Amazon’s healthcare disruption: 5 initial takeaways from the One Medical news
Whenever Amazon announces a new business venture in any industry it creates buzz. When the announcement is related to healthcare – turn the buzz up to 11. That’s what happened last week when news broke that Amazon will acquire primary care provider One Medical in an all-cash deal worth approximately $3.9 billion. One Medical is a membership-based primary care organization that offers virtual care as well as in-person visits.
Not surprisingly, this announcement generated a lot of news coverage, hot takes, predictions and hype. After reading a few dozen stories and lots of amped-up responses on LinkedIn and Twitter, I needed to take a breath for the last week to process this news and do some deeper thinking on what it really means.
There are pros and cons to this move, and we need to look at both sides. Here are five initial takeaways that occurred to me during the last week. I am also including links to some stories that provided the most balanced, or interesting, coverage. If you just want the quick hits, check out the video first.
1. This was a bold, but not unexpected, move
Amazon has been getting more and more involved with healthcare for years. It only makes sense for them to try and make a bigger move, such as acquiring a provider organization. Here is some background from Vox on what Amazon has been up to:
"Amazon has been pushing into the health care space for years. It acquired PillPack, an online pharmacy, in 2018 and then launched Amazon Pharmacy in 2020. Prime members get special discounts on drugs that aren’t covered by their insurance. Amazon has been moving into diagnostics in recent years, and made its own Covid-19 test (which was recently discontinued). The company launched Amazon Care, a primary care service, in 2019 for some of its own employees before rolling it out to other companies as a workplace benefit earlier this year. Amazon has even branched out into medical devices and health wearables, and behind the scenes, it is also investing in developing technology that powers the industry."
"So in just a few short years, Amazon owns (or will own) parts of almost every aspect of the health care industry — seemingly everything except hospitals and health insurance."
Overall, this was not a surprise for those of us working for healthcare systems and hospitals around the country. Amazon has been on the radar for the last five years at least, and most of us did not write them off when the Haven venture failed.
2. Amazon isn’t going to “fix” our healthcare system
"There is an immense opportunity to make the healthcare experience more accessible, affordable and even enjoyable for patients, providers and payers. We look forward to innovating and expanding access to quality healthcare services, together."
That was part of the joint statement put out by Amazon and One Medical. It’s certainly a compelling vision, but I have some questions about how this deal will help do that for the broad population.
The biggest problem with our healthcare system is that too many people lack adequate access to care and cannot afford it even when they do have access. This acquisition will have a lot to offer those who already have good insurance and are willing to pay extra for an improved level of personal experience.
It’s uncertain whether quality will truly improve and I don’t see this impacting cost in an appreciable way. The most expensive aspects of healthcare – emergencies, surgeries, hospitalizations and treating major health conditions like cancer or heart disease – are not where Amazon is going to have an impact.
As always, the best way to evaluate a specific disruption to healthcare is to ask whether it will improve access, improve quality or decrease cost for a significant portion of the population. Basically, some take on the concept of the Triple Aim in healthcare. At this point, I don’t see this venture doing that. However, it might just be the first step towards something that does.
3. Don’t forget: The deal still needs to get approved.
Also, from the Vox article:
“The deal is pending regulatory approval, which means getting the okay from the FTC, which is chaired by Amazon critic Lina Khan. Under her tenure, the FTC has already faced one major Amazon merger: its purchase of MGM studios, which closed last March after the FTC made no move to block it. At the time, however, the agency was missing a crucial tie-breaking Democratic commissioner vote. It now has that commissioner, and may well challenge the MGM merger if not this one.”
The potential deal has also gotten the attention of politicians.
“Amazon’s purchase of a primary care provider network should be deeply concerning to American families and antitrust regulators,” Sen. Elizabeth Warren (D-MA) said. “Amazon already has too much economic power, a terrible track record with workers, and alarmingly little clinical experience, which raises major questions about how this deal could impact consumer prices and health care choices.
With that said, most industry experts and analysts believe this deal will get approved. However, it will bring a level of scrutiny that could make additional acquisitions in the future more difficult to pull off.
4. This is probably about data … and money too.
I have to start by saying Amazon is not going to steal your personal clinical data. However, getting access to aggregate data might look very enticing to them. I’m sure there are many ways they will use data. Some uses will be fine and others might be objectionable, but legal.
So, why is Amazon really doing this? Money.
I've noticed that in many of the stories dealing with healthcare “disruptors” like Amazon, the issue of making money never comes up or gets a passing mention at best. Making money is the primary motivation here, which is fine. Let's just not skip that fact. That's what for-profit corporations like Amazon are designed to do. "Fixing" healthcare is secondary.
Healthcare is an attractive revenue stream. Everyone needs healthcare at some point in their lives, and almost everyone agrees that it could be done better. Quicker, faster and more convenient are the goals, but how much of an “easy” profit can you really make on it?
That leads me to my final takeaway on this potential deal.
5. Getting involved in healthcare will be costly. But Amazon can probably stick it out for the long-term gains.
Healthcare typically has a low margin due to high costs for labor, supplies, infrastructure, charity care/undercompensated care and other issues. Right now, labor scarcity and high costs are profoundly impacting the financial recovery for traditional healthcare providers.
Amazon’s acquisition target might have a good product, but it’s not profitable. One Medical has yet to turn a profit since going public in 2020. In the first three months of 2022, losses reached $90 million.
The unresolved question is how long Amazon will find it palatable to lose money on healthcare. Perhaps they will be willing to go for years. Given that Amazon went almost a decade before becoming profitable after launching in 1994, Jeff Bezos has a proven track record of being patient.
Overall, Amazon will continue to make noise and disrupt parts of the healthcare system. That disruption will push some healthcare systems that are lagging on improving patient/customer experiences to make changes. That's a good thing. Yet, I think that might be about it for now. Amazon is unlikely to buy a hospital or acquire a health system that serves the entire community. It's too complicated and expensive.
In a nutshell, this latest move is more of an incremental evolution than a massive revolution.
💻 Article: AMAZON AND ONE MEDICAL: ARE WE THERE, YET? This is the most in-depth article you'll read on the topic. It's also a fun read with lots of speculation.
💻 Article: Big Tech’s dream of transforming health care is getting the scalpel. "Claims by any large technology company of “revolutionizing” health care should be viewed with skepticism given the lack of progress to date." If that grabs your interest, read the rest of the article.
🎙️ Podcast: Chris Boyer and Reed Smith discuss how Google, Facebook and Amazon are approaching healthcare. Listen here.