Market Shifts and the Future of Healthcare

Unpacking Healthcare Acquisition and Innovation Trends with the Propeller Healthcare Team

Mergers and acquisitions in healthcare have been on a tear with many large acquisitions hitting the news this year. From CVS increasing its market share with the purchase of in-home healthcare company Signify Health to Microsoft’s $19B purchase of Nuance, a company specializing in conversational AI solutions, to a 10-year collaboration between Walmart and UnitedHealthcare to offer value-based healthcare plans to Amazon’s $3.9B deal to acquire primary care company One Medical — there’s been a lot of activity.

These acquisitions and partnerships reflect the opportunistic moves companies are making in today’s fast-changing and growing healthcare industry — and highlight the challenges that come along with it.

Along with Amazon’s recent acquisition also came its decision to shutter its telehealth arm Amazon Care. To some, this signaled a failure — another unsuccessful attempt by big tech to disrupt the healthcare industry. But there’s a lot to unpack as technology and non-traditional healthcare companies continue to enter, exit, and collaborate in the space.

Here are what these shifts signal to our healthcare team and the underlying market trends they demonstrate.

Q&A with the Propeller Healthcare Team on Healthcare Challenges and Opportunities

What’s your reaction to the news that Amazon’s shutting down its telehealth arm? What do you think went into the decision and what does this signal?

LEAH ELSTROTT, MBA

“Working at a healthcare startup and a large multi-state healthcare delivery system, I have personally experienced the friction associated with innovation. Now Amazon has too. This doesn’t signal that they are bowing out of healthcare, but rather that they are embracing the fail fast, learn fast mentality. Amazon Care was a pilot with its employees. As with any pilot, they had to analyze the outcomes before deciding what to do next. While they have made the decision to discontinue Amazon Care, they have also made several strategic partnerships and acquisitions in the past few years and are in the process of more. This indicates their commitment to the industry, albeit a different approach. They realized buying was going to be faster and better.” 

There can still be wins from an unsuccessful pilot. The key is learning as much as possible from a pilot in order to rethink your approach.

“Amazon's size and presence still make it a strong contender for innovation, and this news perhaps only furthers my confidence that they are willing to take risks to disrupt the industry. The question is whether they will learn from this experience and pivot in a more purposeful direction.”


What is different about the healthcare market that makes it so challenging to disrupt?

KENDALL WOMACK, MS, NREMT

“For tech companies looking to enter this new industry that is wrapped in complexities and regulations, there are a lot of obstacles. There are five challenges I think companies like Amazon are not well-positioned to address.”

5 Challenges Facing Healthcare Disruptors
  1. Staffing: The ability to hire sufficient provider staffing in a time of provider shortage is a very real barrier across the industry.
  2. Credentialing + Telehealth: Addressing state-level licensure requirements to treat patients physically located across the U.S. is challenging. There’s a barrier to hiring and staffing telehealth, given that current state and federal regulations have ever-changing requirements for providing care outside of a provider’s licensure range.
  3. Sharing + Accessing Patient Information: Getting information regarding a patient's past medical history, without access to previous medical records, is frustrating for providers and patients alike. Without digital solutions for the rapid release of patient information to an approved provider, access often remains limited to existing healthcare systems and stand-alone retail providers.
  4. Privacy & Security: There are significant considerations and federal regulations around tech platforms capable of securely storing a patient’s protected health information (PHI). Even for long-term healthcare players, challenges related to data architecture, capacity, and security for storing patient data over time in a highly regulated industry remain.
  5. Payment Model: Disruptors either charge patients an out-of-pocket rate, which will impact pricing and dissuade insured people from using the services, or they must manage insurance claims and the reimbursement process. For large companies used to driving delivery models, managing patient expectations and navigating insurance reimbursement can be difficult and not as lucrative as expected. 

Related Content: Embrace Value-based Care Models with Bundled Payments
Related Content: Reduce Healthcare Burnout with People-First Staffing Strategies

While not an exhaustive list, the above list showcases some reasons why healthcare is a difficult market for nontraditional disruptors. That said, there are advantages to being new to the industry.


What are the benefits of having new players enter the healthcare market?

No single company can solve the challenges facing the U.S. healthcare market. Companies like Amazon or Walmart could be well positioned to challenge some of the most persistent barriers to healthcare access if they can organize their business to benefit from consumer behaviors and engagement that prevent more costly utilization later, like annual screenings and clinically appropriate diagnostics.   

MADELINE PEYTON, MPH

“Healthcare disrupters could support improved rural internet access and connectivity to help consumers access telehealth in areas with some of the worst access to care, potentially saving in hospitalization costs later. For example, Amazon’s acquisition of One Medical is also an opportunity to manage primary care end to end, potentially exposing opportunities for new and improved healthcare IT vendor partnerships and collaboration to align more meaningfully to interoperability standards and personalized care. Capitalizing on these opportunities requires an organizational shift from building fast to building for the long term.” 

A good example of new players succeeding in the healthcare technology space is the rise of software designed to support decentralized clinical trials (referred to as clinical trials management systems or CTMS). This is an estimated $1.6 billion market with major companies like Oracle trying to capture their share. These systems allow researchers and manufacturers to launch more targeted trials and analyze data faster, and they can support efforts to increase diverse participation in clinical trials. CTMS proliferation in the last five years is a strong sign that technology companies can combine the speed and agility of consumer technology with healthcare expertise to successfully comply with and excel in arguably the most tightly regulated space in healthcare.

“New players in the space can learn from Amazon’s first primary care attempt and the success of new technology in the clinical trials space to build solutions that address clinical, compliance, and consumer-centric needs in meaningful partnership with experts and end users.”


What are future trends to watch for? And how do they affect non-healthcare companies’ ability to effectively disrupt the industry?

Activity in healthcare from the private sector is likely to continue and with greater velocity.  The big players, such as Amazon, CVS, Microsoft, Walmart, and others, will continue to reach new heights while also paving the way for other companies and startups to disrupt every corner of healthcare.

JEFF ANDREWS

“The very nature of the private sector to move fast means that private companies can reach underserved populations with less red tape than government and big health systems. For Amazon and other big tech companies, we will continue to see them experiment with acquisitions and launches into areas where their employees and communities are underserved in. As we’ve already touched on, failing fast and early is an excellent way to learn in tech, retail, fashion, and many other industries. However, in healthcare, the stakes are higher and failing can be exceptionally dangerous when dealing with people’s health and wellbeing.”

This should be a flag for caution but also a reminder of the impactful change tech companies can bring to healthcare.

“In terms of the next areas of disruption by non-healthcare companies, innovation in health tech will continue to be an exciting arena. Headspace, Calm, and others are great examples of big tech seeking to improve mental health access and convenience. What can big tech do for other areas of healthcare, such as the financial transaction system? The private sector has a great opportunity to bend the cost curve faster and stronger than government regulation can.”

Likewise, big data and responsibly compiling and analyzing health information can accelerate the shift to value-based care and increase care personalization. Large companies, like Amazon, have the ability to collect, secure, and analyze important data points that can lead to advances in care and cost reductions.

“Successful players in this space will be able to securely compile data and use it to inform new care models, pinpoint the right treatments, and proactively monitor for dangerous and expensive health conditions. With Amazon’s latest move to close their in-house telehealth capability and acquire externally, they certainly gathered significant data to inform a stronger iteration of healthcare. What we see next from them will likely signal how other large players will act and will make space for smaller players to enter the healthcare arena.”

Conclusion

Investments in healthcare startups continue to rise, marking 2021 as a record year for digital health funding. And there is no sign of things slowing down. With build-up demand for improved health outcomes and better, more accessible experiences for customers there’s also no shortage of opportunity either.

With innovation, no matter your industry, it is important to strike a balance between velocity and prudence. We want to disrupt, but we want to do it methodically. We want to innovate, but we want to do it informed by past learnings. We want to move fast, but we want to be diligent. Last, but certainly not least, it’s okay to fail. It’s how you manage your way through it that will determine your success.

Our recommendations for effective entry into the healthcare industry:
  • Build organizational structures that align expertise and accountability to build fast like an agile technology company but ensure that clinical, compliance, and customer needs are centered.
  • Collaborate and learn from organizations already in healthcare. Even disruptors must fit into the existing healthcare ecosystem. It is beneficial to leverage learnings from across the industry— spanning from well-established healthcare delivery systems to insurance/payor groups to successful health tech startups. 
  • Staff your team with an intentional balance of clinical, technical, and business expertise. A skew in staffing or leadership can be detrimental to success in this industry. For example, an engineering-heavy team may miss key clinical considerations while designing the product offering. Or, a team too heavily clinical might lack the business experience to successfully brand and price their service.
  • Invest in thorough build/buy assessments so that tools and technology decisions are not made too quickly.
  • Structure teams to adapt to change. Then, manage change early, often, and iteratively.
  • Develop a patient experience journey map to understand the existing tools, systems, and processes and anticipate friction points early.

Whether you are designing a pilot, mapping your digital patient journey, implementing a new tool, or building a strategy to stay current in the ever-changing industry, Propeller can help.