Amazon’s new healthcare company could give smaller healthtech players a boost

Jan. 31, 2018

JPMorgan Chase and Berkshire Hathaway have joined forces with Amazon to form a new healthcare company for all U.S. employees. Right now details are so sparse there’s not even a name associated with the new company. However, this is big news for the industry, and it could possibly have ramifications not only for health insurance giants, but also smaller tech companies that are open to either partnering with the company—or even being acquired by it.

The decision didn’t come overnight. According to reports, the heads of each company—Jamie Dimon, Warren Buffet, and Jeff Bezos—have chatted for years about how to fix the problem of high costs and a broken healthcare system.

But others in tech have tried to jump into healthcare only to get bogged down with regulatory hurdles. Theranos founder Elizabeth Holmes, who did not have a medical background, ran into regulatory issues and was ultimately banned from operating in her own labs due to health and safety concerns.

Google parent company Alphabet is known for dipping its toe in the healthcare waters, with Calico and Verily Life Sciences. However, Google shut down its health management platform Google Health after it failed to gain traction.

“When [tech companies] start to understand the complexity, even just the idea of an electronic health record, they pull out,” says health consultant and CEO of Avalere Health Dan Mendelson.

Bezos has acknowledged the difficulties for tech companies in the space, saying the healthcare system is “complex” and that the three “. . . enter into this challenge open-eyed about the degree of difficulty.”

Companies that have succeeded in healthcare have largely been those with a background in the industry, Mendelson points out. However, the allure to get into the space has fueled plenty of tech company attempts, especially in the last year. Apple recently launched a feature with its iOS update to allow users to upload medical records and Amazon has already been rumored to be in talks with drug makers.

And stronger technological chops is something the industry needs going forward. Amazon is in a position to provide these measures with machine learning, AI, online communications, and other tools needed to make a more efficient and effective system. But it will likely need outside help from health experts, and it remains to be seen how these three iconic companies plan to move the ball forward without industry understanding.

Collective Health founder Ali Diab has one, perhaps unsurprising suggestion: That the new company that’s being formed work with Collective Health.

Collective Health offers companies healthcare coverage through a cloud-based, integrated health benefits platform for self-insured employers and, as Diab points out, has been providing that solution for the last five years to large companies like eBay and Restoration Hardware.

JPMorgan Chase, Berkshire Hathaway and Amazon could potentially snap up smaller tech companies like Collective Health that are working on these types of solutions, as well.

“It would not surprise me to see them start to acquire some of the technology that makes their goals possible,” says Mendelson. “This team is very capable from a mergers and acquisitions standpoint. That’s not an accident.”

TechCrunch has the full article