The professor explains that Amazon will benefit from One Medical’s “5 to 1” model
Amazon Contact (AMZN) Redefining its reach with its recent acquisition of healthcare provider One Medical (ONEM) for $3.9 billion.
The e-commerce giant’s recent expansion into the health care sector follows the pattern of buying companies that complement its existing digital services, from its acquisition of Whole Foods in 2017 to its deal with MGM completed this year.
“What One Medical has — which I think Amazon loves and there’s a lot of synergy — is that they have a subscription model,” Megan Fitzgerald, professor of health care policy at Columbia University, told Yahoo Finance Live (video above). “They have what’s called a 5-to-1 model. You get five virtual telehealth visits and one in-person visit, right? Now it fits Amazon’s model of being able to have an online experience.”
Amazon entered the healthcare sector in 2018 when it acquired PillPack, which was later renamed Amazon Pharmacy in late 2020. The platform is now a hub for ordering prescription drugs at discounted prices.
The tech giant also found success when it created Amazon Care, a telehealth feature that enabled Amazon workers to consult doctors through quick checks. The Amazon Care pilot program began in Seattle in 2019 and has since expanded to 20 other cities and other companies such as Hilton (HLT), TrueBlue (TBI), and Sillicon Labs (SLAB). As of 2021, the program boasted coverage of up to 40,000 workers.
But not all of Amazon’s health initiatives have worked. In 2019, Amazon, Berkshire Hathaway, and JP Morgan embarked on a joint venture known as Haven that was intended to disrupt the healthcare industry. Instead, it was dissolved in 2021.
“Amazon has learned to be very resilient and to fail quickly,” Fitzgerald said. She added that the company’s success with PillPack and Amazon Care was “really what gave them the confidence to make this acquisition and try to group doctors into 25 markets.”
Main member benefit
It remains to be seen how the Amazon One Medical deal will affect competitors such as UnitedHealth Group (UN) and its subsidiary Optum Health or CVS Health’s Aetna.
Fitzgerald described One Medical’s membership-based coverage, which starts at about $200 a year, as an asset that “fits the Amazon model.”
“I imagine they will either add it to Prime, or there will be a price increase to be a Prime One Medical subscriber,” Fitzgerald explained. “In many cases right now, commercial wage employers pay a single medical fee to their employees, and it’s used as a benefit.”
The move will add value to Amazon Prime members, who have seen subscription fees increase by $20 to $140 per year in the US and up to 43% in Europe, varying by region.
However, the deal, which is “more on a medical-empowerment paradigm,” poses a challenge even to Amazon’s logistical prowess, Fitzgerald said. Practices opting for telehealth consultations continue to have varied success in addressing issues of volume and availability for their growing patient lists.
“I think assembling primary care physicians was the hardest thing to do in the United States,” Fitzgerald said. “There has been doubt about how to scale and deliver quality, which is what really matters in healthcare, especially if you’re on a value-based contract where you get paid Only for quality. So Amazon is going to have to learn to roll out these kinds of numbers.”
In other words, while the chaos in the healthcare industry presents a huge opportunity for Amazon and other investors trying to make money, it is also fraught with potential pitfalls.
“There is a symbiotic benefit to aiding a single medical scale,” Fitzgerald noted. “But I don’t think the Amazon team should be the one running a clinical asset – they should leave that to the clinical experts.”
‘A very dangerous river’
There are also concerns about the privacy of patient data.
Some speculated that Amazon might use medical records to try to sell products on its e-commerce platform, leading experts like Fitzgerald to ask, “What’s the limitation of HIPAA about that?”
An Amazon spokesperson stated that, as required by law, it will never share health data of One Medical patients without their permission, according to MarketWatch.
But that doesn’t mean Amazon’s entry into the medical field won’t feed current concerns about how the data will be used.
“It’s a fair question, I think, for consumers to ask Amazon how this relationship is going to be protected,” Fitzgerald said. She explained that although HIPAA is enshrined in law, “it doesn’t mean that people aren’t worried about the parties.” [about] What it can mean to have a complete picture of you now as a consumer.”
“I think crossing the river would be very dangerous for Amazon to start taking patient data, and then trying to monetize it and use it,” Fitzgerald warned.
Luke is a product at Yahoo Finance. You can follow him on Twitter Tweet embed.
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