How Amazon’s $3.9 billion One Medical deal could boost its subscription program – GeekWire

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Amazon Prime shipping containers pile up at the Port of Seattle ahead of the 2021 holiday season. (Photo GeekWire/Todd Bishop)

Will consumers order healthcare through Amazon Prime as easily as they stream The boys or buy an Echo speaker?

That’s a question raised by Amazon’s planned $3.9 billion acquisition of One Medical, announced last week.

The deal “sets the stage for a Prime health subscription service,” said industry veteran Mike McSherry, CEO of Seattle-based digital health company Xealth.

One Medical already operates on a membership model. It’s a social benefit at more than 8,000 companies, enabling virtual care and same-day appointments at clinics in more than 15 metropolitan areas. Individuals can also purchase an annual subscription for $199.

Amazon Health Services chief Neil Lindsay once helped run Prime, which offers free shipping plus perks like media streaming for $139 a year in the US. There are more than 200 million Prime members worldwide, according to Amazon’s latest update last year.

It’s still unclear whether Amazon will offer One Medical services under Prime or something separate, said Andrea Leigh, CEO of e-commerce training company Allume Group and former chief executive of Amazon.

“But I think Amazon has proven that memberships work really well for them,” Leigh said.

Andrea Leigh, Allume Group CEO. (Photo courtesy of Andrea Leigh)

Adding health services to Prime could attract more people to Amazon’s membership program and boost the company’s revenue. Prime subscribers spend significantly more with Amazon than non-members.

Revenue from Amazon’s subscription services, which includes Prime subscriptions, was $8.7 billion for the second quarter of this year, up 10%. According to estimates from Consumer Intelligence Research Partners, approximately 172 million people in the United States were Amazon Prime members in 2021, and the renewal rate after two years was 98%.

“Premium builds loyalty,” McSherry said in an interview. “If you start paying for a subscription to a primary care service, you’re going to become more and more loyal to that brand and that service.”

In a blog post last year, Trilliant Health executive Sanjula Jain noted that Amazon Prime’s sheer number of customers far exceeds the number of a single healthcare company. “Companies like Amazon with a national customer base have a unique opportunity to expand their share of wallet with loyal customers,” she wrote.

Amazon already has existing health services. In recent years, it has acquired the online pharmacy PillPack; the Amazon Care primary care service extended to employees; unveiled a new Halo View health band; and developed a COVID-19 test kit. Amazon Web Services also provides tools for healthcare companies, such as software to extract medical information from doctor’s notes.

Hugs to Chief Medical Officer Shantanu Nundy. (Honor Photo)

About a quarter of Americans don’t have a primary care provider, said Shantanu Nundy, chief medical officer of Seattle and Philadelphia-based health care company Accolade. He said Amazon’s acquisition of One Medical “is an example of a new model of care that I think has the potential to reach more people, and I think that’s a good thing.”

“The general idea of ​​a subscription model in primary care is really positive,” said Nundy, who also commented on the acquisition on LinkedIn.

Accolade also offers virtual primary care services through employers, as well as bundled services such as diabetes care and mental health. Another Seattle-based company, Vera Whole Health, also offers employer-based memberships.

One Medical offers technology-enabled healthcare through its app. (A medical photo)

Healthcare enrollment models often include services such as follow-up text messages or reminders about prescription refills, Nundy said, though they typically don’t cover advanced care with specialists. In addition to membership fees, they often get revenue from insurance companies for services, he said.

In the longer term, Amazon could even buy an insurance company and bring it into Prime, McSherry told GeekWire.

According to its first quarter 2022 financial report, One Medical derives 10% of its net revenue from memberships and 16% from fee-for-service payments, primarily from insurance companies. Fifty percent comes from Medicare and 20% comes from partnerships, such as with healthcare networks that provide specialty care.

One Medical recently acquired Iora Health, which brought in an older population supported primarily by Medicare Advantage, a program that emphasizes “values-based” care rather than fee-for-service.

A Prime-like healthcare delivery model could also provide an accessible option for the uninsured.

“I don’t think that’s the long-term solution to providing universal access to care for people, but it certainly solves the problem,” Nundy said of models that make primary care easier and more affordable.

On the other hand, Amazon’s acquisition of One Medical has the potential to crowd out the most vulnerable by focusing primarily on healthier patients in more urban areas, said Katherine Gergen-Barnett, physician at the Boston University, and Harvard professor Russell Phillips in a STAT News commentary.

Ultimately, trust is fundamental to medical care, especially for marginalized communities, Nundy said. And that’s more important than any set of bundled solutions. “At the end of the day, if you really want to scale and really want to serve patients, you have to have confidence,” he said.

Other retail giants that offer primary care services include CVS Health, which has more than 1,000 clinics, and Walmart, which offers services in rural areas.

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