Amazon's Day One (Medical): "No one can compete with its scale"
Amazon's $4 billion agreement to purchase care clinic operator One Medical is all about one thing: scale.
Why it matters: Amazon, already a powerful health entity with tentacles in nearly every facet of the care ecosystem (except insurance), now has the in-person muscle to outbid most of its rivals, analysts and industry observers tell Axios.
What they're saying: "Whether it's physical interactions or virtual interactions, no one can compete with Amazon’s scale in either of those," Trilliant Health president and CEO Hal Andrews tells Axios.
Be smart: The shipping giant's One Medical buy gives it the ability to scale on multiple fronts, such as:
- Shoring up its expertise in consumer preferences.
- Expanding its existing efforts in primary care.
- Gaining a foothold in the Medicare Advantage market.
Of note: ONEM's Medicare Advantage business, Iora Health, likely played a key role in Amazon's decision to purchase it.
- "Access to Medicare Plans and employer groups is likely a key consideration that Amazon has with this deal," write BTIG analysts David Larsen and Aron Corin in a research note.
- "The sleeping giant in the deal may be One Medical’s Medicare Advantage business (Iora) because they can take on massive risk," says John Driscoll, CareCentrix CEO.
Plus: Thanks to Amazon Prime, the tech behemoth already has detailed insights into consumer behaviors — not only into what people want and need but also into how to influence their purchasing behavior, says Andrews. Leveraging those capabilities, Amazon can grow ONEM's clinic network to its advantage in virtual and in-person care.
- From there, "it’s just about creating brick-and-mortar where you need brick-and-mortar," says Andrews. "There are some consumers who love virtual and telehealth and Amazon knows who those people are."
- "We see the ONEM acquisition being additive to Amazon's move into telehealth, as ONEM performs 5:1 digital-to-in-person visits, providing Amazon with more scale in telehealth," Cowen analysts including Gary Taylor and Charles Rhyee write in a note.
Threat level: Amazon has access to approximately 44% of U.S. residents through Prime, according to a recent Trilliant report.
- In comparison, the largest health system in the country, HCA, serves just 1% of people in the U.S.
- "No health system can match Amazon — or Walmart’s — scale in terms of the next interaction," says Andrews.
The Prime takeaway: The impacts of Amazon's ONEM purchase will only continue to reverberate throughout the health care ecosystem from here.
- "Amazon’s really committed to this," says Andrews. "This is a big investment and sends a significant message that they’re serious."