What's to Keep Amazon From Competing in Brick-and-Mortar Healthcare? Not Much

Amazon could join retail clinics already competing with hospitals and health systems to provide outpatient healthcare services.

Even in a digital age where more services are headed online, e-commerce retail giant Amazon could be poised, alongside retail healthcare clinics, to compete with hospitals and health systems on their brick-and-mortar playing fields.

And there's little preventing Amazon from doing this, especially after news the company is looking to launch new "urban grocery stores," which could serve as a possible beachhead for expansion into outpatient medical care services. Amazon would join retail providers Walgreens, CVS Health, and Walmart, which are competing already with hospitals and health systems to provide outpatient services in their communities.

This potential competition to hospital outpatient business comes as CVS is testing a "HealthHub" store concept in Houston following its acquisition of health insurer Aetna, and as Walgreens is dedicating armies of Microsoft scientists to a "store of the future." Analysts expect these retail clinics to change the way U.S. healthcare is delivered, which includes efforts to give patients less need to use the hospital and its ancillary outpatient services.

And why not Amazon as well?

"Amazon's basic approach has been to create a transactional platform that supports an ecosystem of interrelated products and services," says Ken Kaufman, managing director and chair of consulting firm Kaufman Hall. "Adding brick-and-mortar stores to its online platform will support Amazon's grocery business and its competition with Walmart but could be applied to other products and services, including healthcare, which is very much on Amazon's radar."

Amazon last year acquired the online pharmacy PillPack and formed a new venture recently named Haven with Berkshire Hathaway and JPMorgan Chase to examine ways to lessen the cost of care and improve health outcomes for the three corporate giants' 1.2 million employees. Amazon's announcements don't directly impact hospitals and health systems, though analysts say Amazon, like Walmart, has a laboratory in its large workforce to test what works.

For now, Amazon "plans to launch urban grocery stores that could offer a spectrum of goods that include beauty products alongside food," as The Wall Street Journal reported. Amazon declined HealthLeaders' request for comment on its plans.

But Kaufman sees this as a potential entry point for Amazon to get into brick-and-mortar retail healthcare, given its history to add on services over time from the successful platforms.

For example, Amazon in recent years has opened brick-and-mortar bookstores in New York, Chicago, and Washington, D.C. Earlier this month, Amazon said it is closing 87 of the pop-up kiosk variety stores in malls and Kohl’s stores, but it is maintaining Amazon Books and Amazon "4-star" stores that are largely stand-alone sites.

Amazon is looking at a grocery store model that includes leases with more flexibility than traditional commercial leases, as the Journal reported. That could allow Amazon to jump into healthcare services more quickly.

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Though it's unclear what kind of healthcare services and products Amazon could offer, Kaufman thinks that there's not much keeping Amazon from exploring brick-and-mortar healthcare delivery in the future.

"It is always difficult to predict the long-term intentions behind Jeff Bezos' short-term moves," Kaufman said.

"The more comfortable Amazon gets with physical commerce, the easier it will be to pivot toward healthcare," he added.