How Tech Giants Like Amazon and Google Are Changing Healthcare Strategies After a Year of Harsh Lessons – Business Insider
- In 2021, we saw Big Tech come up short in various attempts to disrupt the healthcare industry.
- But these growing pains are revealing the companies’ long-term strategies.
- They’re at a crossroads between sticking to what they know best and making big innovative moves.
Big Tech is going after healthcare with mixed results.
The stakes have always been high. Healthcare is too important and expensive — with too many unhappy doctors and patients — not to change, Dr. Bob Wachter told Insider.
“The big picture is healthcare is going to be transformed by digital in a major way. It just has to be,” said Wachter, the chair of the University of California, San Francisco’s department of medicine.
Big Tech companies like Apple, Amazon, Alphabet, and Microsoft made their trillions disrupting sluggish industries or inventing new ones. In healthcare, they could potentially bring their deep knowledge about how data should be harnessed and how systems should interact with people.
But all in all, 2021 saw splashy headlines from a few years ago turn sour.
Google’s 3-year-old venture, which wanted to organize the world’s health information, disbanded, as Insider first reported in August. Haven, a joint bet by Amazon, JPMorgan, and Berkshire Hathaway to cut healthcare costs with technology, shut down. Amazon’s pharmacy offering, which started with an acquisition that changed the way people think about CVS and Walgreens, is so far looking like any other mail-order service.
At the same time, Big Tech is still fighting. This year, Amazon launched a care-delivery business, as Insider first reported. Facebook’s reportedly making a wearable for next year and hiring people in digital health. Alphabet’s Verily is laying the framework for a clinical-data powerhouse.
Big Tech tends to repeat its mistakes in healthcare. The latest wave of flops is eerily similar to a decade ago, when Microsoft and Google launched personal health records that both shuttered. But with all the missteps, launches, and reorganizations, 2021 revealed that each tech giant, from Amazon to Apple, is emerging at a crossroads.
Companies like Amazon and Alphabet’s Verily are revving up to take on major healthcare incumbents like UnitedHealth Group with standalone health businesses that challenge the industry’s status quo and work directly with patients, albeit with partnerships. Others, especially Microsoft and increasingly Apple and Google, are taking an incremental approach of meshing health into existing products like cloud services and wearables. But regardless of which path the five big tech firms take, the initiatives themselves are getting more narrow. Amazon’s
business promises to improve primary care, not everything else.
That means we could see more of them try to walk before they run in 2022.
Microsoft is emerging as the poster child for steadily building a business that doesn’t necessarily compete with healthcare’s stakeholders, quietly tailoring its cloud business to their needs. Its biggest acquisition in 2021 — the healthcare artificial-intelligence company Nuance for $16 billion — advanced this strategy.
“It is harder than it looks. It’s going to take another 10 years or so,” Wachter said. “There will be some of the tech giants that do fine here, but it’s going to be after bumping around a lot.”
Big Tech’s catch-22 in health
Healthcare is a challenging industry, but the graveyard of Big Tech’s health bets is also about how these companies get in their own way.
One of the key challenges is a catch-22 about growth — going big in healthcare can be bad for the main business, but without going big, tech companies’ healthcare efforts won’t be worthwhile, much less make a dent in the industry.
Health products require nuance and come with regulatory constraints. Building them can be especially challenging in large companies that have competing priorities, said Deena Shakir, a partner at Lux Capital and a former health manager at Google, said.
“And these nascent projects would almost always inevitably not be prioritized internally over the revenue-generating parts of the Big Tech business, whose interests and incentives may not always be aligned with patients, let alone providers or payers,” she said in an email.
One way around that is mergers and acquisitions. Sari Kaganoff, Rock Health’s general manager of consulting, said that 2022 could be the year we see a Big Tech company make a major acquisition in healthcare.
Dr. Sachin Jain, CEO of Scan Health Plan, wants a Big Tech company to stop “dabbling” and buy a health system, then use it to show how its supposedly game-changing technologies can actually change the game.
“They need to go out on a limb and buy a big provider group and show the art of the possible,” Jain said. “And they need a grand, Elon Musk-sized vision around it.”
Another key problem is focus.
Big Tech, known for thinking big, actually needs to narrow its ambitions around fixable problems in healthcare, said Wachter, a former advisor to the first Google Health.
Apple, for example, has a “so what” problem in health, he said. By sending reams of data to doctors from the watches of countless healthy people, it’s not clear what problem they’re solving, Wachter said.
“They have to pull back their ambitions. They have to walk before they run,” Wachter said, referring to large tech companies. “And they have to make a fundamental decision. Are they willing to deal with being battered around in the healthcare world and having a lot of failures before they have successes?”
Big Tech companies are splitting on their strategies
After getting dinged up trying to compete with incumbents in healthcare, a few Big Tech companies and their peers are focusing more on how the industry can feed into what they already do and vice versa.
The best example of this in 2021 was Google Health.
The tech giant stood up the “product area” — just like YouTube or Google Cloud — just a few years ago. The venture combined Google’s many health teams with the goal of carving out a new business for Google in health.
In August, Google Health disbanded after struggling to land on a strategy, as Insider first reported, and its boss Dr. David Feinberg left for Cerner, the medical-records company.
Google is still working on many of the health objectives that Feinberg first outlined on the stage of a buzzy health conference in 2019.
But now the strategy is flipped on its head. The teams have been redispersed through the company to bake health into Google’s existing products. In December, it launched search tools that help patients find doctors in their network, for example, a glimpse into how Google’s new strategy can help patients.
It’s similar to what happened to Google.org, an organization that made products geared toward social impact like aiding elections. The teams there slowly dissolved with the same logic: Social impact should become part of Google’s existing products, Lux Capital’s Shakir said. This was a different team than the current Google.org, the company’s philanthropic arm.
“But in effect, it was a deprioritization of these product efforts,” she said in an email. “When teams get dispersed, so do their dedicated budgets.”
Apple Health also seems to be changing focus. Its secretive, standalone health bets are struggling, as Insider reported in October. It’s focusing more on its smartwatch, an Apple staple, and what it can offer patients.
Haven, too, led to its companies backing off outsized promises to change the industry. The Amazon-JPMorgan-Berkshire Hathaway venture made the entire industry flinch before it even had a name. It wanted to make healthcare cheaper using technology and started primary-care pilots.
After it shut down in January, JPMorgan launched a new effort dubbed Morgan Health with a much friendlier news release. It’s investing in startups and working with them to improve care for the firm’s employee population.
Focusing on their strengths while going toe to toe with the healthcare industry
The companies that stand a chance of getting embedded into the healthcare industry have done so by narrowing their approaches.
Verily, which spun out of Google in 2015, started out with a lot of buzzwords about hacking human health. But it’s been continuously reorganizing people and projects since late 2020 with the goal of creating sustainable revenue.
Verily’s work with employers is starting to take shape. And its clinical research is a major strategic priority. In June, Verily hired the US Food and Drug Administration’s Dr. Amy Abernethy to head up that side of the business.
Primary care is becoming a major area of focus for the likes of Amazon, Walmart, CVS, Walgreens, and startups like Carbon Health.
Amazon, too, has reorganized its health bets. Most recently, Amazon Care, Amazon Pharmacy, and Amazon Diagnostics have changed hands from Doug Herrington, the head of Amazon’s consumer business, to Neil Lindsay, the former boss of Prime, as CNBC reported in December.
Industry observers have speculated that Lindsay could put a Prime-like spin on these units, a compelling potential improvement with the pharmacy and care teams both struggling to differentiate themselves in the market and diagnostics just getting off the ground.
This is an area where Big Tech could find its voice, Kaganoff said. Amazon’s and the big retailers’ tech, plus tens of thousands of physical locations, could change the face of primary-care significantly, she said.
“Wouldn’t that be great if people could just get care easily?” Kaganoff said.
Though Big Tech hasn’t disrupted healthcare yet, incremental changes still have impact
One the one hand, these potential “disruptors” don’t have a lot to show for themselves if the goal is to change the cost of care, or access to it.
On the other, “horizontal” shifts, in which companies weave health into their existing projects, are often underappreciated, according to Myoung Cha, president at Carbon Health and a former Apple Health chief.
Think of Microsoft this year launching communication tools for doctors on Teams or Apple letting people share their health records with family on the iPhone. Small changes at companies that touch almost everyone’s life go a long way.
The cloud giants like Microsoft and Amazon are beefing up their health offerings. Google’s putting health and fitness metrics on its new watch, as Insider reported in December.
“Every small little thing that a tech company does to embed something that’s related to your health into the platform has profound impact, even though it doesn’t look like a big healthcare business,” Cha said.
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