Amazon.com (AMZN) has set its sights on hospitals and outpatient clinics in the U.S., aiming to become the leading provider of medical supplies to them.
According to a report in the The Wall Street Journal, Amazon has had executives from hospitals at its headquarters in Seattle several times in recent months with one of those meetings happening at the end of January. The e-commerce giant is using the meetings to learn more about the market and to gauge ideas about getting into the medical supplies business via Amazon Business, its business-to-business marketplace. Shares of medical distributors like Cardinal Health (CAH) and McKesson Corp. (MCK) were in the red in pre-market trading on Tuesday.
The idea is to turn Amazon Business into an online store where hospitals can purchase medical equipment and supplies for its outpatient clinics, operating rooms and emergency rooms. It's currently testing a program with a Midwestern hospital system that is using Amazon Business to order medical supplies for its outpatient facilities which number around 150. The country’s leading online retailer already sells a small amount of medical supplies but not specific medical equipment. (See more: Amazon Is Preparing to Take Over the Healthcare Space.)
In a statement to the Journal, Amazon said it's developing technology so that it can sell to health care customers and is aiming to provide hospitals with a marketplace that is different from how hospitals purchase supplies today, which involves contracts with distributors and the makers of the products. “Our goal is to be something new,” said Chris Holt, head of global health care at Amazon Business. “We’ve been actively building out new capabilities and features.” The executive called the current supply procurement system dated, which is why Amazon is aiming to transform the process.
The meeting with hospital executives comes several days after Amazon, Berkshire Hathaway (BRK.B) and JPMorgan Chase (JPM) announced they are teaming up to create an independent health care company. (See more: Amazon Hits New Highs After Revealing Health Care Plans.)
In a press release, which was issued in late January, the three said they are working on ways to address health care for their U.S. employees, focusing on reducing costs and improving customer satisfaction. To achieve that, they will create a company that isn’t focused on profit-making incentives. In the early stages of the collaboration, the three companies intend to focus on using technology to provide U.S. employees and their families with easier, high-quality, transparent health care at a reasonable cost.
“The ballooning costs of health care act as a hungry tapeworm on the American economy,” said Berkshire Hathaway chairman and CEO, Warren Buffett, in the press release. “Our group does not come to this problem with answers, but we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”