healthcare companies will break their control of the industry. Regulatory barriers are another common barrier to disruption. Government policies often hinder innovation, when it comes to healthcare. For example, PillPack wants to use pharmacy technicians to transfer medications into PillPack. However, in Arizona, it is illegal for a pharmacy technician to do that.

The future of healthcare

The digital revolution has introduced non-traditional players into the industry with them trying to solve problems that have eluded the healthcare industry.  These technological giants are playing to their strengths of consumer focused delivery while trying to quickly understand the deep understanding of complex intertwined healthcare issues while placing patients at the forefront. Tech giant such as Amazon, Alibaba, and Apple have been making their mark in the healthcare industry by trying to develop solutions/services that patients love and is market viable. Even though these new players may not solve the underlying issues of our existing healthcare,  they could offer some answers to some of the biggest industry problems.  What is your organization doing to create a personalized, flexible, high-quality, and cost-effective care for patients that differs from your competitors and the new players coming into the space?