Over-Promised and Under-Delivered: Why Big Tech Has Not Cracked the Nut on Health Care

When big tech set their sights on disrupting health care, most believed the outcome was inevitable. Flash forward ~5 years and we’re seeing big names walk back those promises of “disruption.” In August, Google dismantled their health care division after the former head left for Cerner. Haven, the joint venture between Amazon, JP Morgan, and Berkshire Hathaway, shut down after 3 years of struggling to address health care costs. Apple, which once touted grand visions of hiring primary care doctors, is now exclusively focused on the Apple Watch.

Health care has no shortage of problems: clinicians are burned out, rural hospitals are closing at an exponential rate, information sharing is fragmented. Couple this with the fact that America spends $3.6 trillion on health care each year and it’s easy to see why many claim that the industry is ripe for disruption.

If we applied the Uber or Airbnb disruption model to health care, big tech’s disruption of US health care would involve creating a system in which more consumers can access the services they need a a transparent, market-driven price. I don’t reject the premise that technology can — and already is — helping entities across the health care ecosystem deliver more precise, efficient, and affordable care. I do challenge whether that what we’ve seen to date can be considered “disruption” and I question why household names are still largely absent from these solutions.

Why have past efforts by big tech failed?

1. Misaligned incentives: Over the last decade, there has been growing acknowledgement that patients are consumers and those consumers are being underserved. These two facts opened the door to technology companies doing what they do best: designing cheaper, sleeker solutions that meet needs of the underserved. However, that’s just one piece of the puzzle in health care. Big tech companies can lead with solutions that are “better” than what consumers have now, but they can’t do so without considering the industry’s operating model. A product needs someone to use it and someone to buy it and in the case of health care, those individuals are not always aligned. When an individual consumes a health care service, the bill is is footed by some combination of that person, their insurer, and the hospital. Under the current fee-for-service model, these entities’ incentives conflict. Hospitals want consumers to use more services (more services = more revenue), payers want consumers to use fewer services (fewer services = fewer claims), and individuals just want high-quality care at the lowest possible cost but may be unaware of prices or restricted by their insurance networks. These complexities-even described at a high level-show how it is difficult to disaggregate the entity benefitting from a services from those incentivized to pay. Big tech companies’ strategy has been to delight the consumer so they are willing to shell out for a product; in health care, delighting the consumer is necessary, but not sufficient.
2. Consumer preferences are not consumer’s medical needs: To illustrate this point, consider wearables (which Apple and Google doubled down on). It’s evident that there is demand for these products, but a recent review of studies on wearables found that there is “little indication that wearable devices provide a benefit for health outcomes.” Big tech companies brought products to market that promise health improvements, but consumer excitement alone cannot lead to those outcomes. We want to believe that monitoring our health is as easy as wearing a screen on our wrist, when it will instead depend on making difficult and undesirable behavioral adjustments.
3. Big tech is not targeting the neediest consumers: A Kaiser Family Foundation analysis found that in 2016, 5% of the population accounted for 50% of health care spending. That 5% are likely older (expenditures increase with age), lower income, and suffering from multiple chronic conditions that are exacerbated by social determinants of health (e.g., housing, food access). An Apple Watch that measures that person’s heart rate isn’t harmful, but it’s also unlikely to move the dial on health care outcomes or expenditures.
4. Concerns around big tech + data privacy: While this challenge is not unique to health care, it’s more pronounced as health data is seemingly more private and health care services are not rendered for free. It’s one thing to know that Google is using search behavior to target ads; it’s another to wonder how the company is going to leverage results from your latest physical. What’s more, the real cost of big tech’s “free” services is your data; when someone is paying for their health care services already, is it right for data to be used for further commercialization efforts?
5. Medical liability: Though easiest to overcome from a technical standpoint, this marks the most drastic departure from big tech’s traditional strategic wheelhouse. Many big tech companies want to operate on an upside only basis — can the service add value without running the risk of making that individual’s life worse? The problem: health care is not an upside-only industry. A few years ago, Apple released a study on the Watch’s ability to detect atrial fibulation (aFib). The study was described as a breakthrough, but Dr. Robert Pearl pointed out in an article for Forbes, that people who are most likely to suffer from aFib (ages 65+, already diagnosed) were excluded for the study. The study was upside only for Apple — any aFib cases detected were lauded while they could avoid blame for missing others. Health care is messy — there is no algorithm that can predict how a human body develops or responds to their environment. If big tech was the reward from disruption, they have to be willing to take on risk beyond monetary investment.

What will need to change?

Since the passage of the Affordable Care Act, legislators have been talking about the shift from volume to value. Rather than rewarding providers for the quantity of services delivered, they should be rewarded for the quality of those services. With most hospitals’ revenue still tied up in fee-for-service, it’s safe to say this shift has not been as swift as many hoped or expected. As new care models are rolled out and providers are incentivized to deliver more coordinated, less costly care, health care product and service buyers and and users might become more aligned.

While counter to the idea of “disruption,” I think it behooves big tech to lean into partnerships with incumbents. In many cases, tech leaders see themselves as being able to deliver the solution; in health care, empowering incumbents might end up more impactful than uprooting them. Partnerships with incumbents also serves health care companies as they can beta test new products and gain real-time customer feedback.

Looking forward, I’m interested to keep an eye on Amazon Care as they seem the most on-track to deliver on the promise of a better, more resilient care delivery system. Between Alexa devices in hospitals, Pillpack acquisition, and medical supply marketplace, they’ve made considerable inroads into the space. Amazon Care now represents the first time that any big tech company has moved into the health care services space. Now available nation wide, Amazon Care underscores how Amazon understand the health care value chain and incentive structure, recognizing that employers have cash to spend and the ability to steer consumers. They have also built the model around a partnership with Care Medical, an independent medical practice. Amazon delivers on technology and logistics so that the incumbent can focus on patient care. As the model is rolled out, it’ll be important to see whether outcomes improve. Employee testimony shows customer satisfaction, but if they can also improve health and reduce costs, incumbents might level up their own offerings.

There’s no silver bullet and the model of “moving fast and breaking things” is not effective when human lives are at stake. But taking the time to understand incentives at play, think critically about underserved populations, and pinpoint the right partners, big tech might still be able to make a dent in improving our country’s broken health care system.

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