Healthcare Regulators’ Outdated Thinking Will Cost American Lives

In a matter of months, ChatGPT has radically altered our nation’s views on artificial intelligence—uprooting old assumptions about AI’s limitations and kicking the door wide open for exciting new possibilities.

One aspect of our lives sure to be touched by this rapid acceleration in technology is U.S. healthcare. But the extent to which tech will improve our nation’s health depends on whether regulators embrace the future or cling stubbornly to the past.

Why our minds live in the past

In the 1760s, Scottish inventor James Watt revolutionized the steam engine, marking an extraordinary leap in engineering. But Watt knew that if he wanted to sell his innovation, he needed to convince potential buyers of its unprecedented power. With a stroke of marketing genius, he began telling people that his steam engine could replace 10 cart-pulling horses. People at time immediately understood that a machine with 10 “horsepower” must be a worthy investment. Watt’s sales took off. And his long-since-antiquated meaurement of power remains with us today.

Even now, people struggle to grasp the breakthrough potential of revolutionary innovations. When faced with a new and powerful technology, people feel more comfortable with what they know. Rather than embracing an entirely different mindset, they remain stuck in the past, making it difficult to harness the full potential of future opportunities.

Too often, that’s exactly how U.S. government agencies go about regulating advances in healthcare. In medicine, the consequences of applying 20th-century assumptions to 21st-century innovations prove fatal.  

Here are three ways regulators do damage by failing to keep up with the times:

1. Devaluing ‘virtual visits’

Established in 1973 to combat drug abuse, the Drug Enforcement Administration (DEA) now faces an opioid epidemic that claims more than 100,000 lives a year.

One solution to this deadly problem, according to public health advocates,  combines modern information technology with an effective form of addiction treatment.

Thanks to the Covid-19 Public Health Emergency (PHE) declaration, telehealth use skyrocketed during the pandemic. Out of necessity, regulators relaxed previous telemedicine restrictions, allowing more patients to access medical services remotely while enabling doctors to prescribe controlled substances, including buprenorphine, via video visits.

For people battling drug addiction, buprenorphine is a “Goldilocks” medication with just enough efficacy to prevent withdrawal yet not enough to result in severe respiratory depression, overdose or death. Research from the National Institutes of Health (NIH) found that buprenorphine improves retention in drug-treatment programs. It has helped thousands of people reclaim their lives.

But because this opiate produces slight euphoria, drug officials worry it could be abused and that telemedicine prescribing will make it easier for bad actors to push buprenorphine onto the black market. Now with the PHE declaration set to expire, the DEA has laid out plans to limit telehealth prescribing of buprenorphine.

The proposed regulations would let doctors prescribe a 30-day course of the drug via telehealth, but would mandate an in-person visit with a doctor for any renewals. The agency believes this will “prevent the online overprescribing of controlled medications that can cause harm.”

The DEA’s assumption that an in-person visit is safer and less corruptible than a virtual visit is outdated and contradicted by clinical research. A recent NIH study, for example, found that overdose deaths involving buprenorphine did not proportionally increase during the pandemic. Likewise, a Harvard study found that telemedicine is as effective as in-person care for opioid use disorder.

Of course, regulators need to monitor the prescribing frequency of controlled substances and conduct audits to weed out fraud. Furthermore, they should demand that prescribing physicians receive proper training and document their patient-education efforts concerning medical risks.

But these requirements should apply to all clinicians, regardless of whether the patient is physically present. After all, abuses can happen as easily and readily in person as online.

The DEA needs to move its mindset into the 21st century because our nation’s outdated approach to addiction treatment isn’t working. More than 100,000 deaths a year prove it.

2. Restricting an unrestrainable new technology

Technologists predict that generative AI, like ChatGPT, will transform American life, drastically altering our economy and workforce. I’m confident it also will transform medicine, giving patients greater (a) access to medical information and (b) control over their own health.

So far, the rate of progress in generative AI has been staggering. Just months ago, the original version of ChatGPT passed the U.S. medical licensing exam, but barely. Weeks ago, Google’s Med-PaLM 2 achieved an impressive 85% on the same exam, placing it in the realm of expert doctors.

With great technological capability comes great fear, especially from U.S. regulators. At the Health Datapalooza conference in February, Food and Drug Administration (FDA) Commissioner Robert M. Califf emphasized his concern when he pointed out that ChatGPT and similar technologies can either aid or exacerbate the challenge of helping patients make informed health decisions.

Worried comments also came from Federal Trade Commission, thanks in part to a letter signed by billionaires like Elon Musk and Steve Wozniak. They posited that the new technology “poses profound risks to society and humanity.” In response, FTC chair Lina Khan pledged to pay close attention to the growing AI industry.

Attempts to regulate generative AI will almost certainly happen and likely soon. But agencies will struggle to accomplish it.

To date, U.S. regulators have evaluated hundreds of AI applications as medical devices or “digital therapeutics.” In 2022, for example, Apple received premarket clearance from the FDA for a new smartwatch feature that lets users know if their heart rhythm shows signs of atrial fibrillation (AFib). For each AI product that undergoes FDA scrutiny, the agency tests the embedded algorithms for effectiveness and safety, similar to a medication.

ChatGPT is different. It’s not a medical device or digital therapy programmed to address a specific or measurable medical problem. And it doesn’t contain a simple algorithm that regulators can evaluate for efficacy and safety. The reality is that any GPT-4 user today can type in a query and receive detailed medical advice in seconds. ChatGPT is a broad facilitator of information, not a narrowly focused, clinical tool. Therefore, it defies the types of analysis regulators traditionally apply.

In that way, ChatGPT is similar to the telephone. Regulators can evaluate the safety of smartphones, measuring how much electromagnetic radiation it gives off or whether the device, itself, poses a fire hazard. But they can’t regulate the safety of how people use it. Friends can and often do give each other terrible advice by phone.  

Therefore, aside from blocking ChatGPT outright, there’s no way to stop individuals from asking it for a diagnosis, medication recommendation or help with deciding on alternative medical treatments. And while the technology has been temporarily banned in Italy, that’s unlikely to happen in the United States.  

If we want to ensure the safety of ChatGPT, improve health and save lives, government agencies should focus on educating Americans on this technology rather than trying to restrict its usage.

3. Preventing doctors from helping more people

Doctors can apply for a medical license in any state, but the process is time-consuming and laborious. As a result, most physicians are licensed only where they live. That deprives patients in the other 49 states access to their medical expertise.

The reason for this approach dates back 240 years. When the Bill of Rights passed in 1791, the practice of medicine varied greatly by geography. So, states were granted the right to license physicians through their state boards.

In 1910, the Flexner report highlighted widespread failures of medical education and recommended a standard curriculum for all doctors. This process of standardization culminated in 1992 when all U.S. physicians were required to take and pass a set of national medical exams. And yet, 30 years later, fully trained and board-certified doctors still have to apply for a medical license in every state where they wish to practice medicine. Without a second license, a doctor in Chicago can’t provide care to a patient across a state border in Indiana, even if separated by mere miles.

The PHE declaration did allow doctors to provide virtual care to patients in other states. However, with that policy expiring in May, physicians will again face overly restrictive regulations held over from centuries past.

Given the advances in medicine, the availability of technology and growing shortage of skilled clinicians, these regulations are illogical and problematic. Heart attacks, strokes and cancer know no geographic boundaries. With air travel, people can contract medical illnesses far from home. Regulators could safely implement a common national licensing process—assuming states would recognize it and grant a medical license to any doctor without a history of professional impropriety.

But that’s unlikely to happen. The reason is financial. Licensing fees support state medical boards. And state-based restrictions limit competition from out of state, allowing local providers to drive up prices.

To address healthcare’s quality, access and affordability challenges, we need to achieve economies of scale. That would be best done by allowing all doctors in the U.S. to join one care-delivery pool, rather than retaining 50 separate ones.

Doing so would allow for a national mental-health service, giving people in underserved areas access to trained therapists and helping reduce the 46,000 suicides that take place in America each year.

Regulators need to catch up

Medicine is a complex profession in which errors kill people. That’s why we need healthcare regulations. Doctors and nurses need to be well trained, so that life-threatening medications can’t fall into the hands of people who will misuse them.

But when outdated thinking leads to deaths from drug overdoses, prevents patients from improving their own health and limits access to the nation’s best medical expertise, regulators need to recognize the harm they’re doing.  

Healthcare is changing as technology races ahead. Regulators need to catch up.

CVS invests $100M in Carbon Health

https://mailchi.mp/59374d8d7306/the-weekly-gist-january-13-2023?e=d1e747d2d8

On Monday, San Francisco-based Carbon Health—a virtual-first primary and urgent care company with 125 clinics across 13 states—announced a partnership with CVS Health, which includes a $100M investment, as well as plans to pilot its operating model in select CVS stores. The announcement came just days after Carbon reported its second round of layoffs in the past year, as it scales back on less profitable business segments to focus on expanding its primary care model. 

The Gist: It’s been over a year since CVS CEO Karen Lynch said the company was moving with “speed and urgency” to construct a physician-staffed primary care model. Last fall it purchased in-home health evaluation company Signify Health for $8B, after rumors that it had been close to acquiring One Medical.

Between its convenient retail footprint, insurance arm, and Signify’s risk-assessment tools, a nationwide primary care physician network is the last puzzle piece CVS needs to field a comprehensive and formidable primary care strategy.

While it’s currently rumored to be evaluating a $10B acquisition of Oak Street Health, this partnership with Carbon Health is a better bet to deliver value quickly, as CVS should be able to more easily integrate and leverage Carbon’s retail health expertise across its growing care delivery platform.

How the Omnibus spending package impacts healthcare

https://mailchi.mp/ad2d38fe8ab3/the-weekly-gist-january-6-2023?e=d1e747d2d8

While healthcare wasn’t a top priority for lawmakers hammering out the Omnibus bill aimed at keeping the government open through next September, the graphic above outlines the bill’s three greatest areas of impact for providers.

The package reduces the planned 4.5 percent 2023 physician fee schedule cut to two percent, while also extending value-based care bonuses in alternative payment models (albeit at 3.5 percent, instead of five percent). It also delays the $38B Medicare spending cut required by the PAYGO sequester, pushing that cut out two years.

On the telehealth front, the bill extends Medicare’s pandemic-era virtual care flexibilities through 2024, including the “hospital at home” waiver. It also sets April 1, 2023 as the start date of a one-year window for states to reassess Medicaid enrollment, decoupling the start of eligibility redeterminations from the end of the federal COVID public health emergency. Medicaid enrollment grew by 25 percent over the course of the pandemic, but around two-thirds of new enrollees may lose eligibility after redeterminations. 

Overall, the legislation is a mixed bag for providers. The uninsured population is expected to grow, at least in the short term. Physician groups had hopes for a complete reprieve from Medicare pay cuts, and the fact that they didn’t get it may signal growing Congressional hesitancy to intervene with the Medicare physician fee schedule in the future. But the telehealth extensions may encourage other wider adoption of reimbursement by private insurers, bolstering providers’ long-term virtual care investments.

Biden signs omnibus bill into law, reducing physician pay cut

https://mailchi.mp/ad2d38fe8ab3/the-weekly-gist-january-6-2023?e=d1e747d2d8

Late last week, President Biden signed a $1.7T spending package to fund the federal government through next September. While around half the funds are dedicated to defense, some important healthcare items made it into the bill, including a reduction in planned Medicare physician pay cuts and a two-year postponement of the $38B Medicare spending cut required by the PAYGO sequester.

The law also decoupled several measures from the end of the federal COVID public health emergency (PHE), setting April 1st as the start date for states to begin Medicaid eligibility redeterminations, and extending Medicare’s telehealth flexibilities and the Acute Hospital Care at Home waiver program through the end of 2024. For more details on these changes, see our graphic below.

The Gist: Medical groups were hoping for more of a reprieve from the Medicare physician fee schedule cuts, but Congress proved unwilling to address concerns over rising practice costs. We’re relieved that Medicare’s new telehealth and hospital at home policies will continue beyond the PHE, given the early interest we’ve seen from the provider community in embracing these new, more consumer-friendly care models.

Once the new Congress finally gets underway, we’re expecting this to be an uneventful two years for federal healthcare legislation, with the emphasis of health policy likely to shift toward states, federal agency rulemaking, and judicial activity.

10 Key Medtech Themes for 2023

https://medcitynews.com/2023/01/10

We expect 2023 to be a pivotal year for the industry, as the accelerated acceptance of virtual care and demographic trends, such as an aging population, increasing chronic illnesses and healthcare worker shortages, sustain demand for medtech-enabled solutions.

The combination of rapid developments in novel healthcare technology and heightened demand for integrated tech-enabled care has continued to fuel innovation in the medtech industry.  At the same time, medtech innovators – whether in digital health, wearables and AI-driven offerings in healthcare, or diagnostics, telemedicine and health IT solutions – continue to face a patchwork of laws, rules and norms across the world. Life sciences and healthcare innovators and regulators are also looking to medtech to increase access to care and health equity. Here are ten global medtech themes we are tracking in the coming year:

Focus on digital tuck-in acquisitions in medtech M&A

Despite continued uncertainty in the overall financial market, medtech M&A activity continued at a steady pace in 2022.  This year witnessed a rise in tuck-in acquisitions of smaller companies that can be easily integrated into buyers’ existing infrastructure and product offerings, as opposed to significantly sized takeovers of businesses that aren’t squarely aligned with buyers’ existing businesses lines.  Medtech acquirers have been particularly focused on developing their digital capabilities to innovate and reach customers in new ways.  As digitization continues to transform the industry, we expect acquirers to continue to prioritize the value of digital and data assets as they evaluate potential targets.

Continued interest by private equity and other financial sponsors

Private equity firms, healthcare-focused funds and other financial sponsors have continued to display a strong appetite for investing in Medtech companies, with top targets in subsectors such as diagnostics and healthcare IT solutions.  Later-stage medtech companies in particular are gaining a larger share of venture capital funding, as later-stage investments allow financial sponsors to focus on businesses with higher yields, as well as less time to market and capital reimbursement.  Demographic trends, including an aging population and the increasing prevalence of chronic diseases, coupled with healthcare technology advancements have created robust demand for medtech-enabled solutions.  Additionally, medtech offerings have broad applications that can extend beyond stakeholders in a specific therapy area, product category or care setting, offering the ability to satisfy unmet needs with large patient bases.

Strategic medtech collaborations as the new norm

Strategic medtech collaborations and partnerships have become the new norm in our increasingly connected digital healthcare ecosystem.  In response to heightened consumer demand for tech-enabled care, pharmaceutical and medtech companies are collaborating to use digital technologies to engage with consumers, unlocking a vast range of treatments such as personalized medicine.  Additionally, as the market rapidly evolves towards data-driven healthcare, we expect medtech companies to continue to work collaboratively to address existing barriers to data sharing and promote interoperability of healthcare data.

Continued scrutiny by antitrust and competition authorities 

As expected, global antitrust and competition authorities continued to focus on the tech, life sciences and medtech sectors in 2022.  The US, UK and EU authorities have stepped up efforts to investigate and challenge conduct by large pharma and technology companies pursuing mergers and acquisitions.  We expect these authorities to assess similar concerns in the digital health context in an effort to account for the value of combined datasets and the interoperability of various offerings that could be derived from digital health mergers and acquisitions.  Furthermore, geopolitical tensions have resulted in new and expanded foreign investment regimes to improve the resilience of domestic healthcare systems.  Notably this year, the UK government implemented the National Security and Investment Act that allows it to restrict transactions that may threaten national security, including in the AI and data infrastructure sectors.  Sensitive data continues to be a recurring theme for foreign investment review for Committee on Foreign Investment in the US  and that of the EU as well.

Growing importance of data privacy and security

Increasing regulatory attention to sensitive health data and the escalating rise of ransomware attacks has made data privacy and security more important than ever for medtech innovators.  The Federal Trade Commission has issued several statements about its willingness to “fully” enforce the law against the illegal use and sharing of highly sensitive data.  Additionally, several state privacy laws coming into effect in 2023 create new categories of sensitive personal data, including health data, and impose novel obligations on innovators to obtain data-related consents.  As ransomware continues to pose security-related threats, the US Department of Health and Human Services renewed calls for all covered entities and business associates to prioritize cybersecurity.  New standards, such as cybersecurity label rating programs for connected devices, aim to address security risks.  In the EU, medtech providers will need to consider how the launch of the European Health Data Space and newly proposed data regulation, such as the Data Act and AI Act, could impact their data use and sharing practices.

More active engagement with FDA/EMA/MHRA

We expect companies active in the medtech sector, particularly those that make use of AI and other advanced technologies, to continue their conversations with the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”), the Medicines and Healthcare Products Regulatory Agency (“MHRA”) and other regulators as such companies grow their medtech business lines and establish their associated regulatory compliance infrastructure. Given the unique regulatory issues arising from the implementation of digital health technologies, we expect the FDA, EMA and MHRA to provide additional guidance on AI/ML-based software-as-a-medical device and the remote management of clinical trials.  2022 saw stakeholders in the life sciences and medtech industries collaborate with regulatory authorities to push forward the acceptance of digital endpoints that rely on sensor-generated data collected outside of a clinical setting.  As the industry shifts to decentralized clinical trials, we expect both innovators and regulators to work together to evaluate the associated clinical, privacy and safety risks in the development and use of such digital endpoints.

Increasing medtech localization in the Asia Pacific region

2022 saw multinational companies (“MNCs”), including American pharma/device makers make an active effort to expand their medtech business lines in the Asia Pacific region.   At the same time, government authorities in the region have been increasingly focused on incentivizing local innovation, approving government grants and prohibiting the importation of non-approved medical equipment. In light of MNCs’ market share of the medical device market in the Asia Pacific region, especially in China, we expect the emergence of the domestic medtech industry to prompt discussions among MNCs, local innovators and government authorities over the long-term development of the global market for medical technology.

Long-term adoption of telehealth and remote patient monitoring technologies 

The Covid-19 pandemic saw the rise of telehealth and remote patient monitoring technologies as key modes of healthcare delivery.  The telehealth industry remains focused on enabling remote consultations and long-term patient management for patients with chronic conditions.  Looking forward, we expect to see increased innovation in non-invasive technologies that can provide early diagnostics and ongoing disease management in a low-friction manner.  At the same time, we anticipate telehealth companies to face increasing scrutiny from regulatory authorities around the world for fraud and abuse by patients and providers.  Consumer and patient data privacy and security in connection with telehealth and remote patient monitoring continue to remain top of mind for regulators as well.

Women’s health and privacy concerns for medtech

We expect to see increased consumer health tech adoption for reproductive care, especially in light of the U.S. Supreme Court’s decision to overturn Roe v. Wade.  Following the Dobbs decision, a number of states introduced or passed legislation that prohibits or restricts access to reproductive health services beyond abortion.  In response, women’s health-focused companies are expanding their virtual fertility and pregnancy, telemedicine and other services to patients.  At the same time, such companies need to assess the legal risks stemming from the collection and storage of their customers’ personal health information, which could then be used as evidence to prosecute customers for obtaining illegal reproductive health services.  We expect companies active in this space to take steps to navigate the patchwork of data privacy and security laws across jurisdictions while establishing clear digital health governance mechanisms to safeguard their customers’ data privacy and security.

Addressing inequities in the implementation of digital healthcare technologies

Medtech innovators and regulators have been increasingly focused on addressing inequities in the healthcare system and the data used to train AI and ML-based digital healthcare technologies.  In 2022, a number of medtech companies collaborated to provide technologies that result in improved patient outcomes across all populations, as well as boost participation of diverse populations in clinical trials.  In parallel, we are seeing increased interest from regulators to reduce bias in digital health technologies and the accompanying datasets, as evidenced by the EU’s proposed AI Act and the UK’s health data strategy. In the US, which currently lacks comprehensive government regulation of AI in healthcare, there have been increasing calls for institutional commitments in the area of algorithmovigilance.  Because of the inaccurate conclusions that may result from biased technologies and data, MedTech companies must prioritize health equity in the implementation of digital healthcare technologies so that everyone can benefit from the latest scientific advances.

In conclusion, the medtech industry has remained resilient amidst the challenging macroeconomic environment.  We expect 2023 to be a pivotal year for the industry, as the accelerated acceptance of virtual care and demographic trends, such as an aging population, increasing chronic illnesses and healthcare worker shortages, sustain demand for medtech-enabled solutions.  At the same time, the rapidly changing legal and regulatory landscape will continue to be a key issue for medtech innovators moving forward. Adopting a global, forward-thinking regulatory compliance strategy can help MedTech companies stay competitive and ultimately, achieve better outcomes for patients.

Amazon launches direct-to-consumer virtual care platform

https://mailchi.mp/4b683d764cf3/the-weekly-gist-november-18-2022?e=d1e747d2d8

On Tuesday, the e-commerce giant unveiled its latest healthcare endeavor, Amazon Clinic, a “virtual health storefront” that can asynchronously connect patients to third-party telemedicine providers. It offers diagnosis and treatment for roughly 20 low-acuity, elective health conditions—including acne, birth control, hair loss, and seasonal allergies—at flat, out-of-pocket rates. (The service does not currently accept insurance.) It also refills prescriptions, which customers can send to any pharmacy, including Amazon’s. At its launch, Amazon Clinic is available in 32 states. 

The Gist: This is exactly the kind of venture at which Amazon excels: creating a marketplace that’s convenient for buyers and sellers (patients and telemedicine providers), pricing it competitively to pursue scale over margins, and upselling customers by pairing care with Amazon’s other products or services (like Amazon Pharmacy). 

Its existing customer base and logistics expertise could position it to replace telemedicine storefront competitors, including Ro and Hims & Hers, as the leading direct-to-consumer healthcare platform, at least among those that don’t take insurance.

It bears watching to see how Amazon builds on this service, including whether it eventually incorporates insurance coverage, partners with health systems (similar to Hims & Hers), or connects Amazon Clinic to Prime in order to attract greater numbers of—generally young, healthy, and relatively wealthy—consumers.

COVID public health emergency (PHE) likely to extend past January

https://mailchi.mp/4b683d764cf3/the-weekly-gist-november-18-2022?e=d1e747d2d8

The Department of Health and Human Services (HHS) appears set to extend the federal COVID PHE past its current expiration date of January 11, 2023, as HHS had promised to give stakeholders at least 60 days’ notice before ending it, and that deadline came and went on November 11th. Days later the Senate voted to end the PHE, a bill which Biden has promised to veto should it reach his desk. Measures set to expire with the PHE, or on a several month delay after it ends, include Medicare telehealth flexibilities, continuous enrollment guarantees in Medicaid, and boosted payments to hospitals treating COVID patients. 

The Gist: Despite growing calls to end the PHE declaration, and even as White House COVID coordinator Dr. Ashish Jha has said another severe COVID surge this winter is unlikely, the White House is likely trying to buy time to resolve the complicated issues tied to the PHE, some of which must be dealt with legislatively. 

And with a divided Congress ahead, it remains to be seen how these issues, especially Medicare telehealth flexibilities—a topic of bipartisan agreement—are sorted out. Meanwhile the continuation of the PHE prevents states from beginning Medicaid re-determinations, allowing millions of Americans to avoid being disenrolled.

Virtual care solidifying its post-COVID role 

https://mailchi.mp/4587dc321337/the-weekly-gist-october-14-2022?e=d1e747d2d8

After COVID restrictions introduced millions of Americans to telehealth, it became an open question whether virtual care would revolutionize healthcare delivery, or turn out to be a flash in the pan. Using commercial claims data from Fair Health, the graphic above reveals that roughly one in twenty commercial medical claims are now for virtual care, a rate that has held fairly steady since dropping from its early pandemic peak. (These use rates likely extend to Medicare, as a Kaiser Family Foundation analysis showed that the virtual share of outpatient visits barely differed between those younger and older than 65.) 

What could be considered a true revolution is virtual care’s impact on behavioral healthcare, which makes up nearly two-thirds of overall virtual care volume. According to Zocdoc, an online marketplace booking both in-person and virtual care services, 85 percent of psychiatric appointments booked in the first half of 2022 were for virtual care, dwarfing the virtual visit levels of the other top specialties.

Meanwhile, consumers have incorporated virtual care into their lives as a useful option, though not as the sole way they access care. A recent survey found that a near-majority of consumers have accessed care both virtually and in-person, far more than the number who rely exclusively on one channel or the other. The pandemic changed consumers’ baseline expectation of what care could be delivered at home. The ability to deliver accessible, efficient virtual visits and connect that care to in-person care delivery will be a competitive advantage in the “hybrid” care environment sought by many consumers.

Inside the ‘wave’ of health care acquisitions

Amazon and several other major companies have made numerous attempts to “disrupt” health care over the years without much success. But new acquisitions in primary care, home health care, and more may allow them to more successfully expand into the industry, David Wainer writes for the Wall Street Journal.

Competition heats up in the health care industry

According to Wainer, the United States spends a greater proportion of its economy on medical services than any other developed nation, making health care “too big of an opportunity to ignore” for many companies, including those in technology, retail, and more. 

For example, Amazon has launched several forays into health care in recent years, although not all of them have been successful. Some of these health care efforts include its now defunct partnership with Berkshire Hathaway and JPMorgan Chase, as well as Amazon Care, the company’s primary care service that will shut down at the end of the year.

Amazon has also acquired several smaller health care companies in an effort to expand its reach. In 2018, Amazon purchased PillPack for $1 billion as a way to expand its online pharmacy business. Similarly, Amazon in July reached an agreement to acquire One Medical, a primary care company, for roughly $3.9 billion.

Several other companies, including retailers like Walmart and Walgreens and large insurers like UnitedHealth Group* (UHG) and CVS Health‘s Aetna, are also looking to expand their health care offerings. In fact, CVS announced last week that it had purchased home health care company Signify Health for roughly $8 billion—beating out several other competitors.

So far, “[s]hifting social attitudes and market conditions have helped fuel the wave” of health care acquisitions from major companies, Wainer writes, and more are likely to occur going forward.

What companies are targeting in health care

In contrast to the more traditional fee-for-service model, many health care startups are moving toward value-based care, which encourages providers to help prevent illnesses, rather than just treat them.

According to Wainer, UHG, which includes a pharmacy benefit manager, an insurance business, and 60,000 physicians, has made the most progress transitioning to value-based care so far. For example, many of the multi-specialty physician practices UHG has purchased through its medical provider arm Optum Care focus on proactively providing patients home, virtual, and on-site care to help them stay out of the hospital.

In addition, UHG and Walmart last week announced a partnership to provide services and “improve the patient experience” for certain Medicare Advantage enrollees. Through the partnership, UHG will use analytics to help Walmart clinics deliver value-based care to patients.

Aside from value-based care, many companies, including Amazon and CVS, are looking to expand their businesses into primary care. Currently, there is a nationwide shortage of primary care doctors, which has led to worse health outcomes for many Americans.

By providing primary care services directly to consumers, Amazon and other companies are hoping to use the relationship between patients and their providers to sell even more services, such as prescription drug deliveries and more.

Overall, “staying healthy probably will never be the sort of frictionless, one-click experience that Amazon pioneered,” Wainer writes, but the company’s current involvement in the health care industry “is a testament to the fact that there’s a lot of money to be made by fixing America’s broken system.” (Wainer, Wall Street Journal, 9/9)

*Advisory Board is a subsidiary of Optum, a division of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent. 

What shutting down Amazon’s national care delivery service means about its health care ambition

Amazon announced it will shut down Amazon Care—its primary care service sold to employer health plans—by the end of the year. There’s one thing that Amazon’s decision will surely mean: It will continue to be fashionable to mock Amazon.

People may look at this, compare it to Amazon’s Haven misadventure, and say that everyone (including Advisory Board) who speculated that Amazon could succeed in health care is either naïve or delusional.

But there’s more to it.

In looking at what Amazon reportedly said about the challenges facing Amazon Care, we believe that the acquisition of One Medical is the clearest signal yet that Amazon intends to succeed at health care.

The problems with Amazon Care

Amazon Care appears to have struggled to understand the nuances and demands of care delivery, as detailed recently in the Washington Post. Clearly, the tension between expectations for growth and quality were real. This raised questions for us: Was Amazon going to truly “iterate” on its health care capabilities? When it came to care delivery, would Amazon get better, or would it do enough to get by?

Amazon concedes that its product was not comprehensive enough for its employer partners. It’s unclear whether that means it simply wasn’t saving them money, even if employees were using it. At the same time, we wonder how hard it was to persuade employees to embrace Amazon-branded health care or to attract employees to a product centered on virtual and home-based care—or some combination of the two.

Remember: Everyone had to try out telehealth in 2020 because, in many cases, they had no choice. There isn’t any similarly powerful and pervasive force pushing anyone to virtual-first care today. People tend to like virtual visits, but that doesn’t mean that they want to receive all adequately satisfy users or keep care from fragmenting with its mosaic of services, channels, and providers.

What shutting down Amazon Care suggests about Amazon’s health care ambition

Amazon’s willingness to jettison its homegrown but underperforming health care business suggests three things.

  1. One Medical is the centerpiece of Amazon’s health care strategy, not simply one component among many. When viewed this way, the details of the acquisition make more sense than they did four weeks ago. Knowing that a virtual and home-based model wasn’t attractive for employers, we can understand more clearly why Amazon wanted a partner with both in-person and digital health capabilities. Knowing that its own product was struggling, we can see why it was willing to pay a huge premium for One Medical.
  2. Amazon is iterating on its health care capabilities, but it is iterating at an enormous scale. “Fail fast” is axiomatic in technology. It’s usually applied to minimum viable products—applications and services that are quickly built, delivered, and assessed for their ability to meet customer demands and gain traction in the market. Products that don’t meet those demands are replaced as quickly as possible. Obviously, Amazon Care was not a minimum viable product. It was rolled out three years ago, and it offered telehealth services in all 50 states and in-home services in seven markets. But when you look at the pivot Amazon seems to be making from virtual and home-based care with Amazon Care to in-person and virtual with One Medical, it’s hard not to reach for the “fail fast” comparison.
  3. Amazon is a different kind of competitor in health care. We can’t think of another organization that would spend years building out a care delivery enterprise, roll it out in 50 states, and then simply shut it down. We also can’t think of another organization whose alternative care delivery plan is to spend nearly $4 billion on another company. It’s not just the scale and the money—it’s the willingness to throw around those assets that makes Amazon a potentially potent competitor.

There are still enormous execution challenges for Amazon and One Medical. Massive disruption of the industry is not a given, no matter how much money is spent or how many companies are bought and/or fail.

It seems likely that the impact of Amazon on the market will be centered, at least for the immediate future, on the same direct-to-consumer approach that One Medical has taken and at which Amazon is expert in its other lines of business.

That does not mean Amazon can be dismissed as a dilettante or a dabbler in health care. Its mere presence in the market already seems to have sparked a bidding war for Signify Health. Amazon’s continued iteration of its approach to health care demands ongoing attention.