Healthcare: An Industry Ripe for Disruption

The onset of the COVID-19 pandemic added incredible stress to the already fragile US healthcare system. Compounded by (1) the severity of disease caused by early strains of the virus, (2) the US’s initial lackluster response, (3) prior depletions of emergency equipment stockpiles (e.g., N95 respirators) and (4) the high prevalence of comorbidities associated with severe disease and death, the US healthcare system struggled mightily. Despite substantial financial assistance provided to hospitals and Integrated Delivery Networks (IDNs) by the government during the public health emergency, many healthcare workers had their wages reduced—even as they worked overtime under grueling conditions. Meanwhile, many healthcare specialists were left sitting at home as hospitals suspended nonemergency procedures and repurposed space to handle the surge in COVID cases. Ironically, these highest-paid and most oft-lauded healthcare workers were the ones effectively rendered nonessential.

The Pandemic’s Ripple Effects

These disruptions widely impacted the nation’s healthcare system, both clinically and administratively. Procedure suspensions and appointment deferrals exacerbated health problems for many patients. But the US healthcare system’s fee-for-service operating models compounded issues; hospitals and health systems—despite being filled with critically ill patients—faced revenue shortfalls and diminished profits due to canceled services. The negative impact of cancellations and deferrals extended beyond mainstream entities to ambulatory care centers, non-affiliated specialists, and medical device products and services. Companies including Edwards Lifesciences, Alcon, and Johnson & Johnson had to navigate substantial decreases in demand for procedure-related business lines.

Figure 1: Hospital Impairments in the First Quarter

Hospital Closures

Before the pandemic, most US hospitals were already running on thin margins—about 30 percent were unprofitable in 2018—and, as a result, many have recently closed. Eight hospitals slipped into technical debt default early this year (see Figure 1), and since 2019, at least 36 rural hospitals—representing nearly 1,200 beds—have closed.¹ The loss of these hospitals has profoundly affected their surrounding communities: nearly one in five Americans lives in a rural area where, on average, there are just five physicians per 10,000 residents. Community hospitals (i.e., all non-federal, short-term general, and other special hospitals open to the public, about 5.2K in the US) have faced similar pressures: between 2017 and 2020, at least 123 community hospitals closed.² Inevitably, these closures have aggravated conditions at surviving hospitals that must now handle higher patient volumes and more complex patient populations. By the end of 2022, roughly 80 percent of hospital beds were in use, a record level.³

Nursing Shortage

Adding further pressure to the healthcare system is the chronic shortage of healthcare workers, particularly nurses. Roughly “100,000 registered nurses left the workforce during the past two years due to stress, burnout and retirements,”4 and “between 22%–32% of the nursing workforce is actively considering retiring, leaving the profession, or leaving their current position in the near future.”5 Due to hospital closures, ongoing consolidations, and general population migration trends, several areas of the country are facing acute staff shortages. Desperate for workers, hospitals often hire expensive traveling nurses (or other locum tenens employees), amplifying their precarious financial states.

Evolving Solutions

Clearly, change is needed to improve and preserve healthcare access, reduce stress on the healthcare system, and improve health outcomes. One pandemic silver lining: the accelerated adoption of telehealth services. According to the CDC, 37 percent of Americans had used telemedicine by 2021.6 Telemedicine’s benefits are obvious for rural and underserved areas, where access to medical care is difficult or nonexistent. However, telehealth can’t resolve all of the industry’s problems, nor can it replace (critically important) in-person physical exams.

As investors, we are encouraged by Amazon’s multi-pronged foray into healthcare and its acquisition of One Medical, a human-centered and technology-powered provider of primary care. One Medical is an annual subscription service that, for $199 per year, grants subscribers access to 24/7 virtual care, on-demand video chats, and a network of primary care offices across the US. Amazon also has an app-based, virtual-only care offering, Amazon Clinic, which provides remote engagement on a pay-as-you-go basis— typically $35–$45 per appointment. Amazon Pharmacy, formed after the acquisition of PillPack in 2018, provides seamless integration for prescription fulfillment with Amazon’s easy checkout process and expedient shipping. Since medication adherence remains one of the largest obstacles to managing chronic care—only about 50 percent of patients take medication as directed—Amazon appears positioned to drive meaningful improvements in care for many in the US.

Amazon can’t resolve the healthcare system’s myriad problems on its own. But with its successful history of disruption and innovation, we are encouraged by Amazon’s efforts to propel the industry forward by facilitating healthcare access and improving patient outcomes. As shareholders, we’re optimistic Amazon can also create another profitable and fast-growing business in the process.


¹ Data from the Sheps Center for Health Services Research at the University of North Carolina, (

² Data from the American Hospital Association (AHA) (

³ Data from the Department of Health and Human Services.

4 National Council of State Boards of Nursing, “NCSBN Research Projects Significant Nursing Workforce Shortages and Crisis,” 4/13/23,

5 Brendan Martin, PhD; Nicole Kaminski-Ozturk, PhD; Charlie O’Hara, PhD; and Richard Smiley, MS, “Examining the Impact of the COVID‑19 Pandemic on Burnout and Stress Among U.S. Nurses,“ Journal of Nursing Regulation, April 2023,

6 Centers for Disease Control and Prevention, “Telemedicine Use Among Adults: United States, 2021,” NCHS Data Brief, no. 445 (October 2022),

This article was published as part of the LBA Spring 2023 Reflections & Observations.

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