Blog Post December 26, 2018 Healthcare’s Wild West: Six Entrants into the Market in 2018 Authors Dan Cosentino Sean Hartzell 2018 has been a disruptive year for healthcare. New entrants in the form of banks, retail shops, e‑commerce giants, and others have decided to test their abilities in the healthcare market space, leaving traditional players rethinking their strategies. Despite the uncertainty and ambiguity that define the current healthcare landscape, many nontraditional players have been tempted by the substantial opportunities available in the healthcare market. Let’s take a look at six of the most important entrants into the healthcare market in 2018.1. Amazon, JPMorgan Chase, and Berkshire Hathaway In late January, Amazon, JPMorgan Chase, and Berkshire Hathaway announced their collective intent to form a new organization focused on delivering healthcare benefits at a lower cost to patients. The venture would tackle two of healthcare’s largest challenges: price transparency and patient centricity, elements that will be integral to competing in the marketplace for health systems of the future. The joint venture has already brought on several heavy hitters from both inside and outside the healthcare industry, including Atul Gawande, MD, a surgeon at Brigham and Women’s Hospital; Taha Kass-Hout, MD, former FDA Chief Health Informatics Officer; and Jack Stoddard, former GM of Digital Health at Comcast. These types of hires further signal the venture’s willingness to explore nontraditional methods of solving healthcare’s challenges. The “Amazon effect” was manifested in this venture and has provided the impetus for much of the disruption in healthcare that took place this year. 2. Alphabet Invests in Health Insurance Start-UpIn August, Alphabet invested $375 million in six-year-old health insurance start-up Oscar Health. Oscar CEO Mark Schlosser claims the investment allows Oscar to “hire more engineers, we can hire more data scientists, more product designers, more smart clinicians who can think about health care a different way. It’s the acceleration of that product roadmap that fascinates us the most.” This investment gives Alphabet a 10% share in Oscar Health and follows a previous $165 million investment last March through Alphabet’s Capital G investment company and Verily Life Sciences. Additionally, the investment will enable the expansion of a new Medicare Advantage product line in 2020. Like Amazon, Alphabet will seek to optimize its experience in analyzing massive amounts of data to enhance the consumer experience. 3. Google Hires a CEO from within the IndustryIn early November, Google hired David Feinberg to oversee its health initiatives. Feinberg comes from Geisinger Health and is expected to help coordinate siloed healthcare efforts of the various organizations of Alphabet, which is Google’s parent company, into a more cohesive approach. Alphabet’s companies have been involved in healthcare mostly on the B2B end, working on projects ranging from using Nest to detect falls in senior living facilities to utilizing AI to help physicians take notes during hospital visits. Rather than entering the market itself, Google seems to be finding opportunities for performance improvement in existing healthcare organizations. We’ll see what 2019 brings regarding Google’s healthcare efforts and expect to see a more cohesive strategy at a minimum. 4. Apple Tests the Market with Wearables and EHRs In early December, Apple announced the availability of its long-awaited ECG app with irregular heart rhythm notifications. This follows Apple’s move into the EHR space, which officially began in January when the company began allowing patients from 30 different healthcare organizations to gather their medical records on their phone via a healthcare app. These won’t be the only innovations Apple will have in healthcare, considering its iPhones are in the hands of over 90 million Americans, a huge opportunity for healthcare deliverability and patient access. 5. Walmart’s Leap into HealthcareWalmart has been in talks with Humana since at least the spring because it’s hoping to align with or acquire the nation’s fourth-largest health insurer. For Walmart, this marked another way to enter the healthcare market. For Humana, this seems to be one possible route to partner with a retail store. Humana has been reportedly also working with Walgreens on a potential partnership as recently as late November. Don’t write off an alignment with Walmart, though, as a spokesperson from Humana said that a Walgreens partnership won’t prevent a Walmart deal. 6. Vertical Integration within the IndustryWhile vertical integration diverges from our theme of new entrants, it does represent a departure from the traditional healthcare delivery systems that we’re accustomed to seeing. CVS completed its acquisition of Aetna in November, merging Aetna’s medical data and analytics with a supplier of pharmaceuticals for a new care delivery model. As reported by Healthcare Finance, “Services will focus on self-management for patients with chronic conditions, expansion of chronic care management services at MinuteClinic, nutritional and behavioral counseling and benefit navigation support, as well as assistance with durable medical equipment, digital health apps and connected devices.” These types of acquisitions seek to combat the burden of shrinking margins and rising costs by improving efficiencies and outcomes through the creation of a true cradle-to-grave healthcare delivery operation. Vertical integrations are rare and more difficult to achieve than horizontal ones, but it’s likely more organizations will look to vertically integrate going forward as a result of the pressure from Amazon and other nontraditional players entering the healthcare space. Vertical integrators within the industry, tech giants, and retail and e‑commerce veterans are reshaping the healthcare landscape, and 2019 is sure to be a year of continued change. While it’s still unclear exactly what the marketplace will look like going forward, it’s certain the organizations that emerge as market leaders will be patient centric, value transparency, and learn to strategically use tools like technology to bend the cost curve.