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Cb insights amazon-in-healthcare-briefing
1. 1
How the tech giant is attacking the healthcare space
Amazon in
Healthcare
2. 2
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W I T H I N 2 4 H O U R S
4. 4
W H O W E A R E
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5. 5
T R U S T E D B Y T H E W O R L D ’ S L E A D I N G C O M P A N I E S
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Beti Cung, Corporate Strategy, Microsoft
6. 6
I N D U S T R Y - S C A L E S U M M I T S C L I E N T - O N L Y E V E N T SP E E R - T O - P E E R
N E T W O R K
The CBI Community — Membership Has Benefits
DEMO DAY
7. 7
Nikhil Krishnan
A B O U T T H E A N A L Y S T
Nikhil Krishnan is a senior analyst at CB Insights, where he produces data-
driven analysis and research reports on trends in digital health and
healthcare broadly. He sends the weekly Digital Health Insights newsletter
to 55K+ members. His research has been featured in The Economist, New
York Times, Wall Street Journal, and more.
Most popular analyses by Nikhil:
Oscar Health Insurance Strategy Teardown
Apple In Healthcare
Google In Healthcare
@nikillinit | nkrishnan@cbinsights.com
Senior Analyst
8. 8
Contents
-
-
Advantages, Philosophy, and Approach
Where Amazon Should Enter Healthcare
Amazon, the Pharmacy
Claims Administration and Health Benefits Management
Amazon and Medicare/Medicaid management
Amazon for Providers
Amazon in the Lab
-
-
-
-
-
9. 9
A M A Z O N I N H E A L T H C A R E
Advantages,
Philosophy, and
Approach
10. 10
Some of the trends Amazon is riding
Generics are a bigger and bigger part of prescription drug shareMore employers are self-insuring
More people have high-deductible plans Administrative overhead has exploded
Wall Street Journal, Optum, Kaiser Family Foundation, Athenahealth
11. 11
Amazon has a lot
of non-healthcare
revenue
Amazon clearly has cash
and a growing revenue
stream that it can use to
invest in healthcare.
More importantly, this
means that Amazon
doesn’t need to make
money on their healthcare
ventures, and can instead
use it to make its
ecosystem and Prime
membership more
valuable.
Amazon’s cash and revenue over time
Amazon income and balance sheet, 2015 - 2017
12. 12
Amazon has a large testing ground and
aggregated consumer demand
1.2M employees between
Amazon-JPM-Berkshire
5M estimated
sellers on Amazon
2020
TechCrunch, Enterpreneur
310M
Active Customers
(100M Prime Members)
13. 13NPS Benchmarks
People like
Amazon
Amazon is entering the
healthcare with an edge
that existing companies in
the space don’t have –
brand. As Amazon aims
to create a consumer-
driven healthcare
initiative, it’ll be hard for
existing incumbents to
shed that brand and
internal company ethos.
62
12
Amazon Health Insurance (average)
Amazon’s NPS is much higher than that
of health incumbents
15. 15
Amazon = platform + back end infrastructure
for business
Fulfillment By Amazon handles delivery, inventory
management, and customer returns
AWS handles datacenter management and
associated cloud services
16. 16
Amazon’s playbook
1. Invest in large, upfront, fixed cost
aspects of a business (e.g warehouses,
data centers)
2. Bring standardization to messy,
unstructured, and fragmented back-office
functions (e.g. logistics)
3. Add transparency and a platform for
companies to distribute goods and services
Companies can focus on their core
competencies and outsource the rest to
Amazon
17. 1717
“I have devoted my public health career to building scalable solutions for
better healthcare delivery that are saving lives, reducing suffering, and
eliminating wasteful spending both in the US and across the world. Now I
have the backing of these remarkable organizations to pursue this mission
with even greater impact for more than a million people, and in doing so
incubate better models of care for all. This work will take time but must be
done. The system is broken, and better is possible.”
Atul Gawande,
CEO of Amazon-JPMorgan-Berkshire Health Initiative
A T U L G A W A N D E : F O C U S E S O N S T A N D A R D I Z A T I O N A N D S C A L A B I L I T Y
18. 1818
“Reinventing medical care could produce hundreds of innovations. Some may be as simple as giving
patients greater e-mail and online support from their clinicians, which would enable timelier advice
and reduce the need for emergency-room visits. Others might involve smartphone apps for coaching the
chronically ill in the management of their disease, new methods for getting advice from specialists,
sophisticated systems for tracking outcomes and costs, and instant delivery to medical teams of up-
to-date care protocols. Innovations could take a system that requires sixty-three clinicians for a knee
replacement and knock the number down by half or more.”
Atul Gawande,
CEO of Amazon-JPMorgan-Berkshire Health Initiative
A T U L G A W A N D E ’ S R O A D M A P ?
19. 1919
Who’s at risk?
• Middlemen that are value extractors and have large profit
margins
• Companies that focus on formatting or coordinating information
• Areas where customer experience has been an afterthought
• Companies that have relied on opaque pricing as a business
model
20. 20
A M A Z O N I N H E A L T H C A R E
Amazon, the Pharmacy
24. 24St. Louis Post Dispatch
Amazon goes for
the wholesale
licenses first
Amazon reportedly
received approval for
wholesale pharmacy
licenses in 12 states.
Original speculation was
that this was going to be
used for business-to-
business selling since
Amazon still didn’t have
pharmacy licenses.
However…
28. 2828
Potential next steps:
Fill out the rest of the pharma supply
chain and expand offering to self-insured
employers and smaller health plans
29. 29Consumer Reports
Cash paying
customers are an
easy first target
While cash paying
customers are a small
percentage of the
population, there is a wide
disparity in how much the
same goods can cost
across pharmacies. In
some cases, these cash
deals can be even
cheaper than thorugh
health insurers, and it
bypasses PBMs.
Prices for cash paying customers for a basket of drugs
30. 30Fortune
Build out retail
pharmacies for
same day
delivery
While PillPack is great for
regular medication users
with predictable
schedules, Amazon needs
to complement that with
quicker delivery. It can do
this by building out
pharmacies/delivery hubs
in Whole Foods as well as
partner with independent
pharmacies.
31. 31
Offer negotiated
rates to self-
insured
employers
Amazon can offer
employers and small
health plans the
pharmacy benefits that
PBMs traditionally provide
(aggregate leverage to
provide discounts, access
to pharmacies for
medications, etc.)
Self-Insured Employer
Health Plan
PBM
Contracts for medical benefits/
physician network
Option 1: Contract with PBM
directly for pharmacy benefits
Option 2:
Health Plan sub-
contracts with
PBM to include
pharmacy benefits
32. 32
Do employers want to use PBMs?
National Pharmaceutical Council
Survey of 88 large employers suggest that
they’re willing to adopt alternatives and don’t find the incentives
totally aligned
33. 33
The impending Drug Supply Chain Security Act
opens an opportunity for Amazon to create an
FBA for drug manufacturers
Cardinal Health
34. 34
Could Amazon get a manufacturing pharmacy
license? UPS is already moving in this direction
"As a repackager, [UPS is] not just taking the product as it is from
the manufacturer. It's being able to the product and individualize it
and split it up into different units. Becoming an FDA-registered
relabeler means UPS now has the ability to take products from a
manufacturer, relabel them, and sell under their own label or brand.
Because of FDA requirements, we will soon know what UPS will
relabel, as each FDA registrant must list each drug that it
manufactures, repacks, relabels, or salvages for commercial
distribution.“ - Nicodemo Fiorentino, a drug supply chain and
compliance attorney
Supply Chain Dive
35. 35
A M A Z O N I N H E A L T H C A R E
Claims Administration
and Health Benefits
Management
36. 36Tech Tamma
Medical billing is
complicated
The lifecycle of a claim
sees many steps with
various middlemen (e.g.
clearinghouses) and lacks
standardization. The
process is also slow –
laws are in place to
prevent claims from
taking more than 30-45
days.
37. 37
Better claims
processor =
better CX
Oscar has spent the last
few years building its own
modern claims
processing system. This
allows it to do things like
pay doctors more for
working peak hours like
evenings and weekends,
or give members a clearer
sense for how much
procedures or tests will
cost them.
38. 3838
“When we started Collective Health, we thought we would partner with a TPA [Third Party Administrator] to handle
the ‘boring’ part around claims adjudication - which is a small - but important - part of what we do. We went around
the country to meet with dozens of TPAs, but we quickly realized the technology at the core of these businesses
wasn’t capable of powering the transformation in the healthcare experience for members and employers we were
creating.
We eliminated common frustrations by rebuilding the healthcare experience with modern technology. This has
allowed us to build a unique and drastically improved member experience and has allowed us to give employers the
tools to intelligently and easily manage their health plans.”
Rajaie Batniji,
Co-founder of Collective Health
C O L L E C T I V E H E A L T H E S C H E W S T P A S F O R C U S T O M E R E X P E R I E N C E
Quora
39. 3939
Grand Challenge is also working with AWS on a project, internally dubbed Hera, which involves taking
unstructured data from electronic medical records to identify an incorrect code or the misdiagnosis of a
patient. The technology captures patient data that a physician may miss, and can help remove the
inaccuracies for insurers as they assess a population's risk.
Grand Challenge is starting to pitch Hera, which has been in development for at least three years, to
commercial health insurance companies, according to two people familiar with the effort.
I S A M A Z O N P L A N N I N G T O B U I L D
I T S O W N C L A I M S P R O C E S S O R / C L E A R I N G H O U S E ?
40. 40
A Benefits
Marketplace
Once Amazon sets up a
system that handles the
messy back-end for both
employers and healthcare
service providers, it can
set up a benefits
marketplace that removes
the payments and
coordination hassle for
both parties. This
platform + back-end-as-a-
service play has worked
for it in e-commerce.
Cost of genetic testing
Pharmacies
Lab testing centers
PCP/Urgent Care
Wellness benefits
Etc.
Employer A
Employer B
Employer C
Employer D
Employer E
Claims Administration,
Payment, Scheduling, etc.
41. 41
Amazon could offer stop-loss insurance via
Berkshire Hathaway
Stop-loss insurance helps to protect self-insured employers
from catastrophe scenarios. Berkshire’s specialty insurance
subsidiary announced its medical stop-loss division in 2016.
This playbook looks similar to what Collective Health
has done with Sun Life Financial, which also offers
stop-loss insurance.
42. 42
A M A Z O N I N H E A L T H C A R E
Amazon and
Medicare/Medicaid
Management
43. 43
Amazon Prime has low penetration/higher
growth prospects in low income and older
populations
Recode, Prosper Insights
44. 44
Medicaid + Medicare + Dual Eligible Patients
• There are 52M+ Medicare beneficiaries,
71M+ Medicaid beneficiaries, and 10M+
dual eligibles
• Medicare and Medicaid spend topped
$1.3T in 2017
• Spend is concentrated in sickest 10% of
patients
• Biggest issues are lifestyle
management, coordination across
diseases, and consistency in access to
care
Macpac, Kaiser Family Foundation
45. 45
Expansion of
coverage
CMS plans to expand its
definition of health-
related benefits that
Medicare Advantage
plans can cover. This
could include healthy
groceries, air conditioners
for people with asthma,
non-emergency medical
transportation, and more.
Telemedicine-only visits
are also slowly making
their way into Medicare
reimbursement.
CMS, Healthcare IT News
“As part of today’s announcement and guidance, the agency is reinterpreting the
standards for health-related supplemental benefits in the Medicare Advantage program
to include additional services that increase health and improve quality of life, including
coverage of non-skilled in-home supports and other assistive devices. CMS is expanding
the definition of ‘primarily health related.’ Under the new definition, the agency will
allow supplemental benefits if they compensate for physical impairments, diminish the
impact of injuries or health conditions, and/or reduce avoidable emergency room
utilization.”
"Under this proposal, Medicare will start paying for virtual check-ins, meaning patients
can connect with their doctor by phone or video chat…Many times this type of check-in
will resolve patient concerns in a convenient manner that gets them the care that they
need and avoids unnecessary cost to the system. This is a big issue for our elderly and
disabled populations where transportation can be a burden to care as well as to
caregivers. We’re not intending to replace office visits but rather to augment them and
provide new access points for patients.“ – Seema Verma, CMS Administrator
Expanding definition of primary care
Covering telemedicine visits
46. 4646
Can Amazon leverage its relationship
with members at home to become a
Medicaid/Medicare manager?
47. 47
Not a joke
"Something...we've been building for some
period of time and we deeply care about...
relates to what happens to older
people…We have looked at the older
population in the context of health... and
we know this group has a lot of issues and
unmet needs.”
-Babak Parviz, Amazon’s vice president of
special projects
Amazon in talks with AARP
CNBC
SNL does a skit for the Amazon Echo Silver
48. 48
Amazon Prime +
Medicaid
Amazon has begun its
outreach to Medicaid
beneficiaries by offering
Amazon Prime for the
discounted rate for
$5.99/month. At the
moment, it doesn’t give
any discounts for Amazon
Fresh or Prime Pantry, but
is a possibility if it works
with Medicaid carriers.
Members do get
discounts for Amazon
Family, though.
49. 49
Amazon can use meal tailoring to boost its
Amazon Fresh and Pantry businesses
Health Affairs
50. 50
Can Amazon
leverage the
Echo?
As the smart home race
heats up, can Amazon
turn the Echo from a nice-
to-have to a necessity for
Medicaid/Medicare
patients? By adding
healthcare functionality, it
can increase the utility for
existing Echo users. It
could potentially also get
subsidies from carriers,
especially since the new
Echo products have
cameras.
52. 52
The Echo can help manage home care
Alexa for monitoring and adherence Amazon + telemedicine?
CB Insights, JPMorgan Chase
Echo could monitor medication adherence.
The company could also monitor for falls,
and already has patents for monitoring blood
flow.
“We will be hiring a strong management team to
start working on some of these critical problems
and issues:
• Empowering employees to make better choices
and have the best options available by owning
their own healthcare data with access to
excellent telemedicine options, where more
consumer-driven health initiatives can help.
• Developing better wellness programs,
particularly around obesity and smoking — they
account for approximately 25% of chronic
diseases (e.g., cancer, stroke, heart disease and
depression).”
-Jamie Dimon, JPMorgan Chase CEO
Amazon could use the Echo as a medium of
communication for caregivers, coaches, digital
therapeutics companies, family members, or
potentially even physicians.
52
53. 53
The Echo can help manage home care
Allows seniors to verbally report
medical data, get exercise and
adherence reminders, call a
caregiver, and coordinate transport
Development of Third-Party Alexa Apps
55. 55
A M A Z O N I N H E A L T H C A R E
Amazon for Providers
56. 56
Administrative
overhead has
exploded
The healthcare system is
continuing to throw more
humans into the mix,
increasing administrative
costs and middlemen
layers. There are different
potential reasons for the
explosion of
administrators, but many
point to the onerous
regulatory requirements
that require extensive
tracking and coordination.
Athenahealth
57. 5757
Can Amazon revamp the IT
infrastructure and interface at
hospitals/clinics to reduce the admin
overhead?
58. 58
Potential strategy to get into providers
A M A Z O N + H E A L T H I T
B A C K W A R D S I N T E G R A T E
I N T O E X I S T I N G
S Y S T E M S
A G G R E G A T E U S E R S
W I T H A B E T T E R U S E R
I N T E R F A C E
S L O W L Y R E P L A C E A L L
F U N C T I O N S O F T H E
S Y S T E M A N D B E C O M E
T H E P R E F E R R E D B A C K -
E N D + P L A T F O R M
1 2 3
59. 5959
Example 1: Using Alexa to integrate
and become the electronic medical
record (EMR)
60. 60
A case study…
• Premier Health, a medical network of
five hospitals and two major health
centers spent as much as $1.6M to
implement voice recognition software
integrated with an electronic medical
records system from Epic Systems
Corp
• The software reduced “clicking fatigue”
by 90 minutes a day for doctors
• Estimated first year savings on labor
and productivity are $1.3M
Digital Commerce 360
61. 6161
"We definitely need to make that transition into the HIPAA-
compliant framework before we can build out fully-enabled
skills that have all the patient's health information on demand.
"I'd say there's definitely a future vision of voice being able
to drive a lot of the interface or interactions that clinicians
have with the medical record and other reference data sets
around patient information, just because it's such a deep
amount of information you have to process about a
patient…Pulling those things via voice commands is really
powerful and I think that's probably the future of voice in
healthcare.“
-Matt Murphy, ex-Digital Health Innovation Lead at Boston’s
Children’s Hospital
A L E X A I S E N T E R I N G T H E H O S P I T A L
MDDI Online
63. 63
Suki is a virtual scribe that can input
data into the EMR via voice. Alexa could
potentially do something similar, and in
the process build the pipes into its own
EMR offering.
Select Investors
Social Capital, Venrock, First Round
Capital
C O M P A N I E S W O R K I N G O N V O I C E + E M R S
Funding
$20M
S I M I L A R C O M P A N I E S
65. 65
Hospital supply chains are expensive and
middleman heavy
A M A Z O N + H E A L T H I T
Navigant
Manufacturer Distributor Group Purchasing Organization
(GPO)
Hospital
Hospitals spend
approximately 30% of
operating expense on
supply chain with that
number expected to
increase
66. 66
Amazon
Business
Amazon’s B2B division
offers low-risk commodity
products that don’t
require a specific supply
chain (e.g. cold chain).
This includes
stethoscopes, gloves, etc.
Amazon has more
success with smaller
clinics than large
hospitals, which have
stakes in GPOs and can
get all their products from
existing distributors.
67. 6767
"We gave [Amazon] a piece of our supply
chain to see whether they could get us
better pricing and the answer to that was
no."
R E L Y I N G O N S I Z E / D I S C O U N T S W I L L N O T W O R K F O R A M A Z O N I N I T I A L L Y
Healthcare Dive
Steven Corwin,
CEO of New York Presbyterian
68. 6868
Amazon Business claims a number of their healthcare customers have
seen their labor costs cut by more than half — and it's not just big hospitals
they are going after
.
“When an employee sits down at work, and they see Amazon, they
already know exactly what to do — they don’t even need to be trained…
The procurement tools often feed back into an ERP (enterprise resource
plan) or financial system that has a very standardized general ledger
that does really well when it’s a repeat order, but isn’t very good at
anything new,” Holt said. “We’ve been building technology to integrate
backwards into all of these systems, even to enable EDI (electronic data
interchange) transactions,” allowing Amazon's system to fully interact
with the healthcare system’s.”
N E W M E T R I C S : P R O D U C T I V I T Y , I N T E R F A C E , A N D B E T T E R P R O C U R E M E N T
Chris Holt, Global Healthcare at Amazon
Healthcare Dive
69. 69
First improve
efficiency, then
introduce the
marketplace
If Amazon can bring on
customers with the
promise of better usability
and improved efficiency,
it can eventually use that
as a lever to get more
systems onto its
marketplace, and increase
the number of suppliers
for customers.
70. 70
Amazon could also go the consumer route for
medical device delivery and monitoring
CNBC
The physician can order all the
supplies the patient
needs directly for the patient
powered by Amazon
71. 7171
[Whole Foods CEO, John Mackey’s] second idea is even more grandiose: a Whole Foods medical clinic.
He says he was inspired by Rosen Care, an employer health-care program run by Rosen Hotels & Resorts
in Orlando, which offers employees an on-site company-owned medical facility. The clinic has a staff of
38 health-care practitioners serving 5,300 employees and places an emphasis on nutrition and preventive
medicine, which company founder Harris Rosen says has reduced his per-employee health-care costs to
about half the national average. Mackey met Rosen at a health-care conference last summer in Las
Vegas, then traveled to Florida to tour the clinic. He’s considering rolling out Whole Foods clinics to
employees—and even, perhaps, to customers.
A M A Z O N B E C O M E S T H E P R O V I D E R : W I L L C L I N I C S E N T E R W H O L E F O O D S ?
Bloomberg
72. 72
A M A Z O N I N H E A L T H C A R E
Amazon in the Lab
73. 73Forbes
The cloud wars
are heating up
Amazon, Microsoft,
Google, and many other
large tech companies are
competing in their
offering of cloud services.
Several of these
companies see healthcare
as a high growth area due
to the vast amount of
data that’s being
produced and the need for
high performance
computing to make sense
of it.
77. 77
Amazon can drop the cost for small labs the
same way AWS did for tech startups
Outsourced services to
clinical research
organizations (CROs)
become a major cost
component as companies
scale.
Perlara Open Finances
9%
Lab Supplies
20%
CRO
29%
Wages
13%
Taxes
14%
Overhead
15%
Other
Perlara PBC’s 2016 expense report
Amazon can facilitate
the market place for
these companies to
compare and shop for
services
11%
Lab Supplies
23%
Wages
8%
Service
Providers
42%
Capital
Equipment
9%
Screening
Compounds
7%
Other
Perlara PBC’s 2014 expense report
Large fixed costs in the
form of capital
equipment exist for
early stage biotech
startups
Amazon can
outsource those
fixed costs, similar
to what it did with
datacenters for
AWS
78. 78
Transcriptic operates an outsourced
robotic lab. You send in your samples,
run your assays, and it sends back raw
and analyzed data. Amazon could build
or acquire something similar to lower
the equipment cost for small labs.
Select Investors
Data Collective, Y Combinator, Google
Ventures
T H E O U T S O U R C E D L A B
Funding
$26M
S I M I L A R C O M P A N I E S
79. 79
Amazon can facilitate the marketplace for other
services as well
AWS marketplace Marketplace for other CRO services
79
80. 80
Can Amazon recreate this for the lab?
Both Sides Of The Table
$5,000,000
$500,000
$50,000 $5,000
2000 2005 2009 2011
Cloud + AWS
Amazon can allow small labs to outsource fixed costs to them while also building a marketplace
and finding future AWS clients through the process
Costs to launch an internet tech startup (approximately)
Open source + horizontal
scaling
Developers start
companies
82. 82
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