Amazon, health care and the first American chaebol

By Abe Kasbo, CEO, Verasoni Worldwide
New Jersey | Feb 2, 2018 at 11:56 am
Op-Ed

Amazon’s recent landmark partnership with Berkshire Hathaway and JPMorgan Chase is yet another example of how certain sectors continue to underestimate Amazon’s imagination, never mind business prowess. I honestly believe some businesses, though fully capable, simply do not know how to respond to Amazon, and therefore don’t even try. Or they may want to try, but are afraid to fail. Amazon has led the way in industries where there’s prodigious inertia, like retail, entertainment, grocery and now health care.

The announcement, which is short on details, spurred a sell-off in some of health care’s most popular stocks like CVS, Cardinal Health, Walgreen and United Healthcare, among others. If the Whole Foods acquisition wasn’t a wakeup call, this particular venture into health care is a shot across the bow to every industry in America. It seems the financial markets were nervous that Amazon and partners will do what no American government could achieve to date: get better control of health care costs and deliver efficiencies and results where they matter. The cornerstone of the announcement, in my estimation, is the intention by this coalition to deliver health care “free from profit-making incentives.” American health care’s long resistance to price transparency seems to be have been dealt a blow with this announcement and that is a good thing for patients, and for health care providers, who can now compete on price, experience and outcomes.

With this move, Amazon has accomplished two unprecedented markers in American business. One, successfully taking on the business issue of our time: health care. Two, becoming the first true American chaebol. In South Korea, chaebols are business conglomerates that are imbedded into everyday life from birth to death and everything in between. For example, babies may be born in a Samsung hospital. They attend Samsung schools. Parents wash and dry laundry in Samsung appliances and watch Samsung TVs. They are insured by Samsung, study at Samsung Universities and die at Samsung funeral homes.

In the U.S., over 300 million of us get our stuff from Amazon. We watch movies and listen to music on Amazon. We shop in its food stores, and we have freely invited the Echo and Alexa into our homes. Now, we’ll go to Amazon doctors, and hospitals, and perhaps be insured by Amazon as well. Amazon is truly the first American chaebol.

What’s interesting is that Amazon isn’t going to be satisfied with the consumer side of the health care business. Health care’s business-to-business sector is within its sights. Distributors, drugmakers, manufacturers, technology, hospitals and large medical and dental practices all are now fair game. There’s money to be made there and efficiencies to be had. Amazon, acting as a chaebol, will demand tangential control over the entire health care supply system for their employees in order to achieve desired outcomes and long-term business objectives.

The trio may not need to buy businesses along the supply chain to control costs, though purchases of strategic health care assets are likely. One of the ways Amazon can control costs is by cutting deals with manufacturers to give them access to sell directly to consumers online. This may throw competitive pricing ripple effects to help drive down costs. What Amazon does really well is work from the customer backward to its systems, and in this from the patient backwards. Health care as a whole has had a tough time with this concept.

Let’s imagine a few scenarios for patients:

Need wound care supplies? “Alexa, reorder my wound dressing,” and a dressing kit shows up at your door same or next day right from the manufacturer.

“Alexa, make me an appointment with Dr. Brown for anytime next week.”

(READ MORE from ROI-NJ on the Amazon health care company.)

On the physician, dentist or veterinary office side, it could go something like this, “Alexa, add gloves to my last order,” or “Alexa, what are HIPAA regulations around emailing patients?” or even “Alexa, pull up this office’s P&L for 2017?”

The B2B possibilities in health care for Amazon are seemingly endless. For those who continue to doubt Amazon’s national distribution power to deliver health care supplies in the immediate term, think of those 450 Whole Foods locations around the country as distribution centers.

Yet, you can be certain there will be a response from another soon-to-be American chaebol: Walmart. Walmart has been the only major company to effectively respond to Amazon’s advances. The company seems to be rising to the challenge with its own innovation team, as well as more recent acquisition of Jet.com, Bonobos and other notable online retailers with unique technologies. Walmart’s partnership with Google in August 2017 is another testament to its willingness to take on Amazon and, in essence, putting it well on its way to become a chaebol. Make no mistake, Walmart’s acquisitions and partnerships aren’t necessarily about market share, they are about leading with technology, processes and, yes, imagination; a direct challenge to Amazon.

This certainly feels like a seminal moment. Perhaps the same as media executives felt when the internet radically changed their landscape. If health care executives are going to avoid the ill-fated destiny of their media counterparts, they must move with speed and wisdom. Amazon is in the business of imagination, it can reimagine entire industries in ways people working those in very industries aren’t able. Hey, one day, patients staying in Amazon hospitals may be watching the Super Bowl streamed on Amazon while eating dinner prepared by Whole Foods. We can only imagine.

ROI-NJ Staff | editorial@roi-nj.com | @ROINJNews