Amazon Care may be done, but that’s not the end of Amazon’s bold healthcare ambitions, industry watchers say.
The online retail giant revealed plans last week to shutter Amazon Care, its in-house business providing virtual and in-person medical services. The business launched in 2019 as a pilot project and then quickly expanded its telehealth services to all 50 states. In-person medical services, typically offered at patients’ homes, were offered in seven major cities. Amazon was expected to roll out its hybrid care model to 20 additional cities this year.
“We’ve determined that Amazon Care isn’t the right long-term solution for our enterprise customers,” Neil Lindsay, senior vice president of Amazon Health Services, said in an email to employees last week. “Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”
Lindsay said the decision to end the program had been under consideration for “many months” and that Amazon Care will stop operating at the end of 2022.
Amazon’s decision to shut down Amazon Care, which works with about half a dozen employers, comes one month after the company announced a $3.9 billion deal to buy primary care provider One Medical, a company that works with more than 8,000 employers.
The company operates 188 clinics in 29 markets and has about 767,000 members. One Medical represents a more mature, advanced primary care model compared to what Amazon built internally, many experts say.
With that deal, Amazon also gains a footprint in the Medicare space to serve patients 65 and older with One Medical’s Iora Health line of business.
Executives hinted that the decision to pull the plug on Amazon Care was made prior to the One Medical acquisition. That deal has not yet closed and could face antitrust scrutiny from the Federal Trade Commission.
The Washington Post recently reported that there were tensions between Amazon Care and the clinical staff the company brought on to treat patients. Former employees from Care Medical, the company that provides clinical care, said the two sides clashed over Amazon’s fast and frugal approach to expanding Amazon Care, according to the report.
Some industry watchers have interpreted Amazon’s decision to eighty-six Amazon Care as a sign that the tech company is pulling back from healthcare. It marks the second major healthcare investment that Amazon has wound down. Last year, the company shut down Haven, the healthcare venture it started with finance firms Berkshire Hathaway and JPMorgan Chase.
But analysts at Forrester called the shuttering of Amazon Care “a strategic move” rather than a failure.
“We believe the closure of Amazon Care comes at an opportune time alongside Amazon’s planned acquisition of One Medical and entry into the bidding war for Signify Health,” wrote Forrester vice president and research director Natalie Schibell along with researcher Kara Wilson in a blog post.
Amazon has reportedly put in a bid for Signify Health, a home health technology and services provider.
“This is unequivocally not the end of the retail titan’s healthcare ventures. Instead, the shut down of Amazon Care is a strategic plan to move the focus of their healthcare offerings from the employee to the consumer,” Schibell and Wilson wrote.
Citi analysts agree, writing in a flash note last week that Amazon’s move to get rid of its virtual care solution “is far from the death knell for Amazon’s healthcare ambitions” but is “more like just the beginning,” Seeking Alpha reported.
Amazon has been rapidly expanding its reach in the healthcare space, most notably in 2018 with its acquisition of online pharmacy PillPack, now branded Amazon Pharmacy, as well as its fitness band Amazon Halo and Alexa-powered devices with health-related skills.
Amazon’s cloud business, Amazon Web Services, also has been making inroads into the healthcare industry.
With the One Medical deal, Amazon is moving away from employer healthcare and setting its sights on direct-to-consumer opportunities, Forrester analysts say.
However, Lindsay’s note to employees about shutting down Amazon Care specifically mentioned the large enterprise customers it had been targeting. One Medical deal would enable Amazon to tap into thousands of employer clients.
The acquisition also could help Amazon tap into the payer market, noted Samantha Prokop, an attorney at Gunster law firm who specializes in advising healthcare companies that are executing M&A deals.
“Announcing this right on the brink of the One Medical acquisition, what that tells me is they probably have the platform they need or the contracts they need with payers,” she said in an interview. “This venture probably solved some of the problems they were having because they diversify the payer sources. One Medical takes insurance and it has Medicare enrollment versus just the self-pay employer model. That’s where the money is going to be. That’s where the reimbursement is.”
Prokop added, “I don’t know that you look at it as shutting down the old company. They’re probably going to take what works for both and kind of merge them together.”
Amazon still has its sights set on primary care, many healthcare experts say, as it represents the gatekeeper of patient care. A push into primary care gives companies the ability to control access to more expensive specialists and the entire continuum of care.
Case in point: Investors poured $16 billion into primary care in 2021, according to unpublished research by Harvard scholars, the Advisory Board reports.
“It makes sense that [Amazon] would start with primary care. People may say, ‘Well, there’s not a lot of money in primary care.’ That’s true. But then again, primary care is what controls patients,” Michael Abrams, managing partner at Numerof and Associates, said in an interview with Fierce Healthcare.
By picking up One Medical, Amazon gains a network of clinicians, a retail clinic footprint and a trove of patient data.
A potential deal to acquire Signify Health would strengthen Amazon’s healthcare strategy, Abrams said. Signify uses analytics and technology to help health plans, employers, physician groups and health systems with in-home care.
“I can see synergy between home health care and their pharmacy and diagnostics operations and the telehealth component with One Medical and the bricks and mortar clinicians on the ground,” he said.
In his note to employees last week, Lindsay hinted that Amazon’s work in healthcare was not finished.
“Our work building Amazon Care has deepened our understanding of what’s needed long-term to deliver meaningful health care solutions for enterprise and individual customers. You’ve heard me say it before, but I believe the health care space is ripe for reinvention, and our efforts to help improve the health care experience can have an immensely positive impact on our quality of life and health outcomes,” he wrote.
Forrester analysts say it remains to be seen whether the strategies and tactics of the retail titans, like Amazon, will substantially improve the quality of patient care. “But, one thing is definite, Amazon’s healthcare plays demonstrate they are serious about their healthcare business and transforming the patient experience,” Schibell and Wilson wrote.
The industry will be closely watching Amazon’s next moves, and Abrams believes the tech giant’s laser focus on meeting consumers where they are ups the game for the entire industry.
“I think that the pressure that they’re putting on traditional healthcare providers to become more customer-centric is great. The sooner Amazon can provide to the marketplace a viable alternative in primary care, the better, as far as I’m concerned,” he said.