In an effort to slow the pace of runaway healthcare costs, Amazon.com (AMZN 4.44%), Berkshire Hathaway (BRK.A 0.55%) (BRK.B 0.49%), and JPMorgan Chase (JPM 0.94%) are creating a new joint venture that won't be hamstrung by a goal of turning a profit. The companies haven't said specifically how they plan on disrupting this massive industry, but there are hints that telehealth, electronic records, and the real-time tracking of health data could be on the table. If so, then it could be worth keeping tabs on Teladoc (TDOC -0.87%), Athenahealth (ATHN), and Apple Inc. (AAPL 1.41%).
A new way of delivering care
About 20% of the $3.3 trillion-plus that the U.S. spends on healthcare every year goes to physician and clinical services, and that suggests to me that any effort to control healthcare costs will include reforming access to primary care, urgent care, and specialists. If so, then telehealth could be a solution.
Teladoc is the nation's biggest telehealth company by far. Its 75% market share is approximately three times bigger than its next three largest competitors combined, and last year, the company significantly expanded its telehealth offering when it acquired Best Doctors, a service that matches patients up with specialists for second opinions.
The company markets its services to healthcare insurers and companies that self-insure as a low-cost solution that can provide patients with healthcare advice more quickly and at a lower cost than traditional primary-care doctor visits or unnecessary visits to the ER.
It appears that's an easy sell. Teladoc's revenue grew by a compounded 80% annually between 2013 and 2016, and in January 2018, management reported preliminary fourth-quarter revenue of $76 million, up 103% year over year. In 2018, it forecasts that sales will climb an additional 52% to at least $350 million.
If Amazon, Berkshire Hathaway, and JPMorgan team up with Teladoc to transition more patients to the cloud, it could relieve bottlenecks associated with access to care -- particularly in rural areas -- and reduce costs by cutting down on unnecessary ER visits and testing. According to the company, its Teladoc service saves $46 per visit in productivity costs and $472 per visit in claims, while its Best Doctors service for complex cases generates $36,000 in savings per patient.
Given that Teladoc is already serving 300 of the Fortune 1,000 companies, I think it makes sense that Amazon, Berkshire Hathaway, and JPMorgan would turn to them if their solution includes telehealth.
Better information = better and cheaper care
A lot of progress has been made toward digitizing patient records over the past decade. However, access to comprehensive patient data remains one of the biggest challenges healthcare providers face today.
Athenahealth is one company at the forefront of developing next-generation electronic records, and although it isn't the biggest electronic health record software company, it has significantly penetrated the primary-care market. About 106,000 healthcare providers rely on its cloud-based software to manage administrative functions, such as scheduling, billing, and digitizing patient health records.
Recently, Athenahealth's been strengthening its competitive position by investing in artificial intelligence. In 2016, it acquired Arsenal Health so that it could build a smart scheduling platform, and last year it acquired Praxify Technologies so that it could improve electronic healthcare record workflows using machine learning and natural language processing.
Over time, Athenahealth thinks its software can take over all of the business functions of a practice so that doctors can spend more time treating patients. It also plans to use next-generation technology to mine patient records in ways that can increase preventative care, eliminate unnecessary testing, and recommend appropriate treatments.
If it can do all of that, then perhaps Amazon, Berkshire Hathaway, and JPMorgan can use it to, as they put it, "provide U.S. employees and their families with simplified, high-quality, and transparent healthcare at a reasonable cost."
Siri, am I healthy?
Embracing wearable technology may be another intriguing way that Amazon, Berkshire Hathaway, and JPMorgan can improve the U.S. healthcare market.
Wearable technology is becoming increasingly intelligent yet less intrusive, and that's allowing companies like Apple to create applications that provide greater insight into a patient's health.
For example, Apple CEO Tim Cook said last year that he was using his Apple Watch to track the impact his diet has on his blood glucose levels, and in December, Apple announced a first-of-its-kind heart study that allows anyone age 22 and up to use an Apple Watch to monitor heart rhythm. If an abnormality is discovered, a telehealth visit is scheduled to determine the wearer's risk of atrial fibrillation, a common cause of hospitalization.
Conceivably, projects like these could save the healthcare system billions of dollars annually. According to the American Diabetes Association, diabetes and prediabetes costs exceed $320 billion in the U.S., and according to the U.S. Centers for Disease Control and Prevention, heart disease and stroke cost America nearly $1 billion per day.
Overall, it's anyone's guess what Amazon, Berkshire Hathaway, and JPMorgan will focus on initially, but given that the lion's share of healthcare spending is associated with patient care, such as doctor visits and hospitalization, it wouldn't surprise me if telehealth, electronic records, and wearable technology are among the first things they consider.