Executive Briefing | by Monica E. Oss | December 6, 2017
Well, the mega merger news is in—CVS is purchasing Aetna (see CVS Health to Acquire Aetna; Combination to Provide Consumers with a Better Experience, Reduced Costs and Improved Access to Health Care Experts in Homes and Communities Across the Country). And at this point, I don’t even want to think about this headline—Wal-Mart May Buy Humana to Combat CVS-Aetna. What does this mean for strategy? I think there are two takeaways. First, Aetna insureds will find a “care hub” at the 10,000 stores that CVS operates. Second, the resulting merged organization will have a lot of data on consumers and their health.
On the service delivery side, CVS has been busy. This is some of our coverage over the past two years:
In addition, in a quick perusal of the CVS website, it looks like CVS is providing a range of services to consumers with complex needs including retail pharmacy, pharmacy benefits management, and specialty pharmacy; plus clinical services using MinuteClinics to diagnose and treat minor health conditions, perform health screenings, and monitor chronic conditions.
But the “land of the giants” that is health care does not only have its homegrown players. There are new out-of-industry competitors entering the space. That was put in context for me at our 2017 OPEN MINDS Technology & Informatics Institute by Andrew Wright, the Vice President, Digital Medicine for Otsuka America Pharmaceutical, during his keynote, Remaking Health Care With Wearable Technology & Digital Health – A View To The Future. He observed that the U.S. economy has evolved—initially dominated by manufacturers, then retailers, and now tech companies. The five largest publicly-traded companies in the United States are now Apple, Alphabet, Microsoft, Amazon, and Facebook.
These very same tech giants are now entering the health care space, and everyone in the field should think about the implications. The most notable health-related activity at Apple is the Apple Watch—which is now providing symptom tracking for consumers with major depressive disorder. The watch monitors cognitive function and “measures” users’ memory, social cognition, attention, executive function and psychomotor speed (see Apple Watch Study to Use Digital Health to Tackle Depression). This is just one of a number of Apple products with health care applications. In addition, there is speculation that Apple is or was considering buying a health clinic start-up (see Report: Apple Interested In Buying A Health Clinic Startup).
Google (aka Alphabet) has a number of toes in the health care waters, with investments in DeepMind, Verily, and Calico. DeepMind is using AI to decrease incidents of kidney injury. Calico is focused on slowing the aging process through applied biotech. In addition, they have announced a venture with Stanford on a digital scribe pilot project. Microsoft is busy expanding its footprint in the digital space—in November, Microsoft and The University of Pittsburgh Medical Center (UPMC) announced a partnership to design three “digitally-based specialty hospitals (see DIGITAL HEALTH BRIEFING: Microsoft, UPMC Partner For Digital Hospitals). And earlier this year, Facebook announced online tools via Facebook Live and Messenger to support consumers who may be suicidal (see Facebook brings suicide prevention tools to Live and Messenger).
Then there is “category killer” Amazon. Amazon’s cloud computing business, Amazon Web Services, is partnering with Cerner to help provider organizations make data-informed health predictions. Furthermore, Amazon now has wholesale pharmacy licenses in many states, and has met with Tennessee and Indiana about medical device and supply shipment regulations (see Amazon To Enter Major Healthcare Partnership – Apple Watch Aids In Treating Depression – IBM Watson Shows Its Power In Cancer Study).
So the question, posed in my article earlier this week—can the cash-strapped, specialty provider organization “Davids” compete with the capital-rich health system “Goliaths” in terms of innovation—takes on a whole new meaning (see David Versus Goliath?). The “Goliaths” have now met King Kong, so to speak. In this proverbial “clash of the titans”, who will win? The cash-rich homegrown team or the new players? And what does this mean for smaller specialty provider organizations? I’m reminded of the expression, “When you sleep next to elephant, you can’t help but notice when it rolls over” (see When Elephants Fight.).
The big tech players certainly are more creative thinkers and aggressive innovators. Relative to the current players in the health and human service sector, they act quickly and look at problems from a different perspective—with the oft-referenced “customer obsession” (see Connecting The Dots-Sustainability & Tech Leverage and The Amazon Leadership Principles & The Amazon Flywheel – What They Could Mean For Your Organization). I think those are the reasons that the tech Goliaths could prevail over the current array of organizations in the health and human service field.
But there have a number of notable failures (or least hiccups) when tech companies come charging into the health care space. In 2013, 23andme had to discontinue its service providing health-related data pending completion of an FDA review (for the suspension and the reinstatement, check out Personalized Medicine Hits A Bump In The Road and FDA Clears 23andMe For Its Direct-To-Consumer Genetic Carrier Test). In 2011, Google decided to stop providing its personal health records service, which was launched in 2008 (see Google Health Fades to Black). And in 2016, Zenefits, which offers cloud-based software to help with health insurance coverage and works as a health insurance broker, came under investigation for not obtaining the licenses necessary to sell insurance in individual states (see The Snags In ‘Speed To Market’ For Health Care Innovations).
As we were discussing this issue of “David versus Goliath versus King Kong”, my colleague Jamie Stewart, Chief Executive Officer, Grafton Integrated Health Network, said:
Aren’t the tech giants in health care akin to a fish climbing a tree? There is such a big difference is the regulatory landscape. Large tech organizations, for the most part, are unfettered in what they can develop and how they do it. I think they will find the health care field a bit surprising. Could major health care systems be more creative? Can provider organizations built to meet consumer needs in a highly regulated environment, both in facility and human capital requirements, truly innovate outside their area of expertise? I think so. In fact, I think they could be great partners for the “tech giants”.
The one thing I know is that every organization is going to need a focused and flexible strategy going forward. It reminds me of the statement by Michael Small, the Chief Executive Officer of Gogo: “I think that our continued survival in a land of the giants over the last five years has proved that strategy works.”
For more on combining leadership vision, strategy, and innovation with your operations, join me on June 6 at The 2018 OPEN MINDS Strategy & Innovation Institute, for my closing plenary, “Incorporating Innovation Into Everyday Operations: A New Strategy For Sustainability.”