Zachary Alexander co-wrote this article with Florent Moise.


It’s been more than a year since Amazon joined forces with Berkshire Hathaway and JPMorgan Chase to reduce healthcare costs and improve patient satisfaction among their 1.2 million employees in a joint venture called Haven. In our previous post, we explored the current state of Amazon’s efforts in healthcare, the creation of Haven and what a health plan for its employees could look like.


Is the next step extending this offering to all Americans?


With Amazon’s retail growth reaching a plateau, it’s a logical route to the company sustaining its trillion-dollar market cap. According to former Haven COO Jack Stoddard, “If you come up with a great solution, why wouldn’t you make it available?”


Haven’s deniers argue that healthcare cannot be compared to other industries because it’s not a consumer product or regulated like other markets.


The healthcare industry has made tremendous progress over the past 70 years while also generating a fair amount of waste and patient dissatisfaction.


Since 1959, breast cancer five-year survival rates have risen from 60% to 90%. More than 90% of the U.S. population is covered by a health plan, and all seniors have access to medical and drug benefits. At the same time, total wasteful spending on healthcare in the U.S. has reached $1 trillion annually, and customer experience has been inconsistent because of many factors, including:

  • Limited or no choice in terms of plan
  • Wait time for appointments
  • Filling out 10 pages of lawyer-created paperwork at every visit
  • One-size-fits-all services centered around immediate treatment
  • Interactions with armies of unknown people asking the same questions without coordination
  • Discrepancies between different touch points such as specialist, pharmacy or lab
  • Fight for prior authorizations and surprise billings
  • Personal data scattered across multiple actors
  • No transparency on costs
  • Price increases outpacing inflation

Customers are not looking forward to these negative experiences on top of their illnesses. A lot of the positive consumer experience changes were outside traditional healthcare at companies such as WebMD, Healthgrades and Livongo.


Amazon’s modus operandi is simple, customer-oriented and ruthless:

  1. Identifying new categories based on market frictions
  2. Testing the market by learning from select merchants
  3. Providing as many options as possible at different price points
  4. Gathering data on merchants’ customer preferences to segment the marketplace
  5. Providing a platform that drives down prices as competitors compete for customers
  6. Selecting winners based on customer satisfaction
  7. Taking control of the winners’ logistics through its warehouses and delivery system
  8. Creating its own products and services based on customer-preferred features
  9. And sometimes replacing incumbents by driving them out of business (e.g., Toys “R” Us)

Leveraging these strengths, Haven could launch its own health plan, manage its provider groups, and improve peoples’ healthcare experience by treating them as consumers—providing service on a scale that has never been achieved before. It would likely start by providing more consumer choices (with different features at different price points), making prices transparent and removing friction from handovers. Doctors and hospitals could compete on a single platform based on customer reviews. Haven can incentivize members to go to providers that either charge less or produce less-costly outcomes. Teledoctors, doctors and nurses on wheels, and prescriptions to the doorstep through PillPack would be obvious benefits. And when at-home service is not an option, members in high-density areas could visit clinics with “Amazon Basics” providers. Coordinating the entire process by people or machines will reduce costs and make navigation easier.


The go-to-market strategy would start with the commercial segment, which is less regulated and easier to impact. Employers need to focus on selling products and services, not administering employees’ healthcare costs. In most countries, employers do well by outsourcing healthcare administration to government-affiliated entities. Even self-insured employers would gladly give up this task if they could find cheaper alternatives, as they have mostly given up owning and managing their own data servers.


Instead of taking over an entire employer and forcing itself on employees, Haven will want to be a first choice for employees among traditional health plan offerings. It can leverage Amazon Prime members to advocate for Haven and provide a price-cap guarantee for employers. This strategy would enable Haven to select companies as customers who would be most likely to appreciate its value proposition. So long as Haven can reduce an employer’s total healthcare costs, they will likely be receptive.


Haven can leverage Berkshire Hathaway’s insurance and management expertise as well as JPMorgan’s corporate relationships and retail network: 5,000 Chase locations, 450 Whole Foods markets and hundreds of Geico agencies provide quite the network.

Clearly, Amazon has a path to control all aspects of the healthcare journey. Starting Haven and focusing on its own employees is just step No. 1 in the process.


Many people have predicted that companies such as GM, Sony, BlackBerry, Microsoft and Sears would take over the world. None of them have. And although Amazon accounts for half of online sales, it represents only 5% of the retail market. It has also failed and quietly exited certain areas. Do you remember Amazon Destinations, Local, Quidsi, Askville or Fire Phone? Probably not. In fact, Amazon just recently said it will shut down its restaurant delivery service due to failed promotion and a lack of partnerships.


Providing healthcare insurance and service is more complicated than selling and moving SKUs. Even with the best business plan, at some point, reality and gravity kick in. “Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures," said Jeff Bezos in his annual letter to shareholders. This could be another one.


So while new entrants like Haven have the potential to redefine the healthcare industry, it’s not a certainty. Health plans can play both defense and offense. Working with physician groups, advocating for advantageous regulatory changes, and avoiding partnerships with Amazon (Toys "R" Us) are a few ways to start.


However, developing a strategy to coexist and compete in Amazon’s world is a necessity. Many retailers, including REI, Costco, Net-a-porter and Target, have thrived by differentiating themselves from Amazon. Health plans must do the same by focusing on the following key areas:


1. Customer value proposition: Health plans need to understand customer insights not just for actuarial reasons but also for marketing and service purposes. Developing a deep understanding of each customer through hyper-segmentation will help create tailored offerings such as benefit plans. To avoid commoditization and improve branding, health plans must position themselves as customer-centric marketing companies rather than insurers. This may also require creating different brands to match different patient segments (think Toyota vs. Lexus).


2. Customer experience and engagement: Companies such as Amazon, Apple, etc., have raised the bar on customer experience. Healthcare is a personal matter that lends itself to deeper levels of engagement. However, the individual’s journey needs to be carefully designed and implemented to balance privacy and personalization. Health plans must always keep the customer at the center of their decisions.


3. Provider network management and value-based care: Enhancing the experience and increasing the quality/cost ratio will happen only through the innovative engagement of the provider network. High-performance networks result in better outcomes and lower costs. Health plans need to think beyond geography, network adequacy and individual performance to focus on collaboration among providers and performance of the whole local network. To support this goal, value-based care programs need to incentivize providers and pharmaceutical companies on outcomes and costs.


4. Data management and integrated analytics: Efficient claims management is no longer sufficient. A true member/customer 360-degree picture is needed, one that incorporates claims, electronic health records and socio-determinants of health with enough data velocity to enable timely interventions. Health plans will also need to move beyond their memberships to understand best practices across similar populations. Furthermore, understanding providers, their attitudes and behaviors, and their affiliations with integrated networks is the key to quality networks.


By carefully considering these factors, health plans can get ahead of the game and compete effectively with potential disruptors like Haven, leveraging their long experience and in-depth healthcare knowledge for the benefit of their members. The ability to act quickly and manage change across all areas will be critical to building a secure future.