- Microsoft has been building strategic alliances with companies like Walgreens, Walmart, and Kroger, in which Microsoft provides cloud services and data tools to the companies in addition to working with them on bigger projects.
- On Monday, the tech giant came out with its latest partnership, this time with Providence St. Joseph Health, a West-Coast-based health system that operates 51 hospitals and made $24 billion in revenue in 2018.
- Peter Lee, the corporate vice president of Microsoft Healthcare, told Business Insider that the partnerships have helped the company develop better cloud and platform technologies for the industry than if Microsoft had gone it alone.
- According to Business Insider Intelligence, healthcare companies are projected to spend $11.4 billion on cloud computing in 2019. Right now, Microsoft has a small slice of the cloud market.
- Click here for more BI Prime stories.
Microsoft is making a big bet on signing deals with healthcare and retail giants like Walgreens and Walmart as it figures out how to tackle the massive healthcare technology market.
The tech giant came out with its latest partnership on Monday, bringing on Providence St. Joseph Health, a West-Coast-based health system that operates 51 hospitals and made $24 billion in 2018. Providence agreed to work with Microsoft for the next five years, using Microsoft’s cloud services and artificial intelligence tools, as well as designing health clinics in the Seattle area that draw on Microsoft technology.
Peter Lee, the corporate vice president of Microsoft Healthcare, told Business Insider that the partnerships have helped the company develop better cloud and platform technologies for the industry than if Microsoft had gone it alone.
"The complexity of information technology in healthcare is so extreme that we’re very unlikely to develop the right cloud technology and the right platforms and services unless we really engage deeply with leading health organizations," Lee said.
Never miss out on healthcare news. Subscribe to Dispensed, our weekly newsletter on pharma, biotech, and healthcare.
This isn’t the first time Microsoft has made a strategic alliance with a healthcare company.
As part of a January deal, Microsoft became Walgreens’ cloud partner, meaning Microsoft is in charge of managing Walgreens’ data storage, and Walgreens employees will use Microsoft 365 for their office software. For consumers, Microsoft and Walgreens plan to test out health offerings, including 12 pilot "digital health corners" in stores. Prior to that, Microsoft struck up such alliances with Walmart, and Kroger, both of which operate pharmacies.
In its partnership with Walgreens, Microsoft came across the challenge of dealing with retail data coming from the purchases consumers made at the pharmacy, as well as with data coming from health providers, insurers and the pharmacy itself.
"We never would’ve gotten that right in the cloud if we did that on our own," Lee said.
Why Providence picked Microsoft
Over the past five years, Providence St. Joseph Health, which is based in the Seattle area, has been turning to its high-tech neighbors for executive hires as it works to improve its operations, bringing on executives from Amazon and Microsoft.
Providence CEO Rod Hochman told Business Insider that while the health system has worked with other technology companies offering cloud services, his conversation with Microsoft CEO Satya Nadella convinced Hochman that the company was interested in being a true partner to the health system.
"They want to make healthcare better, but they don’t want to do healthcare," Hochman said.
Amazon and Google, which also offer cloud services, have each pursued strategies or investments in healthcare that could potentially compete with established providers. Amazon bought pharmacy startup PillPack in 2018, marking its entrance into prescription-drug delivery, and is separately working on a healthcare initiative with JPMorgan Chase and Berkshire Hathaway.
Alphabet, Google’s parent company, has a number of bets in healthcare, ranging from Verily, its life-sciences arm that’s developing surgical robots, to Calico, its life-extension spin-off. It also owns a stake in the insurer Oscar Health.
"Our ambition is to accelerate Providence St. Joseph Health’s digital transformation and to build new innovations together that are designed to improve health care delivery and outcomes," Microsoft CEO Nadella said in the statement announcing the collaboration.Drew Angerer/Getty Images
Microsoft’s partnerships have 3 key pieces
Hochman said he hopes that the work with Microsoft will help the health system reduce the amount of time caregivers are stuck inputting information into computers, ideally helping to bring the cost of the administrative work down. At the same time, Hochman said he hopes the partnership will make it less difficult for patients to navigate getting care via Providence.
The way Lee sees it, there are three parts to the strategic partnerships. The first two have to do with modernizing how the companies store data and giving employees of those companies tools like Microsoft’s productivity software.
The third part is where Microsoft goes in and co-invests with its partners, assigning researchers from Microsoft to work with the team on projects that could contribute to the future of healthcare.
In total, Lee said Microsoft has commercial relationships with 170 healthcare organizations, the majority of which are straightforward accounts without that added third part.
"We’re trying to be as selective as possible," Lee said. "Because these strategic alliance partnerships have an element of co-investing and putting researchers to be devoted full time, we have limits on how many we can do."
Facing cloud and AI competition
As healthcare companies — from health systems to biotech companies — have been amassing more information, there’s an emerging race to see which company might benefit from storing that data on their respective clouds, and what other platforms or tools might sway healthcare companies to work with them.
According to Business Insider Intelligence, healthcare companies are projected to spend $11.4 billion on cloud computing in 2019. Amazon as of 2017 had about 46% of the cloud infrastructure market, while Microsoft had about 11%.
For its part, Amazon has its own AI component that it’s using in partnership with healthcare companies. In 2018, Amazon announced it would be offering a new service called Amazon Comprehend Medical to hospitals, insurers, and pharmaceutical companies with the hope of helping them analyze their health-record data.
The service will comb through unstructured medical texts from records and pull out information like diagnoses, symptoms, and treatments. Organizations like the Fred Hutchinson Cancer Research Center in Seattle has been working with Amazon’s Comprehend Medical.
Working with healthcare companies will be critical as more and more look to move to cloud services rather than host information on their own servers, Microsoft said.
"There is a transition of health data to the public clouds" Lee said. "That is a transition that’s going to happen exactly once." He said he expects that to happen over the next decade.
- Read more:
- The hospital in Amazon’s backyard has a plan to disrupt itself before being disrupted by big tech companies
- The new tech chief of the $24 billion health system in Amazon’s backyard has big plans after a 26-year career at Microsoft. But first, he has to help his hospitals with the basics.
- Healthcare startup Livongo is gearing up to go public at valuation of up to $2.5 billion. Here are the people and investors who stand to benefit the most.
- Big hospital systems are borrowing an 80-year-old idea to keep patients healthy and cut costs, and it could be the future of healthcare
- A longtime healthcare VC just posted her 13 rules for entrepreneurs and investors, and they’re required reading for any startup that wants to get into the industry
- VCs in the hottest part of healthcare explain why the time is ripe for a mental health funding boom
- An entrepreneur who worked with uBiome says the troubled poop-testing startup owes him $600,000