On Thursday, Amazon said it plans to buy One Medical, a primary care startup, for $3.9 billion, its third-largest acquisition ever.
Amazon's long been interested in healthcare. Its projects range from moving health system's data to the cloud to strapping Prime members into wearables that can track their heart rate.
But primary care has been an elusive target for the trillion-dollar tech giant, and the One Medical deal solidifies the true scope of Amazon's ambitions: It wants to help fundamentally transform how we all go to the doctor.
In a press release on Thursday, Neil Lindsay, who's heading up health services at Amazon, bemoaned the typical consumer's primary care experience: booking an appointment with a physician, waiting weeks or months for it, taking time off work, parking, waiting, seeing a rushed provider, then making another trip to the pharmacy.
"We love inventing to make what should be easy easier and we want to be one of the companies that helps dramatically improve the healthcare experience over the next several years," Lindsay said.
Other big tech companies have tried and failed to break into care delivery, or shied away from it entirely. But by buying One Medical, Amazon inherits a full-fledged healthcare business with 188 clinics, 767,00 members, and 8,500 employer clients — a much larger footprint than what Amazon's achieved with in-house projects.
Daniel Grosslight, a senior healthcare analyst at Citi, told Insider that a combination with One Medical makes a lot of sense for Amazon and represents a broader phenomenon in healthcare. Amazon launched virtual care for companies last year, but thus far hasn't had significant in-person resources.
"That's the next step in the evolution of telehealth," he said. "How do you combine both in-person care and virtual care more efficiently?"
Amazon's long history of experimentation in health
In 2018, Amazon banded together with Berkshire Hathaway and JPMorgan to try to address rising healthcare costs, a venture later named Haven. While it shut down in early 2021 after a lot of internal confusion, that effort seemed to give way to another.
In 2021, Insider reported that Amazon was growing its own primary care business, Amazon Care. Companies pay Amazon monthly fees for employees to be able to use an app manned by care teams. It's seen slow progress, struggling to solidify deals with health plans, for instance, as Insider reported last summer.
But Amazon's been positioning itself internally to further prioritize health.
In December, it moved Lindsay, the former Prime boss, to head up Amazon Care; the new testing venture Amazon Diagnostics; and Amazon Pharmacy, a team that grew out of the tech giant's PillPack acquisition in 2018 and offers Prime members discounts on their prescriptions. The pharmacy business has also been slow to gain ground, as Insider reported in March.
Lindsay brought in Aaron Martin, the former chief digital officer of Providence, a Washington-based health system, in March, who's now overseeing Amazon Care and a new organization called "Health Storefront and Shared Tech," an employee who was not authorized to speak to the press told Insider.
Around the time when Lindsay took the helm, these efforts became part of a larger brand "Amazon Health Services." It's similar to Google bringing its health projects under one umbrella, "Google Health," and giving them a single leader, Dr. David Feinberg, in 2019.
Amazon might end up succeeding where Google failed because a big bet was placed on a unifying strategy: delivering care both in-person and virtually. Many people access the healthcare system through primary care. Owning that front door gives companies more control over where people go for additional healthcare services and how much they spend. From Amazon to Walmart to CVS Health, companies are increasingly jockeying to own this part of the patient journey.
"This is another datapoint in the arm's race for primary care," Tom Cassels, the president of Rock Health, an investment and advisory firm, told Insider.
Why Amazon wants to buy a primary-care startup
There are a number of ways scooping up One Medical can benefit Amazon's healthcare business.
The deal would give the tech giant an easy way to expand its primary-care clinic footprint fast without having to take on the arduous task of building out brick-and-mortar locations and recruiting doctors to staff them, as One Medical's already done that, Brian Tanquilut, a healthcare analyst at Jefferies, told Insider.
Stephanie Davis, an analyst at SVB Securities, said it would also give Amazon an opportunity to own the consumer relationship in healthcare. People are guarded with their healthcare relationships, and the deal would allow Amazon to side-step having to build trust with those consumers, she said.
"There's been a lot of value in owning the consumer relationship. We've seen that across health tech, and this is the closest you can get to a consumer – it's a physical relationship where you see them in person," Davis said.
One Medical could boost Amazon's patient-facing technology, Cassels said. The startup built a lot of its technology, aimed at more easily tracking patients, in-house. Amazon could also gain more business for AWS through the health systems that pay One Medical to manage certain patients, he added.
The deal would also give Amazon a foothold in the lucrative business of caring for older people enrolled in Medicare Advantage. While One Medical provides in-person care and virtual visits mostly to people who receive access to its services as a health benefit through their jobs, it also services people enrolled in Medicare Advantage thanks to a $2.1 billion acquisition of Iora Health, a primary-care company that gets paid set fees upfront to care for such members, in September 2021.
Medicare Advantage is the private alternative to the federal Medicare program that provides health coverage to people 65 and older. Health insurers and providers alike have clamored for a bigger piece of that market as Americans age into the program at a rapid clip.
Even though just 39,000 of One Medical's 767,000 members were enrolled in Medicare, that program contributed more than half of the company's revenue in the first quarter of 2022.
Industry observers have been waiting for Amazon to break into the health insurance industry. In a way, the deal with One Medical moves the tech giant in that direction. Through Iora, One Medical takes on financial risk for certain patients, just like a health plan does.
Combined with the physical sites, potential for pharmacy benefits, and referrals to certain hospitals, its easy to imagine Amazon building a kind of "network," Dr. Jonathan Slotkin, the chief medical officer of Contigo Health, a healthcare startup, told Insider.
"The potential becomes very powerful," he said.
Integrating One Medical into Amazon's business
Given Amazon plans to spend nearly $4 billion for One Medical and intends to keep its CEO Amir Rubin, per the release, the startup is set to continue as a separate brand. But previous Amazon acquisitions can offer clues as to how the startup will eventually plug into other resources like Amazon Care.
One Medical could follow the Zappos playbook and stay a separate business, or the Whole Foods playbook, where Amazon shoppers get benefits from their Prime memberships.
Either way, it could send more customers to the other health ventures at Amazon. One Medical physicians could help design a meal plan for someone who's prediabetic and send them coupons to Whole Foods, Grosslight said. Clinics could offer patients prescriptions through Amazon Pharmacy, Tanquilut added.
"I think this is just part of the broader Amazon strategy of expanding the offering into a physical location, the way they did it with Whole Foods," Tanquilut said. "I think that this is a way to put physically on the ground those Amazon Health services lines that they've already put out."
