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Signify Premium Insight: What Signify Research Expects in 2023

With the distractions and disruptions of Covid finally fading, digital health enters 2023 with a clarity of vision, if not full predictability, not enjoyed for three years.  

The broader underlying trends driving digital health – for example, the digitalisation of health systems, hospital IT upgrade investments and a shift towards value-based care (VBC) models in the US – continue. These have the overarching goal of reducing the costs of healthcare provision, streamlining workflows, improving patient care and expanding healthcare services reach. 

For some digital health players, particularly the disruptors who entered the market (with mixed success) directly in response to breakneck pandemic-driven demand, the ‘end’ of Covid creates new challenges to their models. In the highly fragmented remote patient monitoring (RPM) market, in particular, some companies will fall by the wayside. For others, the relative calm of 2023 buys time to plan with greater certainty and implement strategic plans. As such, specific trends will emerge in digital health in 2023, which we outline here. 

Big Tech Becomes Mainstream   

After almost a decade of knocking on digital health’s door, Amazon, Google and, to a lesser extent, Microsoft will finally make the leap from pure cloud play into healthcare IT and services. Amazon and Google will build on recent acquisitions and product launches to cement their position as disruptors in healthcare IT and services. 

VBC will drive Big Tech’s move into the mainstream. Amazon’s HealthLake data aggregation solution, launched in late 2020, will kick on. We also foresee Amazon making more acquisitions this year to flesh out its portfolio. This follows its $3.9B acquisition of primary telehealth concierge business One Medical last year.  

VBC will also be the springboard for Google’s digital health strategy in 2023. The company will expect to leverage its $1B Verily investment, the launch of an AI-powered medical imaging suite last October and its Care Studio platform. These, along with an integration tie-up with EHR vendor MEDITECH, promise to disrupt the existing IT vendor ecosystem in 2023. 

In the public cloud market, the power struggles between EHR vendors and Big Tech, which have been a feature in recent years, will make way for a more collaborative approach this year. Partnerships between Google Cloud and Epic (in the US), and Amazon Web Services (AWS) and Dedalus (in Europe) will accelerate the adoption of hospital EHRs to the public cloud (from a relatively low base of just 15% in the US in 2022, for example). As more hospitals complete their migration journeys, hospitals will in 2023 start to realise lower operating costs, total cost of ownership and improved data security. Increasingly analytics and artificial intelligence (AI) will play an influential role in this, particularly in the early stages in the curation of data to support clinical decision making. Big Tech’s role as a conduit for IT vendors delivering software to provider and payer organisations will also evolve during the year.  

VBC Reboot Takes Root  

Having been hamstrung by Covid for three years (after underwhelming and underperforming for the best part of a decade), the US VBC market will finally shake off the shackles and reach its true potential in 2023. The value of the global VBC market is forecast to reach $11.3B in 2025 (with the US accounting for 80% of that), from $6.8B in 2021.  

Large health systems, Integrated Delivery Networks (IDN), big tech, big retail and major EHR vendors will all drive VBC services adoption. Business models will be increasingly predicated around VBC, and new revenue streams realised. 

IT will play a central role in this, especially investment in risk stratification, care management and patient outreach tools. 

US retail health clinics are aligning with this new VBC reality (see also below). This year will also see pharmacy retail giants expand their primary care services to more of the population than ever before. It is forecast that these clinics will, in 2023, account for double the share of the US primary care market than they did in 2022, deploying their financial firepower to develop the scale needed to improve patient experiences and reduce total healthcare costs.  

As more large retail clinics offer primary care services and IDNs continue to acquire practices and hospitals, there will be a continued reduction in the number of small, independent family practices and standalone hospitals in 2023. 

Size is Everything: Consolidation Around Big EHR Vendors to Pick Up Pace    

The trickle towards procurement around large hospital EHR vendors, underway over the last two years, will become a more pronounced stream in 2023. This will widen the gap between the likes of Epic (in the US) and Dedalus (in Europe), and tier-2 vendors. 

In Europe, consolidation around big EHRs will be notable in Germany, where the €4.3B Hospital Futures Act (KHZG) hospital digitisation initiative is being executed. KHZG funding allocations are based on the vendors meeting criteria around 11 main pillars covering diverse technologies. Big EHR vendors hold the cards in this. 

Oracle Cerner is poised to capitalise on this trend in the UK, where the NHS is encouraging Acute Trusts that are part of the same Independent Care System (ICS) to move towards a common vendor for EHR. Oracle Cerner is already well placed in this market. However, the company has challenges elsewhere this year, and the market will be watching its steps closely. It continues to grapple with a steady erosion of US market share to rival Epic, as well as persistent problems with its flagship Millennium EHR solution on a multibillion US Department of Veterans Affairs contract. Cerner, which was acquired by Oracle last year, must also find a way to stage manage fallout from software multinational SAP’s recent announcement that it would pull support for Oracle Cerner’s i.s.h.med EHR solution by 2030. This year, we expect Oracle Cerner to respond to this by offering clarity to its customers on its intentions for i.s.h.med. Until it does, the vultures will be circling.  

Household Names to Become Synonymous with US Primary Care  

Walgreens, CVS and Amazon will become household names in primary care provision in the US in 2023, deploying their unrivalled physical reach and supply chain and logistics expertise to reach more of the US population than ever.  

This follows a 2022 of headline acquisitions including Walgreens company VillageMD’s $9B purchase of urgent care provider Summit Health, and CVS’ $8B buyout of Signify Health. As the US retail pharmacy chains assemble the technology (for example risk stratification, analytics and workflow tools, as we discussed earlier) needed to transform primary care, these, alongside healthcare systems, payers and independent practices, will begin to make more money from VBC. 

The retail giants will, however, face challenges in 2023. These include how to handle higher acuity cases, and how to manage the connection between healthcare provision and securing reimbursement from government and commercial payers. 

Telehealth and RPM to Change Tack   

Telehealth and RPM will adopt a more strategic stance in 2023, replacing the reactive, quick-win approach of the Covid era. Cementing themselves in a maturing VBC ecosystem, telehealth and RPM vendors will support VBC delivery. Real time remote patient data and video/virtual consultations will be at the heart of this effort. 

We expect more acquisitions, partnerships and product launches from telehealth leaders Teladoc and AmWell, as well as VBC pioneers Innovaccer and Health Catalyst. As telehealth and RPM becomes more mainstream and more consolidated, the emphasis here will be on developing toolsets that will manage patients and serve VBC contracts via virtual care.  

 

 

Signify Premium Insight: Amazon in Prime Position with HealthLake Plans

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Last week Amazon made clear its intentions in medical imaging, announcing two new capabilities in HealthLake focused on medical imaging and analytics.

The Seattle-based tech firm says that the abundance of data created in medical imaging is slowing down decision-making in hospitals. In response, the cloud vendor has launched Amazon HealthLake Imaging, which is designed to expedite medical imaging retrieval in clinical workflows, as well as powering existing medical viewers and analysis applications. This, the vendor claims, can result in considerable cost savings.

However, with Microsoft’s Nuanced-derived healthcare expertise, Google’s recent moves into medical imaging, and Oracle’s inherited incumbency via its Cerner acquisition, has Amazon done enough to win the interest of providers?

The Signify View

Tech giants’ interest in healthcare is nothing new. Amazon, like other Nasdaq darlings, has made various approaches to different healthcare markets over recent years, from the launch, and subsequent shuttering of Amazon Care, a primary care service, to its Amazon Pharmacy play. Recently however, several of the world’s biggest tech firms have redoubled their focus, setting medical imaging firmly in their sights. After Microsoft’s acquisition of Nuance, which closed in April 2022 and Google’s recent launch of its Medical Imaging Suite, Amazon has become the latest tech firm to make a concerted imaging effort.

Like Google’s launch before it, the launch of Amazon AWS’ HealthLake Imaging suite is not festooned with brand-new, never-before-seen capability. Instead, many of the tools and partnerships included in the package have been available previously in various guises. However, the new packaging highlights Amazon’s increasing focus on selling cloud services to acute and outpatient providers as interest in, and understanding of the technology increases. While many of the tools have been previously available, it would likely have taken an already knowledgeable user at a provider to capitalise and work out how best the range of tools offered by Amazon could be applied to their own imaging departments. The packaging and positioning of Amazon’s latest effort, however, should help providers more clearly appraise the potential of cloud adoption for their imaging departments, easing the transition for more mainstream providers.

Such positioning, however, is only enough to make AWS more accessible. What Amazon hopes will encourage providers to commit, is its boasts about price. In its blog detailing the new solution, Amazon estimates that HealthLake Imaging helps reduce the total cost of imaging storage by as much as 40%.

The Cost of Delivery

This figure, as is often the case with those used in marketing materials, should be taken with a pinch of salt. No doubt Google, Microsoft and other cloud providers harbour some technologies which are also designed to help reduce the cost of storing images on the cloud. However, the fact that Amazon has publicly stated the savings that providers can expect indicates the vendor’s confidence in its ability to offer providers an affordable option.

Cloud adoption, can, after all be stymied by the cost, or at least perceived cost, of making the transition. While this is less of an issue for flagship academic providers and the premium they are willing to pay to have the latest and most experimental technology, for the acute and outpatient providers, cost is a far greater barrier. If Amazon is to truly capitalise on the revenue-making potential that cloud provision in medical imaging offers, however, this mass market is ultimately where the vendor must target.

By highlighting the cost-savings providers can expect to make if they adopted Amazon’s imaging cloud solution, even if the actual savings delivered are not quite at the quoted 40%, the vendor hopes to overcome the perception that cloud is prohibitively expensive, and at least engage mainstream providers in a conversation.

Even with such savings, cloud could still prove too expensive, depending on the volume, complexity and standards of the data held by the provider, but, crucially, these factors stem from providers’ individual circumstance. Moreover, the shift to cloud for imaging can also require substantial investment in network infrastructure (e.g. local bandwidth) to leverage the benefit of cloud-based performance.  While there will be providers for whom AWS’ HealthLake Imaging product is still too expensive, the advertised and expected cost savings, will likely be enough to convince some providers, particularly when other factors, such as cybersecurity or the requirement to deliver capability across complex outpatient networks, for example, are considered.

Choosing Between Sellers

At present, the key differentiators between cloud providers are still minimal. While different providers may have different strengths, individual niches where they excel and particular partnerships that will ease certain use cases, any of the major cloud providers can, in essence, offer almost the same broad capability in cloud services for imaging. However, despite this comparability, leading cloud vendors are still beginning to better arm themselves and shape their identities in an attempt to build links to certain customer bases. Amazon’s focus on efficiency and the cost savings it offers is one such strategy, a play that, as highlighted, stands to place cloud capability firmly in the reach of acute and outpatient providers.

Other cloud providers also have their own strengths, however. Microsoft’s Azure finds itself in a particularly strong position, largely thanks to its acquisition of Nuance. Most obviously, that acquisition gives Microsoft a direct line to a claimed 77% of hospitals in the United States. However, that acquisition also fits in with Microsoft’s broader portfolio. It is, after all, not difficult to see the possible synergies with Nuance’s Powerscribe solution (and nascent, yet impressive DAX ambient reporting), combined with Microsoft’s ubiquitous tools, including Teams videoconferencing. This could bring ambient listening to all consultations and telehealth visits, leaving essentially every interaction structured and stored on the cloud along with relevant medical images.

Google, meanwhile, may lack the Nuance play that Microsoft can lay claim to, and it may lack the relentless operational focus that Amazon has developed through its commerce heritage, but its expertise in search, AI and broader image analysis, will give its own strengths, making it, for example, an attractive provider for leading academics focused on using their data libraries to develop their own AI algorithms.

Expected Arrival

In most cases though, these are concerns for the future. At present many providers aren’t considering long-term population health-focused imaging data repositories in the cloud, or developing their own AI tools. Instead, most providers are looking to the cloud for improved accessibility, efficiency, security and cost.

With these basics amply covered by all leading cloud providers, at present, which cloud provider hospitals choose is likely to depend more on customer-context, rather than unique capabilities. It doesn’t necessarily matter, for example, if a radiology department harbours a desire for an AWS imaging IT platform deployment if it is part of a large hospital network, which has just agreed an enterprise-wide deal with Azure. Almost all leading Imaging IT software vendors have some degree of flexibility on cloud-provider for hosting their applications, making cloud adoption often an enterprise, as opposed to departmental, decision.

By a similar token, hospitals in regions where there are restrictions on public cloud provision, where there is a preferred partner or a requirement for in-region datacentres, for example, have needs that trump any smaller local preference for individual cloud providers.

Despite these considerations, there is one area where AWS might have an advantage. AWS has arguably worked its way into a broader group of informatics partners (and larger market share) as “preferred” cloud provider, than some of its chief competitors. While some providers will disregard the partnerships their IT vendors have fostered, for many, simply adopting their imaging IT vendor’s preferred cloud provider partner will prove to be the most straightforward route to transition to the cloud, and as such, all else being equal, will be the one that is chosen.

There are some factors that will become increasingly important over time, such as the ability to manage and retrieve unstructured data, the ability to offer analytics so providers can use their cloud resource most efficiently, and even the adoption and ingestion of different data standards from across an enterprise imaging platform. However, in the near term, such subtleties are far from a provider’s priority.

In the near-term one of the main priorities, particularly for many mainstream providers, is cost. As such, Amazon’s claims of cost savings along with its repackaged and repositioned offering may make it an obvious choice for some. And for now, when fresh, first-time opportunities abound, that should be enough for the Seattle-based tech giant to deliver.

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Signify Premium Insight: Google Searches for Imaging Success

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In its most high-profile bid to capitalise on the medical imaging market to date, Google has launched a new cloud-based medical imaging suite.

The suite is comprised of several tools, centred around Google Cloud’s image storage and Healthcare API suite, including NVIDIA’s MONAI for AI annotation and automation, BigQuery and Looker to help providers better navigate imaging datasets and Vertex AI to help accelerate the development of scalable AI models. Google says that by offering these tools in one product, it hopes to make diagnostic data more accessible and interoperable, while also readying providers for the development and implementation of artificial intelligence programmes.

While there has been significant promotion of the new suite, many of the tools were already available individually. What, therefore, does the launch really have in store?

The Signify View

Some well-justified scepticism will no doubt surround Google’s launch of its Medical Imaging Suite. The company has looked to expand its role in healthcare beyond feeding the imaginations of hypochondriacs several times, introducing Google Health in 2008 and discontinuing it in 2012, before rebooting it in 2018 and dismantling it again in 2021. It has, in the past also looked to develop front-line AI tools from its DeepMind division, consumer health products via its FitBit acquisition and apps for medical research among others. None of these tools, however, has yet made the significant, lasting impact that was expected by one of the world’s best-known firms.

Despite the sometimes inconsistency of these attempts, however, the company has been making headway in medical imaging with another, broader part of the business.

The adoption of cloud capability in medical imaging is still nascent, but some cloud providers, including Google, have become trusted partners for many earlier adopters. While Amazon Web Services (AWS) and Microsoft’s Azure are the public cloud providers that have seen the most uptake in medical imaging so far, Google Cloud, having reached some significant agreements with notable imaging IT vendors such as Visage, and Change Healthcare, as well as some notable and well-respected providers such as Mayo clinic, is hot on their heels.

Despite this, however, the Alphabet subsidiary’s presence in the market has been less visible compared to that of Azure and AWS. The launch of the Google Cloud Medical Imaging Suite highlights an end to this quiet and heralds the start of a more aggressive approach.

Remaining Relevant

Making such a transition has become increasingly important for the cloud provider. While Google has made progress, as AWS and Microsoft begin to pull away, Google misses its window to capitalise on the first phase of medical imaging cloud adoption. This is particularly true as Microsoft begins to capitalise on its Nuance Communication acquisition, for example, while Amazon continues to leverage its already extensive list of AWS partners.

Google will not countenance these advantages overnight, particularly given that on the face of it, its Medical Imaging Suite, which no doubt will be preferred by some customers with some specific use cases, is not a revolutionary leap. It may offer some advantages, but there is nothing truly ground-breaking that stands as a major differentiator compared to AWS or Microsoft.

That isn’t to say that there aren’t any aspects that aren’t attractive. The emphasis Google has placed on its AI offerings, for example, could swing some providers in its favour if they are looking to capitalise on their medical imaging data and facilitate its use among AI developers or indeed develop their own tools in-house. Its reputation for AI development could, in some cases aid its cause. This is especially true as many of the customers which have chosen to use Google public cloud are highly influential academic hospitals.

Reputation Management

Reputations work both ways though. While Google holds a staunch reputation for technical prowess, there are other factors that may give potential customers pause for thought. Chief among them are several high-profile incidents and agreements surrounding Google and identifiable patient data, including data from the Royal Free NHS Trust in London, and a deal with US healthcare provider Ascension. In these and other cases, Google’s actual culpability is somewhat moot, with the shadow of data insecurity, even if entirely unjustified, potentially enough to push a would-be customer in the direction of one of Google’s competitors.

Another concern for any potential customers considering turning to Google for their cloud provision is the vendors’ long-term commitment to medical imaging. While the more general aspects of Google’s cloud offering will continue to be supported, Google’s repeated high-profile salvos into healthcare, and the associated withdrawals, give the impression of a vendor that has no compunctions about pulling out of a market, reorganising its business units and ending its involvement in certain segments with little notice. Such an assessment may be unfair, particularly given that other cloud providers including Microsoft and IBM have both made equally high-profile pushes and retreats from some healthcare markets, but, with cloud representing a long-term investment, such concerns may weigh on decision makers’ minds when it comes time to signing on the dotted line.

These spectres are not impossible to exorcise, however. Google along with its peers are increasingly forging partnerships with imaging IT vendors in order to effectively create a joint sales strategy. Cloud providers, alongside vendor partners, are combining their efforts to sell to hospital networks, enabling the partners to highlight the benefits associated with a public cloud deployment, while also utilising the expertise from the imaging IT vendor in radiology.

Broader Responsibilities

Such evolution in sales strategy is also being mirrored in service provision. Along with the broader medical imaging market, deals are increasingly transitioning to managed service agreements. In terms of cloud deployments this is beginning to manifest as public cloud providers managing deployments much more closely, with for example, infrastructure and costing falling under the cloud provider’s remit.

Whether any of these factors are enough to sway a decision towards or away from Google, and indeed what influence they ultimately have on a providers’ choice of public cloud vendor, is still overarchingly dependent on individual deal context.

Google’s new Medical Imaging Suite will make the firm’s solution more attractive to many vendors, but any advantages will likely be overshadowed by much more significant influences. A deal’s locality, for example, may be a far more important factor in a provider’s decision if that provider is in a country which stipulates that cloud providers must have datacentres within-region, for instance, or if it is in a market sector that already has a preferred supplier.

As such, there are in most cases considerations far more significant than the differences between comparable cloud competitors. That, however, does not mean that Google’s latest efforts do not represent a significant step.

While the launch of its Medical Imaging Suite is unlikely to reverse the lead that AWS and Microsoft’s Azure have for public cloud departments, it does show Google’s intention. It highlight’s the vendor’s ambition in the space and lays the foundation upon which it can build over the coming years. Moreover, the launch also enables Google to remain competitive as other cloud providers such as Oracle and IBM which have already made their intentions clear, begin to more aggressively promote their own solutions.

Or, to put it another way, Google’s launch ensures it remains on the first page of search results, but, it has not yet offered anything to warrant rapidly climbing through the rankings.

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Signify Premium Insight: Amazon’s Multi-Billion Dollar Care Conundrum

This Insight is part of the Signify Premium Insights (SPI)-Digital Health service, which will launch on 9 January 2023. From that date, this and all SPI-Digital Health Insights will be available only by paid subscription. Click here for a free one month trial of this service. 

What began as a purely cloud-based healthcare play for Amazon is evolving into an ecosystem of health IT and services propelled by the proliferation of value-based care (VBC) reimbursement models in the US. But it has been an uncertain and unfamiliar journey for the tech giant. Its recent $3.9bn planned acquisition of telehealth firm One Medical, coming weeks before its failure to land Signify Health, indicate that its healthcare strategy is still very much a work in progress.

 The Signify View

Amazon’s healthcare DNA lies in providing pure cloud storage infrastructure to host hospital/healthcare IT systems through Amazon Web Services (AWS). AWS is a market leader in healthcare cloud, and overall contributes around two-thirds of Amazon’s total revenues.

However, over the last three years, Amazon has shown sustained interest in healthcare IT and services, albeit with limited success to date as it dabbled on the fringes of the market. Determined to make a more definitive play in the telehealth market in particular, the company has in the last 12 months switched tactics, focusing on acquiring the competencies, reach (and knowledge of how to navigate complex healthcare regulation) it feels it needs for true market penetration. Its recent $3.9bn purchase of primary telehealth concierge business One Medical is proof that Amazon is no longer prepared to play second fiddle to existing vendors. It now seeks to disrupt them.

Amazon is betting big on the VBC reimbursement model transformation in the US, in which healthcare providers are financially incentivised to keep people out of hospital, ease pressure on beds and reduce the costs of healthcare provision. The global market for IT (e.g. risk stratification tools, care management tools and patient outreach tools) to support VBC implementation is forecast to reach $11.3bn in 2025, up from $6.8bn in 2021, with the US accounting for 80% of that market. See figure below.

Source: US PHM Market by Major Product Signify Research, Oct-21

Amazon the Aggregator

Amazon has been targeting the lucrative data aggregation market since December 2020, when it launched HealthLake. HealthLake aggregates structured and unstructured EHR data, along with data from other sources, into an index-structured database. Organisations can then analyse population health trends, outcomes and costs, and identify the most appropriate intervention for the patient population. This is a key process in any IT solution aimed at supporting VBC implementation, because it provides the building blocks for healthcare providers looking to migrate to VBC. HealthLake’s launch, while several years after the respective product launches of the leading vendors in this space, now positions Amazon well to capitalise on the market growth outlined above.

That said, the VBC IT market is maturing more slowly than forecast five years ago. The below diagram illustrates a maturity model typically followed in the US to implement IT solutions supporting VBC. The components required for each step include tools to aggregate data, perform risk stratification and cohort ID, provide care coordination and patient outreach. Although market maturity remains some way off, investment over the next three years will move processes along the model and drive additional growth. Amazon needs to develop its solutions and partnerships with third-party vendors to capitalise on growth that the maturity model will bring in the VBC IT market.

Amazon Care Falls Short

Amazon Care was created in 2019 partly to leverage the abovementioned VBC market potential. It initially offered Amazon employees virtual (and some at-home) consultations with health professionals, and was then subsequently marketed to other large organisations. Amazon Care proved little more than a corporate dalliance, however. Its August 2022 announcement that the business would shut by the end of 2022 came as a shock to staff and the market.

 One Medical

This was surely no mere coincidence. Mere weeks before Amazon Care had dropped its bombshell, Amazon’s $3.9bn cash bid for One Medical, a premium, membership-based primary telehealth concierge, had been accepted.

On the face of it, One Medical makes perfect sense for Amazon, being a near replica model of what Amazon Care wanted to be; a comprehensive, wide reaching primary telehealth provider centred around VBC. It is match fit and ready to capture new market opportunities far faster than Amazon could ever have achieved by going it alone.

One Medical’s 767,000-plus members (mostly insured staff of companies) pay $199/year to access a US-wide network of primary care doctors in around 180 clinics. Around 20% of consultations are face-to-face.

In the last 12 months it has targeted the Medicare Advantage value-based reimbursement scheme, where One Medical bills insurance firms for the services it provides. More than half of its $255m revenue in the last quarter came from Medicare, largely through contracts with private insurance firms signed up to Medicare Advantage.

Signifying a New Strategy

Confirming its new-found appetite for acquisitions in the telehealth and value-based care space, Amazon followed up the One Medical deal with a much larger bid for Signify Health. Although it ultimately lost out to US retail pharmacy company CVS, which paid $8bn, but, like One Medical, Signify would have been a good strategic fit for Amazon as it assembles the various pieces of the strategic VBC jigsaw.

Signify’s services would have complemented Amazon’s HealthLake IT portfolio. It boasts a network of around 10,000 physicians and clinicians across the US focused on complex care, strong revenue growth (up 16% year-on-year between Q2 2021 and 2022) and with a model predicated on VBC.

Big Tech’s Healthcare Troubles

Amazon’s Signify failure underscores the difficulty big tech has had in consistently moving beyond cloud infrastructure and cracking healthcare IT and services. Microsoft pulled the plug on its HealthVault fitness platform in 2019, while numerous telecoms firms have also tried, and largely failed, to make inroads in the sector. Alphabet’s path has some similarities to Amazon. It too has enjoyed success via its Google Cloud services. The August 2021 announcement that it was disbanding Google Health should not be read as an indication it is stepping back from the healthcare sector. Far from it, the recent announcement of the additional $1bn investment in Alphabet-owned Verily, the October 2022 launch of an AI-powered medical imaging suite, alongside Google’s 2021 launch of Care Studio and subsequent partnership and integration with Meditech are all clear signs that it expects to be a leader in healthcare IT too, and that its sees value-based care as a springboard to disrupt the existing IT vendor ecosystem.

What Next for Amazon?

Amazon will continue to bet big on VBC, and will be inspired, rather that deterred, by its experiences around Amazon Care and Signify Health. No longer prepared to operate around the fringes of the market, it is now in the mood to disrupt the established vendors, and sees acquisitions as the way to do so.

Amazon’s future moves should be viewed through the lens of its patchy track record in healthcare to date (outside of cloud). But, to its advantage, it has a proven suite of tech solutions (HealthLake, Amazon Comprehend and Amazon Transcribe) which could effectively complement some future acquisitions.

When Deep Pockets Aren’t Enough

The last three years have been a roller coaster for Amazon in healthcare. It will have learned lessons from its experiments and failed ventures, not least that healthcare is a far more complex, heavily regulated area than it is used to. Deep pockets alone are not enough.

The market is highy competitive, illustrated by CVS outbidding Amazon for Signify Health. And then there are regulatory headwinds; the One Medical deal is undergoing a second round of scrutiny by the Federal Trade Commission (FTC), and there are anti-trust concerns around the firm, in particular how it manages patient data.

However, the One Medical deal suggests Amazon now has a clearer focus than ever on where it wants to be, and how it wants to get there. Expect more acquisitions in the coming 12 months as it looks to complete the jigsaw puzzle.

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Signify Premium Insight: Oracle Ups Microsoft’s Efforts on Journey Into Healthcare

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Late last December, Oracle revealed its plans to acquire EHR vendor Cerner for almost $30bn.

The deal will see the tech giant buy the healthcare firm in an all-cash tender offer of $95 a share, resulting in a total equity value of $28.3bn. The acquisition of Cerner will give Oracle a direct route into a large number of providers in the US and beyond, and marks Oracle as only the latest company with a legacy in technology to beat a path into healthcare.

Assuming it is approved by regulators, the deal is set to close in 2022, and is expected to be accretive to Oracle’s earnings right away, while Cerner will be organised as a dedicated business unit within Oracle.

The Signify View

For some years, the healthcare market has been seen as one of the key sectors into which investment from big tech companies would one day flow. There have been several instances of this happening in the past with Google, Amazon, and IBM among those that have already acted upon their designs for the sector, with varying levels of success.

More recently, however, these broader ambitions have started to become more tangible, and more serious, with the most notable move being made by Microsoft in April, when the company announced it was taking over radiology transcription specialist Nuance for $19.7bn. That deal, which so far has received antitrust approval from the U.S. Department of Justice, the Australian Competition Commission and, most recently, the European Commission, represents something of a change in strategy for Silicon Valley firms. In the past, tech firms have tended to focus on the internal development of products to sell into healthcare. Microsoft, however, bucked this trend, investing heavily into a successful healthcare company in a bid to, among other things, access a host of sales opportunities for its own cloud offering.

Oracle’s bid for Cerner lies along similar lines. Instead of investing heavily on research and development internally, and risking falling into one of the traps of moving into healthcare – a lack of pragmatic clinical expertise – Oracle has spent externally. Cerner’s latest financial results, for Q3 2021, saw revenues of $1.4bn, with an adjusted operating margin of 21.9%, and so, the vendor represents a strong revenue generator for Oracle in its own right. However, as illustrated in Signify Research’s Electronic Medical Records – Market Intelligence Service Cerner’s use in approximately 25% of acute hospitals in the U.S in 2020, as well as a strong presence elsewhere, including 9.5% of the revenue share in EMEA, acquiring Cerner also provides Oracle with a vast amount of sales opportunities for its core cloud services offering.

About That Cloud

Cloud providers are increasingly interested in the healthcare market, and more similar deals are likely to follow; there are rumours, for instance, that . This raises questions of compatibility. Oracle will naturally hope that when Cerner’s customers make the transition to cloud, they will do so using Oracle’s cloud services. The same is true of Nuance customers for Microsoft and will be for any cloud providers that take this approach into healthcare. This means that in the mid-term, imaging IT vendors are unlikely to limit themselves to just one cloud provider, as this could drastically shrink the number of hospitals that they are able to sell to. This cloud compatibility is even expected in cases where one cloud provider is nominally preferred or partnered. GE Healthcare’s TruePACS for example is promoted as being built in partnership with AWS, but GE’s software can be deployed on the customers chosen cloud platform; AWS or otherwise.

The cloud market is not straightforward, however. In the U.S. Cerner accounts for 27% of all EHR revenue but is losing market share to its chief rival Epic. Despite this, it still has a strong presence internationally. This will be advantageous for Oracle, which will look to sell its cloud services across the world. However, there are, in some markets still some regulatory hurdles that will increase the difficulty of cloud adoption and make Oracle’s ambition more challenging. In Australia, for example, there are strict rules around data centres, and their location. The sentiment in Nordic countries meanwhile is comparatively against public cloud, again, making this a difficult region for Oracle to capitalise on its newly-found access. As such, while Cerner’s international reach will open opportunities, Oracle will still have to work hard to capitalise on them.

Although Cerner’s biggest market is by far the U.S., it does have a presence globally

Healthcare’s Digital Deficit

Ultimately, this increased interest in the healthcare sector is, for the most part, a positive change. The Covid-19 pandemic, in particular, has recently highlighted some of the frailties of the broader healthcare sector from the perspective of digitisation. This emphasised the opportunity that awaited Silicon Valley companies that had the technology and the resource to come and offer solutions to these frailties within imaging and elsewhere. It increasingly seems as though these vendors have taken this cue, and are making much more concerted efforts into healthcare. While there have been false starts in the past from vendors such as Google, Amazon and Microsoft, and rumours suggest that other vendors such as IBM are also looking to free themselves of their healthcare concerns, the present investment represents a new level of commitment.

Not every deal will impact medical imaging to the same degree, with Microsoft’s acquisition of Nuance likely to have a much more direct effect than Oracle’s acquisition of Cerner, particularly for Imaging IT vendors, despite being around two-thirds the size. Regardless, the wave of investment into this digitisation, the additional spending in the market and the added impetus to adopt and embrace broader trends driven by big tech means that Oracle’s impact will ripple out to all parts of healthcare, including imaging. Microsoft and Oracle have shown their hands first, but it is unlikely their peers won’t soon follow.

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