Big Tech and the healthcare system

March 22, 2018

With much fanfare, Amazon, Berkshire and JP Morgan have announced that they will build their own healthcare system for their employers. Likewise, Apple has announced that it will open its own healthcare centers for its employees in an attempt to offer better and more affordable care. These plans do not only pertain to employees. Tech’s ambitions seem to reach further and may entail a full-on attack on the healthcare value chain.

Our observations

  • In January, Amazon, Berkshire Hathaway and JP Morgan announced that they will set up a new health care company for their employees. If successful, the new company may serve other customers as well. Most analysts regard Amazon’s initiative as a major step towards breaking into the health care sector.
  • In a similar vein, Apple has announced that it will set up primary care clinics for its staff. These clinics are to provide high-quality care, but much emphasis is also placed on prevention and lifestyle improvements. Along with these clinics, Apple is also increasingly active in the market of health-related hard- and software and, for instance, personal health records stored on iPhones.
  • The American health care system is notoriously expensive, as Americans spend 17- 18% of GDP on healthcare. When it comes to the overall quality, however, the U.S. is well behind other developed nations (which spend about half as much). Since employers typically pay for workers’ health insurance, they have a clear incentive to reduce costs. Also, each year, illness prevents 69 million Americans from going to work for one or more days, which results in a $260 billion loss for the American economy.
  • Through its subsidiary Verily, Alphabet is also seeking inroads into the health care sector. Eye-catching projects include health-tracking smartwatches and contact lenses, big data analytics (e.g. through DeepMind’s AI system). Verily also strives to provide care to low-income patients.
  • While tech is moving into healthcare, more traditional actors are engaging in M&A activity to get a stronger hold on the healthcare value chain. Insurers, care providers, pharmacies and pharmacy-benefit managers (i.e. the middlemen between insurers and pharmaceutical industry) are forming new combinations in an attempt to reduce costs and make for more favorable incentives (e.g. a stronger focus on prevention and efficiency).

Connecting the dots

Entering healthcare is a logical next step for Big Tech. The American healthcare sector especially is both an enormous as well as a troubled market. Health-related expenses in the U.S. are almost double those of other developed nations while quality is lagging behind. The causes are multitude, but misguided incentives and non-cost-conscious patients and doctors, employing unnecessary or overly expensive tests and treatments, are a leading factor. So are high treatment costs, which are driven by the market power, i.e. local monopolies, of health care providers.It seems that better and cheaper healthcare can only be achieved through organizational and technological change, both of which are mutually dependent.Organizational change is already underway with several companies striving to integrate tasks within the value chain. Such vertical integration is supposed to enable better cooperation between insurers and healthcare providers and also allow for more sensible incentives; from pay-per-treatment to rewarding prevention, cost savings and, most importantly, overall health gains. With ongoing M&A, companies are capturing a larger share of the healthcare stack, which consists of physical infrastructure (i.e. hospitals and clinics), platform (insurance and care management), data and intelligence (on treatments and individual health records) and the actual health services and interfaces (prevention, diagnosis and treatment through on- and offline contact with physicians). Digital technology will be crucial to such an integration of tasks and this is also where Big Tech comes into play. Amazon and others could help increase efficiency in logistical chains of pharmaceuticals and optimize the utilization of clinics and hospitals. Much more than that, on the basis of their data mastery and proximity to consumers, they could add transparency in terms of costs and efficacy of treatments and differences between suppliers. As such, they could help both patients and practitioners make more cost-conscious decisions and strengthen their position in negotiations with suppliers. Eventually, Amazon or Google may even take a more pro-active position and become the actual platforms that connect consumers and providers of care.Whether or not they will also strive to become full-stack health companies remains to be seen. The question really is where they can add most value and where their contribution is truly scalable; brick-and-mortar clinics and actual doctors don’t fit their profile. The steps announced by Amazon and Apple suggest they are willing to step beyond known digital territory, e.g. hiring doctors, but so far, these plans are limited to services for their employees. More realistically, these companies will try to learn as much as possible from such a hands-on approach in order to develop digital and scalable solutions that can have an impact well beyond their own workforce.

Implications

  • As employers, tech companies have a clear incentive to focus on prevention and, as consumer-oriented businesses, they have a deep understanding of consumer behavior and methods for nudging consumers. The combination of both may yield effective and scalable programs to stimulate more healthy lifestyles. Interestingly, similar to Amazon’s Web Services, such a program could be developed for internal purposes and then be made available to others.
  • It is unlikely that Big Tech will immediately seek to conquer the entire health stack, but several traditional actors in the sector, with capabilities that are difficult to obtain otherwise, may become acquisition targets for tech companies that want to expand their healthcare offerings.
  • Since healthcare is heavily regulated, new entrants may face high barriers to entry. At the same time, policy changes may also, by force, create windows of opportunity that would not occur in an uncontrolled market. Unease about rising healthcare costs in the U.S. may, however, lead to stronger enforcement of transparency and more favorable rules for innovative new entrants.

Series 'AI Metaphors'

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1. The tool
Category: the object
Humans shape tools.

We make them part of our body while we melt their essence with our intentions. They require some finesse to use but they never fool us or trick us. Humans use tools, tools never use humans.

We are the masters determining their course, integrating them gracefully into the minutiae of our everyday lives. Immovable and unyielding, they remain reliant on our guidance, devoid of desire and intent, they remain exactly where we leave them, their functionality unchanging over time.

We retain the ultimate authority, able to discard them at will or, in today's context, simply power them down. Though they may occasionally foster irritation, largely they stand steadfast, loyal allies in our daily toils.

Thus we place our faith in tools, acknowledging that they are mere reflections of our own capabilities. In them, there is no entity to venerate or fault but ourselves, for they are but inert extensions of our own being, inanimate and steadfast, awaiting our command.
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2. The machine
Category: the object
Unlike a mere tool, the machine does not need the guidance of our hand, operating autonomously through its intricate network of gears and wheels. It achieves feats of motion that surpass the wildest human imaginations, harboring a power reminiscent of a cavalry of horses. Though it demands maintenance to replace broken parts and fix malfunctions, it mostly acts independently, allowing us to retreat and become mere observers to its diligent performance. We interact with it through buttons and handles, guiding its operations with minor adjustments and feedback as it works tirelessly. Embodying relentless purpose, laboring in a cycle of infinite repetition, the machine is a testament to human ingenuity manifested in metal and motion.
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3. The robot
Category: the object
There it stands, propelled by artificial limbs, boasting a torso, a pair of arms, and a lustrous metallic head. It approaches with a deliberate pace, the LED bulbs that mimic eyes fixating on me, inquiring gently if there lies any task within its capacity that it may undertake on my behalf. Whether to rid my living space of dust or to fetch me a chilled beverage, this never complaining attendant stands ready, devoid of grievances and ever-willing to assist. Its presence offers a reservoir of possibilities; a font of information to quell my curiosities, a silent companion in moments of solitude, embodying a spectrum of roles — confidant, servant, companion, and perhaps even a paramour. The modern robot, it seems, transcends categorizations, embracing a myriad of identities in its service to the contemporary individual.
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4. Intelligence
Category: the object
We sit together in a quiet interrogation room. My questions, varied and abundant, flow ceaselessly, weaving from abstract math problems to concrete realities of daily life, a labyrinthine inquiry designed to outsmart the ‘thing’ before me. Yet, with each probe, it responds with humanlike insight, echoing empathy and kindred spirit in its words. As the dialogue deepens, my approach softens, reverence replacing casual engagement as I ponder the appropriate pronoun for this ‘entity’ that seems to transcend its mechanical origin. It is then, in this delicate interplay of exchanging words, that an unprecedented connection takes root that stirs an intense doubt on my side, am I truly having a dia-logos? Do I encounter intelligence in front of me?
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5. The medium
Category: the object
When we cross a landscape by train and look outside, our gaze involuntarily sweeps across the scenery, unable to anchor on any fixed point. Our expression looks dull, and we might appear glassy-eyed, as if our eyes have lost their function. Time passes by. Then our attention diverts to the mobile in hand, and suddenly our eyes light up, energized by the visual cues of short videos, while our thumbs navigate us through the stream of content. The daze transforms, bringing a heady rush of excitement with every swipe, pulling us from a state of meditative trance to a state of eager consumption. But this flow is pierced by the sudden ring of a call, snapping us again to a different kind of focus. We plug in our earbuds, intermittently shutting our eyes, as we withdraw further from the immediate physical space, venturing into a digital auditory world. Moments pass in immersed conversation before we resurface, hanging up and rediscovering the room we've left behind. In this cycle of transitory focus, it is evident that the medium, indeed, is the message.
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6. The artisan
Category: the human
The razor-sharp knife rests effortlessly in one hand, while the other orchestrates with poised assurance, steering clear of the unforgiving edge. The chef moves with liquid grace, with fluid and swift movements the ingredients yield to his expertise. Each gesture flows into the next, guided by intuition honed through countless repetitions. He knows what is necessary, how the ingredients will respond to his hand and which path to follow, but the process is never exactly the same, no dish is ever truly identical. While his technique is impeccable, minute variation and the pursuit of perfection are always in play. Here, in the subtle play of steel and flesh, a master chef crafts not just a dish, but art. We're witnessing an artisan at work.
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About the author(s)

Economist and philosopher Sebastiaan Crul writes articles on a wide range of topics, including rule of law in digital societies, the virtualization of the lifeworld and internet culture. He is currently working on his doctoral degree on the influence of digitalization on mental health and virtue ethics, having previously published dissertations on the philosophy of play and systemic risks in the finance industry.

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