Amazon pushes to become a major hospital supplier: 7 things to know

Deepening its move into healthcare, Amazon is pushing to turn its developing medical supplies business into a major supplier to U.S. hospitals and outpatient clinics, reports The Wall Street Journal.

The latest push into the healthcare arena comes less than two weeks after Amazon announced it would collaborate with JPMorgan Chase & Co. and Berkshire Hathaway to launch a new company aimed at cutting healthcare costs for their U.S. employees.

Here are seven things to know about Amazon's latest venture.

1. Amazon Business, the company's separate business-to-business marketplace, already sells a limited selection of medical supplies — ranging from sutures to hip implants — as well as industrial supplies and office supplies. However, Amazon is hoping to expand this marketplace into one where hospitals could shop to stock emergency rooms, operating suites and outpatient facilities.

2. Amazon has invited hospital executives to its headquarters in Seattle on numerous occasions, most recently in late January, to understand the needs and wants of the healthcare industry and to feel out ideas for expanding its medical supplies business, according to The Wall Street Journal, which cited hospital executives who attended the meetings.

3. Recently, Amazon Business sent employees to a large hospital system in the Midwest with roughly 150 outpatient facilities to test Amazon Business as a medical supplier.  Essentially, the pilot is testing if the system can effectively order healthcare supplies for all of its facilities. The pilot is customized for the healthcare system's catalog of supplies and allows employees to compare prices the hospital negotiates with its distributors and the supplies in Amazon Business' marketplace.

4. When asked about these current efforts, Amazon Business told The Wall Street Journal it is building technology to serve healthcare customers and seeking to reinvent typical hospital purchasing, which is generally done through contracts with distributors and manufacturers, like McKesson Corp., Cardinal Health and Owens & Minor.  The e-commerce giant, echoing opinions held by some in the industry, said existing supply chain options are outdated.

"Our goal is to be something new," Chris Holt, the leader of global healthcare at Amazon Business, told The Wall Street Journal, adding that to simplify purchasing, the company has been "actively building out new capabilities and features."

5. Over the past year, Amazon slowly acquired more than 10 wholesale pharmacy licenses from state pharmaceutical boards. The licenses are held in Alabama, Arizona, Connecticut, Idaho, Louisiana, Michigan, Nevada, New Hampshire, New Jersey, North Dakota, Oregon and Tennessee. These licenses are necessary for selling medical equipment to licensed professionals.

6. Some hospital administrators have been hesitant to purchase supplies from Amazon Business, citing reasons such as lack of options, disruption in the continuity of product supply, and lack of control over shipping. Typically, hospitals contract for assurance with distributors to ensure the products are available and delivered securely and in a timely manner.

"We can't be without supplies," Phyllis McCready, chief procurement officer for Great Neck, N.Y.-based Northwell Health, one of the hospital executives who attended a meeting with Amazon in Seattle, told The Wall Street Journal. "It's a little different than being out of a size 6 dress. I can't be out of a six French catheter."

7. Fees and administration, marketing and shipping costs account for 20 to 30 percent of healthcare supply costs, according to a 2017 research report cited by The Wall Street Journal. Rob Austin, a former hospital supply chain executive and associate director at Navigant Consulting, told The Wall Street Journal about Amazon's latest move, "There's a lot of people with fingers in the pie. There is a huge opportunity."

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