Amazon is learning that healthcare is "complicated," as one health system leader told Becker's.
The tech giant said Feb. 6 it is laying off hundreds of employees from One Medical and Amazon Pharmacy, following years of growth in its healthcare businesses. The move wasn't all that surprising to health system execs, though they were split on its broader implications for the industry.
"Given more than half of U.S. hospitals had expenses outpace revenues over the last year creating negative margins, I think it's logical that Amazon's healthcare operations felt the impact too," said Scott Arnold, chief digital and innovation officer of Tampa (Fla.) General Hospital. "With that said, Amazon is one year into the One Medical acquisition and it wouldn't be unusual to naturally make adjustments in the business. I suspect it's a combination of business-tuning and a tough year for healthcare."
Neil Lindsay, senior vice president of Amazon Health Services, called the cuts of a "few hundred roles" a realignment of resources to "help accelerate our efforts to deliver the best experience for our patients, customers and members."
"Who would have thought healthcare was complicated?" said Richard Zane, MD, chief innovation officer of Aurora, Colo.-based UCHealth. "To say that it is white knuckle time in healthcare would be an understatement."
He pointed to the "unprecedented combination" of reimbursement pressures from payers, continually rising staffing and supply costs, and "seemingly never-ending" government regulatory and reporting mandates.
"Any role that doesn't provide direct patient care must be scrutinized," Dr. Zane noted. "That being said, those systems — Amazon included — who lean in, embrace the change and disruption, and deliver the economies of scale and efficiencies that technological advances have delivered in virtually every other industry will win."
More than 33,000 tech workers have been laid off so far in 2024, according to layoffs.fyi. Health systems — including some of the largest in the country — have also been cutting or outsourcing IT jobs in recent months.
Health systems and disruptors alike face "significantly increased provision-of-care costs while revenues remain relatively stable," said Michael Restuccia, CIO of Philadelphia-based Penn Medicine. "As a result, Amazon's actions are in alignment with other provider organizations which are attempting to disrupt the environment while not suffering significant financial losses and remaining relevant in the space."
Joyce Oh, CIO of Tampa, Fla.-based Moffitt Cancer Center, said she isn't reading too much into the layoffs as Amazon has also recently cut jobs in nonhealthcare businesses such as Buy with Prime and Audible. But she is paying attention to the company's moves for competitive reasons.
"Personally speaking, I am more interested in following the adoption and success rates of the One Medical model as it helps inform on the demand for telehealth as well as the propensity of patients to switch providers based on ease of access and digitization of traditionally manual processes such as scheduling," she said.
It's a reminder that healthcare is hard, especially when you're a huge company, like Amazon, that is simultaneously trying to increase shareholder value, said Aaron Miri, chief digital and information officer of Jacksonville, Fla.-based Baptist Health.
"I wouldn't count them out or view this as anything other than a focusing effect while they work on continuing to integrate their product into Amazon Prime and other efforts to maximize integration with a margin," he said.
Mr. Miri said he's rooting for Amazon because of its potential to increase access to care, particularly for disadvantaged patients.
In the scheme of things, Amazon has about 1.5 million employees so the recent cuts appear to be "small shifts" as the company refines a "large-scale market play," said Chris Coburn, chief innovation officer of Somerville, Mass.-based Mass General Brigham.
If it's something bigger, however, "it will be a reminder that while the large tech-platform companies deliver immense scale and resourcefulness, they are entering a marketplace with hundreds of thousands of incumbents — providers, vendors, distributors — that exist in a dense web that touches more than 300 million healthcare consumers," he said. "While it can happen, true disruption is rare."