Meet Healthcare's Newest Players

Companies like Google, Apple, and Amazon are poised to disrupt healthcare as we know it and create a rising tide of consumerism focused on new patient innovations.
Customer Experience

Consumer-oriented technology and initiatives are transforming industries from retail to financial services and the same thing is happening across healthcare. The healthcare field has long struggled with inefficiencies that affect quality and access to care. However, new entrants ranging from consumer products businesses to startups and enterprise tech firms are joining the fray.

With millions of more consumers expected to enter the healthcare market over the coming years, numerous companies are eager to capture what Pricewaterhouse Coopers estimates is a $2.8 trillion industry.

In fact, about two dozen companies in theFortune 50have recently begun targeting the healthcare sector, according to a PwC report, "Healthcare's New Entrants: Who will be the Industry's" Those companies include retailers such as Walmart, Walgreens, and CVS/Caremark; and Ford, which is developing services for chronic condition management while driving.

And unsurprisingly, consumers are interested in more affordable and convenient care. Consumers want a healthcare experience that matches the convenience and transparency of their banking, retail, and other purchasing experiences. "People aren't necessarily comparing you to other health insurance companies; they're looking for that Amazon experience," notes Peter Atkins, director of market research and planning at health insurance provider Fallon Health.

New Players
Data giants like Google and Apple are two such companies that are filling gaps between consumer expectations and the healthcare field. Last year, Apple rolled out HealthKit, a new function on iOS 8 that centralizes health and fitness data from various apps and monitors. Apple also partnered with the Mayo Clinic and Epic Systems, a large supplier of electronic medical record systems, on an initiative that would allow smartphone users to send providers data about their heart rates, blood pressure, and other vital statistics.

And while Google Health, a project that was designed to let users connect medical records from different providers was shuttered in 2013, Google continues to build health-related products. In 2014, the company unveiled Google Fit, a platform that allows app developers to share data between other apps, such as other fitness trackers and monitors.

And in March this year, Google announced a partnership with Johnson & Johnson to develop new robotic tools and capabilities for surgeons that integrate medical device technology with robotic systems,imaging,and dataanalytics.

"The most salient thing on my radar is the new surgical robot being developed by Google partnering with Johnson & Johnson," says Dr. Antonio Pizarro, MD, a private practitioner who specializes in obstetrics, gynecology, and reconstructive surgery.

But while Google's partnership with Johnson & Johnson is compelling, healthcare faces "daunting challenges" to adopt consumer-oriented approaches, Pizarro adds. In healthcare, it is difficult "to replicate what consumers expect with regard to things like refunds, online care, discounts, and price competition."

And the growing expectation for customer-oriented patient care, Pizarro continues, "will manifest at a granular level: in the office. Soon enough, one or both of the following phenomena will typify the healthcare landscape: single-payer insurance and large system providers (Mayo, etc.) The dynamics and inner-workings of those two phenomena, good and bad, will determine the customer experience."

The growing shortage of physicians is another major challenge. In 2013, there were about 767,000 doctors practicing in the U.S., according to a report by the Association of American Medical Colleges (AAMC). But by 2025, the U.S. faces a shortage of as many as 90,000 physicians. "The facts are simple: Our population is aging. It is also growing. Demand for medical care is higher than ever-and in fact, medical schools have been expanding enrollment to meet this demand," says the AAMC in a statement.

Even though medical school enrollment has increased, it is not keeping pace with the population's needs. Companies from Walmart to startups recognize the gap as an area that's ripe for disruption. Over the past year, Walmart has opened more than a dozen primary care clinics in Georgia, Texas, and South Carolina.

The clinics are located in Walmart Supercenters and offer services ranging from diagnosis and treatment of chronic and acute illnesses, as well as immunizations, health screenings, and physicals. "Our expanded scope of services enables us to be your primary medical provider," the company claims on its website. While CVS and Walgreens offer similar services, Walmart is the only one marketing itself as a primary medical provider.

Entrepreneurs McKay Thomas and Jay Marcyes also saw an opportunity to connect consumers with physicians. Thomas and Marcyes built an app, First Opinion, which allows users to text health-related questions to doctors to determine if they need to seek medical help. Instead of waiting in a doctor's office, members pay $9 a month and receive a response within 5 minutes (or they can use the app for free and receive a response within 24 hours). The 2-year-old app recently passed more than 5,000 downloads and the company has raised $8.6 million in funding.

The idea for the app stems from the growing expectation of on-demand services, explains Chief Operating Officer Dr. Vikram Bakhru, MD, who also has an MBA from the Wharton School of the University of Pennsylvania. "People are getting used to Uber's fast services," Bakhru notes. "And they expect the same from healthcare."

From the payer's side, First Opinion is not going to replace health insurers, but it reflects a move toward more direct relationships between consumers and providers. The physicians who staff the app go through a screening process to assess their skill level and bedside manner and they are paid as contractors. The majority of the physicians are based in India. More than 90 percent of the app's users are in the U.S., though and the company is hoping to eventually hire more U.S.-based doctors, Bakhru says. First Opinion is headquartered in San Francisco.

Challenges Ahead
While retail clinics and healthcare startups are alleviating the demands for care, they can only do so much, points out Jed Batchelder, a healthcare IT advisor who consults on patient engagement and population health strategies."One key challenge these new entrants will face is coordinating patient care in other settings, such as a surgery center or hospital," Batchelder says. "The lack of care coordination is a challenge today and won't automatically improve by the shifting of primary care to retail settings."

Partnerships between consumer-oriented firms and healthcare organizations are not necessarily successful, either. Walgreens launched three accountable care organizations (ACOs) in 2013 through partnerships with physician groups and health systems. The purpose was to make more pharmacists available for services like personalizing a medication care plan.

"The way I like to describe it is as a physician-led plan where we're an active partner,' Walgreens Senior Vice President Jeffrey Kang told The Washington Post in 2013. "They're the quarterback who creates the treatment plan. We can be care extenders who help implement and execute the plan."

But after launching the ACOs, Walgreens exited two of them at the end of 2014. Walgreens ended its partnerships with the Advocare Walgreens Well Network in New Jersey and the Texas-based Scott & White Healthcare Walgreens Well Network. Walgreens still has a partnership with The Diagnostic Clinic Walgreens Well Network in Illinois but did not immediately respond to a request for comments about its plans for maintaining the partnership.

For its part, Amazon has been quiet about whether it plans to pursue the healthcare space. There was some buzz when Modern Healthcare reported Amazon officials met with FDA officials last summer but nothing has developed since then. It is not difficult though to imagine Amazon targeting the medical industry's sales and distribution models, such as by selling medical equipment to corporations as well as individuals.

But the most difficult consumer experience for the healthcare industry to match is cost and quality transparency, maintains Will Hinde, senior director in consulting firm West Monroe Partner's healthcare practice. "The billing environment is extremely complex consisting of myriad fee schedules, networks, specialties, and physician-facility relationships," Hinde notes. "Simplifying this to provide an individual with an accurate, meaningful estimate for a particular service (beyond a simple office visit) will take a significant amount of work." Additionally, "providing quality transparency is a sticking point as physicians are sensitive to their quality being 'rated,' and insurers tend to avoid any activity that would upset their providers."

Indeed, simplifying the payment structure between payers, providers, and third-party vendors is critical to ushering in innovation, agrees J.B. Silvers, a professor of healthcare finance at theWeatherhead School of Managementat Case Western Reserve University.

"The tipping point will be payments," Silvers says. "Right now, doctors have to produce billable hours or they'll get penalized. But new entrants are looking for ways to simplify the system and once that happens, things like telemedicine are going to explode."

Editor's Note: An earlier version of this article listed First Opinion as raising $2.6 million in funding. The correct amount is $8.6 million.