What you need to know about the forces reshaping our industry.

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Executives rank Amazon as the most likely to disrupt health care—are they right?

September 11, 2018

Regardless of actual moves by potential disruptors, the perception of disruption in health care is palpable among health care executives. A recent Reaction Data survey found that 59% of respondents see Amazon as the entrant that will have the largest impact on the market (for comparison, Apple was a distant second at 14%). High resource availability, market influence, name recognition, and the ability to distribute products were listed as some of the top factors that could make Amazon successful in the industry. (Although it's worth noting that executives in the survey said Apple, Google, and IBM were more closely associated with the topics, "technology" and "predictive analytics.") 

The Health Care IT Advisor's recent Digital Health Systems presentation included an overview of what the "big five" tech vendors have done so far in health care. These moves, which are significant, largely follow two routes: The first is to do business with health systems and companies within the industry, and the second is to use technology platforms to create new delivery channels.

Narrowing in on where Amazon has the best disruption opportunities related to provider organizations, we see five, and they are not to be ignored. Slowly but surely, Amazon is establishing key partnerships to pressure test new business models and competitive distribution.

1. Become the new medical supply ordering system

Expensive and middleman-heavy, the medical supply chain is ripe for disruption—and Amazon aims to do just that. Amazon Business, the tech giant's B2B purchasing arm, provides a marketplace for low-risk commodities such as stethoscopes, gloves, and biopsy forceps.

Movement in this space will take time; many health systems have stakes in group purchasing organizations, which they would need to abandon, and because Amazon doesn't offer all needed supplies, many prefer to get all their products from existing distributors. Because of this, they are struggling to deliver immediate financial benefits to their customers.

But Amazon has the building blocks for long-term success. The company's marketplace model, user-friendly interface, streamlined workflow, and backwards integration into existing systems and processes, has tremendous potential to deliver savings through productivity gains and price-transparency. This promise of better usability and increased efficiency may allow Amazon to attract more customers and bring in more suppliers offering better deals.

2. Become the premier enabler of post-visit communication and delivery

Amazon recently announced a partnership with Xealth, a digital prescribing platform. This move will allow clinicians to recommend bundles of medical products to patients directly from the EHR and have those products delivered to patients' homes upon discharge. Pilot projects, which are still being reviewed, will begin at Providence Health & Services and University of Pittsburgh Medical Center (UPMC). The organizations hope to improve patients' experience by providing them with discounted, easy access to the medical supplies and other goods they need via Amazon Prime and may save time for providers, whom patients commonly call if they misplace or forget their discharge instructions. This partnership could also allow providers to prescribe Amazon Echo-based digital therapeutics through the same system.

3. Become the preferred back-end platform for existing IT systems

For years, Amazon has been supporting health care IT systems through Amazon Web Services. Their partnership with Cerner, announced in November 2017, to provide more robust cloud computing services, gives Amazon increased access to the large health systems that make up Cerner's market share.

In addition to enhancing system data storage and analytics capabilities, the opportunity for Amazon to integrate Alexa, their voice command-based virtual assistant, in the EHR is promising. Health care providers are already experimenting with ways to use voice-based tools to improve care quality and increase operational efficiencies. One of these organizations, Boston Children's, envisions using Alexa to provide clinicians access to patient data through voice command. Although not HIPAA-compliant just yet, sources report that Amazon is currently addressing the need for a HIPAA-compliant framework.

4. Become the provider

Amazon is already making strides in this area by opening primary care clinics for employees at its Seattle headquarters. These clinics are intended to increase employee access to care and reduce the likelihood of more costly care episodes. Amazon is keeping the operation in-house and doing its own hiring, a telling decision that could signal an intent to expand and implement onsite clinics for other employers or establish retail clinics available to the public. With their 2017 acquisition of Whole Foods, this publicly available offering could be housed within the health-focused supermarket chain, an idea in which Whole Foods Market CEO John Mackey has expressed interest.

5. Become the industry leader in delivering a reliable consumer experience

This final opportunity is broad in scope. Amazon already corners the market on consumer loyalty with its existing platform. As the company continues its entry into health care, it will bring with it a consumer-centric approach and focus on building a reliable platform. In particular, as a health care provider, Amazon will be able to deliver a simplified consumer platform that supports long-term loyalty. Similarly, as a provider of back-end functionality, Amazon will be able to help incumbent organizations achieve this same goal.

How should health systems respond to the threat of disruption?

External disruptors pose both a threat and an opportunity for incumbent health care organizations (HCOs). HCOs must build the digital capabilities necessary to redefine their business and care delivery models in the face of outside disruption, as well as create a foundation for partnership opportunities with these new players.

IT plays a critical and enabling role in this self-disruption. We have identified 10 foundational competencies essential to IT-enabled digital innovation and transformation, grouped into five overarching steps:

  1. Align IT-related activities with business needs through good governance and strategy processes;
  2. Earn credibility to participate in innovation by managing "keeping the lights on" costs and providing a stable, reliable, scalable, and secure operational backbone;
  3. Build the capabilities to exploit technology assets using advanced analytics and interoperability capabilities;
  4. Ensure availability of adequate skills and resources through talent management and partner management; and
  5. Build upon existing skills to improve IT departmental and organizational agility and help change the organization's culture regarding innovation.

If you want to learn more about these competencies, listen to our webconference recording "Digital Health Systems: The Innovation Journey Continues".


October 17 webconference: Health Care IT 101

Join our 30-minute session to learn about critical health IT capabilities and the rise of digital-enabled strategies in health care.

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