The New Doctor in the House

From retail to tech giants, all kinds of firms may be jumping into a sector that's far from easy.

It is one of the biggest trends in US business: non-healthcare firms buying into the healthcare industry. These new entrants likely have ideas to improve people’s health, cut costs, expand their customer bases, or a combination of all three.

But experts say that these new aspiring doctors will learn that the industry is one complex patient. Unlike many other industries, making a change in one aspect of healthcare—modifying the services covered by an insurance plan, for instance—can have large effects on government involvement, customer experiences, employee motivation, and elsewhere. “It’s difficult to solve for one part of healthcare without solving for all of healthcare, says Harry Greenspun, MD, Korn Ferry’s chief medical officer.

The wave of new entrants has accelerated over the last six months. It started somewhat straightforward, when the big drugstore chain CVS agreed to buy the health insurer Aetna. But then came Amazon, Berkshire Hathaway, and JP Morgan Chase teaming up to start a healthcare company. Next, Apple announced a program to share medical records with dozens of hospitals. Then last week came reports that Walmart is in merger talks with the large health insurance firm Humana.

Consolidation in the healthcare industry is nothing new, either; the only difference this time is that many of the firms doing the consolidating don’t employ many doctors, drug researchers, or other healthcare workers. Tech companies are developing tools and products to digitally transform healthcare; large retailers and other organizations are seeking more control over costs and better service and convenience for customers.

A foray by retailers makes strategic sense, says Denise Kramp, head of Korn Ferry’s North American Retail practice. “Healthcare services increases frequency of visits to a retail site, when brick-and-mortar retail is shrinking. It also creates a different relationship with the consumer versus just the selling of products,” she says. Leaders at other organizations believe they could provide higher quality healthcare at a more reasonable price if they had more direct control, says Tom Flannery, PhD, a senior client partner at Korn Ferry.

To achieve these lofty goals will require a great deal of leadership skill, experts say. The new entrants will have to reconcile the cultural differences between themselves and legacy healthcare organizations and non-healthcare firms. Retailers, for example, don’t have the same goals, exposure to government regulations, customer base, or workforce demographics as health insurers. Leaders will have to find different talent, engage and motivate employees in different ways, and have different business models and growth expectations. “The ability of leaders to translate between both worlds, to sit in the middle of them and explain problems and solutions in a way that both sides can understand, is critical,” says Greenspun.

Talent with that kind of agility and emotional intelligence are in high demand as more combinations between traditional healthcare and non-healthcare organizations arise. “There is a recognition among organizations that these types of ventures require leaders with a different set of competencies and experience than they are used to,” says Flannery. Some of the non-healthcare firms recognize the talent need. “The reason why most are buying these companies is to acquire the talent, intellectual property, and a plethora of data,” Kramp says.