- Yale New Haven Health CEO Marna Borgstrom and Henry Ford Health System CEO Wright Lassiter are among those worried so-called disruptors like Amazon may divert revenue streams away from hospitals, speaking at the AHA's annual meeting this week.
- When new market entrants want to push into health systems' most profitable business streams and "skim the cream off the top," Lassiter said, undercapitalized hospitals could become reliant on low Medicare and Medicaid payments while responsible for the most vulnerable and highest-cost patients. "None of the disruptors" are targeting traditional Medicare and Medicaid populations, Borgstrom said, because they have to answer to shareholders.
- Former FTC Bureau of Competition director Debbie Feinstein said that while she believes this is "absolutely" an issue the FTC will look at, the conversation is framed by basic market definitions and whether new healthcare entrants will "fundamentally change the landscape." While CVS-Aetna could siphon away some business from hospitals, she said, they don't own general acute care hospitals and aren't considered a competitor by market definition.
Hospitals have been gearing up to protect their profits from fresh threats from Silicon Valley and vertical integrations, with Amazon, Apple and Google inching into the market and the CVS-Aetna merger threatening to cut into hospital outpatient revenues. As those pressures continue to escalate, health systems are dealing with the margin-straining push out of volume and into value and the public's growing anger over high costs of care.
New entrants in the market are a double-edged sword, Lassiter said. There are opportunities to partner and collaborate in some places and compete for market share in others. Both Henry Ford and Yale New Haven Health, for example, have worked with Amazon to develop new Alexa skills. On the online retailer's interest in the PBM space, Lassiter gave Amazon credit for being better at logistics than health systems. But new competitors only interested in "picking off little pieces" of the healthcare industry are cause for concern.
"Hospitals are in the bulls-eye around driving affordability across this country," Lassiter said. "What I worry about is disruptors who simply want to find a new source of an income stream to drive shareholder value but aren't thinking about overall community health."
Borgstrom said investments in social infrastructure like education, housing and food security aren't lucrative, and aren't of interest to publicly-owned companies that have to answer to shareholders.
"As we often talk about at our board meetings," she said, "None of the disruptors are targeting the Medicaid populations or the non-Medicare Advantage populations."
Haven, Amazon's recently-branded healthcare collaboration with J.P. Morgan and Berkshire Hathaway, created something of a panic across the industry when it was announced in January 2018, and the frenzy hasn't slowed. The launch of the venture was drawn out and veiled, creating just enough ambiguity to cement Amazon's place in discussions among industry leaders.
Fueling the frenzy is Silicon Valley's dive into the industry's talent pool as Amazon and Google continue to scoop up healthcare leaders.
In March, Fitch advised nonprofit hospitals to "out-Amazon Amazon" and other nontraditional competitors hoping to route patients away from hospitals and into primary care clinics. The financial challenges Amazon and other "disruptors" pose, the Fitch report said, will need to be met with heavy investment and/or an attempt to partner with the company.
A number of health systems have decided on the latter, particularly on the artificial intelligence front.