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Healthcare Spending Paves the Way for Silicon Valley

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Healthcare Spending Paves the Way for Silicon Valley

Author: Vice President of Healthcare Banking Oscar Gonzalez
Publish Date:
August, 2018


Imagine refilling your prescriptions and having them delivered to your home in two days from Amazon Prime, catching a free ride from Uber to your doctor’s appointments or seeing a nurse at a health clinic owned by Apple instead of a hospital system. It may seem odd to link tech giants like Amazon and Apple to healthcare but shakeups in the industry may make some of these possibilities a reality (if they aren’t already).

What has Silicon Valley eyeing the healthcare industry? The answer is simple and is something the healthcare industry is familiar with—cutting costs. Healthcare is not only expensive for the everyday consumer; it’s a huge expense for businesses throughout America. Annual premiums for employer-sponsored family health coverage reached $18,786 in 2017, with employees paying an average of $5,714. If you have 100 employees on a family health plan, that’s $1,307,200 in premiums each year. It’s no wonder organizations are coming up with new ways to cut costs.

Wellness programs have been used by employers for years to save money on healthcare expenses. Many firms offer their employees premium discounts if they meet certain criteria and offer on-site wellness perks. Some offer employees additional incentives to participate in wellness programs and meet certain health criteria (like tobacco cessation, for example). Encouraging healthy lifestyles and offering these programs to workers is a great way to cut costs and create a positive work environment, but some innovators are taking it a step further.

Take the recent Amazon, JP Morgan Chase and Berkshire Hathaway deal. In early 2018, these three companies decided to cut out the middleman (payers) and announced a joint effort to create an independent healthcare company for their estimated 950,000 employees. By offering health insurance to employees, these firms will enter the medical insurance industry with an estimated market share of 0.4 percent. According to the three companies, their goal is to focus on technology to provide simplified, high-quality and transparent healthcare. It’s not hard to imagine this partnership expanding outside of employees. In fact, Amazon recently announced its acquisition of the online pharmacy PilPack, which packages, organizes and delivers medications. With the ease-of-use of Amazon Prime’s delivery service, it’s easy to see why patients who find medication management difficult would be intrigued by this deal.

As companies are finding innovative ways to save on employee healthcare costs, consumers are also looking at how they can lower health expenses. Many Americans now have high-deductible health plans and are responsible for thousands of dollars up front for healthcare costs. This has led to patients turning into smart healthcare shoppers, looking for new ways to save money while still receiving high-quality care. The need for cost-effective and transparent options has created a new marketplace and firms outside of the traditional healthcare industry are seeing it as a way to expand their services.

One example of a company entering the healthcare market is Uber. The ride-sharing service launched a new business line called Uber Health that providers can use to assign rides for their patients from a centralized dashboard. The rider then receives a complimentary ride to medical appointments.

Retail giant Walmart has also been expanding its involvement in healthcare. The company was recently awarded a patent that describes a system of storing patient medical records using blockchain within a wearable device so first responders can see patient data in emergency situations. In addition, Walmart has been eyeing insurance giant Humana. The two companies have been having talks of strengthening their relationship.

In the end, the goal of these mergers and acquisitions is to provide consumers with more affordable, transparent healthcare options. As tech giants enter the healthcare space, consumers may see this as a way to have a better patient experience. Companies like Amazon and Apple have strong customer loyalty and brand recognition, which may make patients more open to trying their new health services.

In addition to offering affordable choices for patients, tech initiatives in healthcare may help providers and hospitals ease the transition from fee-for-service to fee-for-value healthcare. Many fee-for-value models rely on quality measures. New technologies help health systems track the numerous financial and quality performance metrics, as well as maximize reimbursement and improve operational efficiencies.

Even though Silicon Valley is known for shaking things up, the healthcare system is highly regulated and complex, which makes it hard to be disruptive in the industry. Providers and hospitals may not see big changes for quite some time, if at all. Healthcare is also very local. Patients tend to stick to healthcare providers they know. Large tech companies may have a hard time influencing how providers care for their patients.

It’s hard to say how soon we’ll see Apple Health Clinics alongside urgent care centers or what Amazon’s pharmacy services will entail. Even though it’s hard to create big shifts in healthcare, it’s important to monitor these changes in the industry to see how they may affect your health system or practice. Change is never easy but if it improves quality and safety or cuts costs, it can be worth the headache.

First National Healthcare Banking offers a full suite of revenue cycle solutions that allow our customers to focus their time and resources on what matters most – providing the best possible healthcare services throughout our communities. We offer financing for working capital, new construction, renovations, equipment acquisitions and patient financing. Learn more.

About the Author

Oscar is the Vice President of Healthcare Banking at First National Bank, where he joined in 2007 and has held numerous commercial banking positions. He grew up in Mexico City where he attained his Bachelor's in Economics and interned at the Central Bank. He then moved to Spain and obtained his Master's in Banking and Finance, and finally moved to the United States and received his MBA with a concentration in corporate finance.

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