As reported last Thursday, Amazon will spend $3.9 billion to acquire 1Life Healthcare Inc., which under the name One Medical provides membership-based primary healthcare services to employees for more than 8,000 companies in a dozen major US markets. This is Amazon's third largest acquisition, after Whole Foods ($13.7 billion in 2017) and MGM ($8.5 billion earlier this year).
Some analysis from various sources…
• From CNBC:
"These deals underscore how Amazon and other Silicon Valley giants like Google, Facebook, and Apple have transformed into 'modern day conglomerates' in pursuit of continued growth from their already enormous bases, according to Emilie Feldman, a management professor at the University of Pennsylvania’s Wharton School.
"'What they’re doing is a strategy in search of growth in adjacencies to this core area that might be a bit constrained in and of itself,' said Feldman. 'So e-commerce is e-commerce, but can we kind of search for niches that might be faster growing like health care, or can we accelerate our ability to get before people’s eyeballs through ads or something like that through MGM.'
"'They need to get into new areas where they can find growth, and health care is ripe,' agreed Lisa Phillips, a principal digital health analyst at Insider Intelligence. 'With this acquisition here, they’re saying we’re in this to win it now.'
"Amazon also can’t make acquisitions in its core markets, lest it risk angering regulators who are already eager to scrutinize its market power. Instead, the company has to buy big in areas where it has less of a presence, like healthcare or autonomous driving."
• From MarketWatch:
"The One Medical deal will place Amazon in the increasingly popular field of primary care. Long viewed as the center of American medicine, the place where patients can talk directly to their doctors about their health, it’s also become ripe for investment in recent years. CVS, UnitedHealthGroup, Walgreens Boots Alliance and Walmart all operate clinics that offer primary-care services.
"That said, healthcare is a very small slice of Amazon’s revenue. A search of the company’s most recent 10K doesn’t yield a single mention of any of its healthcare or medical businesses, including Amazon Care and Amazon Pharmacy, the rebranded PillPack business.
"'While One Medical will not be a meaningful contributor to revenue near term, it provides AMZN more touch points with patients, particularly early on while medical decisions are being made, both preventative and reactionary,” JMP analysts told investors on Thursday.
"The deal will also give Amazon new options to bundle services. Wall Street analysts say they expect Amazon Care, if it includes One Medical services, to eventually be included in Amazon Prime memberships."
• From the Washington Post:
"Krista Brown, a senior policy analyst at the American Economic Liberties Project, a nonprofit advocacy group that supports antitrust causes, called the acquisition 'terrifying' in a statement.
"'Acquiring One Medical will entrench Amazon’s growing presence in the health care industry, undermining competition.' Brown said. 'It will also pose serious risks to patients whose sensitive data will be captured by a firm whose own Chief Information Security Office once described access to customer data as ‘a free-for-all'."
• From the New York Times:
"Health care has been tantalizing to Amazon executives who believe it is an immense market, rife with inefficiencies and generally lacking the kind of customer-focused approach that Amazon tries to take with its businesses. But none of the company’s forays into health care have had notable success nor have they been as big as the One Medical acquisition.
"'We think health care is high on the list of experiences that need reinvention,' Neil Lindsay, the senior vice president of Amazon Health Services, said in a statement announcing the deal.
"Mr. Lindsay ticked off some of the annoyances of modern health care: booking appointments, sitting in waiting rooms, traveling to a pharmacy, even finding a parking spot. Amazon’s notion of seeing a provider could include more virtual or online care, which health care companies like One Medical and Kaiser Permanente are already doing.
"Amazon wants to be the 'front door' through which customers access health care, said Christina Farr, an investor in health care with OMERS Ventures. 'They want to nail the consumer experience'."
- KC's View:
To me, this is a mixed bag. Amazon is expert at the online customer experience, about eliminating a lot of the friction that exists in many traditional shopping trips. But I don't think it has yet earned the right to suggest that it has nailed the customer experience in physical locations - it has a long way to go, and the algorithm-based approach that it takes to so many of its businesses won't necessarily apply to the health care continuum.
So this is far from a slam-dunk, though, as a point out in my FaceTime this morning, there are a lot of ways in which Amazon can create connections that can be a game-changer in the segment.
There are a lot ways this can go.
Jessica E. Lessin of The Information offers this perspective:
"Imagine you were a giant company under government investigation and you wanted to send a message to antitrust regulators that you won’t be deterred from continuing to gobble up companies. What would you do? Well, you would probably announce that you were acquiring a company in a highly sensitive industry, handling a highly sensitive type of data, right before the summer recess of Congress, right?
And that’s just what Amazon did … announcing its plans to acquire One Medical for $3.9 billion. One Medical operates primary care facilities that bill themselves as more 'user-friendly' than your average doctor’s office. It also has a pretty robust remote medicine practice. I’ve been a customer, and honestly this acquisition prompted me to reup. Then I got caught in an infinite password reset loop and found myself rooting for a day when my One Medical account is integrated with my Amazon login!"
Lessin goes on:
"I think it’s a pretty smart deal for the company. It’s a small amount of money in the scheme of things. Regulators and lawmakers will use the transaction to sow more fears about Amazon’s growing power, but it’s hard to argue that Amazon has market power in health. I suspect it will clear any hurdles and close. And I look forward to getting my Covid-19 booster along with my kale smoothie when the Whole Foods and One Medical mashup comes to pass!"
And, let me refer you to one more piece of analysis from CNBC, in which writer Ari Levy makes the point that "for the better part of a decade, One Medical has been my primary care provider. It’s convenient, with locations around the Bay Area, and I like being able to schedule a same-day physical or get a quick referral to a specialist.
"One Medical knows a lot about me. In addition to many years of clinic visits and virtual chats, I use the mobile app to record my blood pressure and resting heart rate, check my lab results and renew prescriptions as needed. For that, I pay a membership fee of $199 a year."
That said, Levy writes, "I never took into account the possibility that Amazon may one day own One Medical.
"The same company that sends me countless boxes every week, peppers my Kindle with book recommendations and my smart TV with film suggestions, tells my kids the weather forecast when they call Alexa, and offers Prime discounts when I shop at Whole Foods is about to provide my medical services and own the portals containing my most sensitive information."
Levy isn't the only one trepidatious about Amazon's health care ambitions. You can read the entire piece here.
"Amazon did little to calm my fears with its acquisition announcement. The company said nothing to provide One Medical customers with any comfort, and there was no conference call discussing the acquisition, as is customary with many large transactions. Closure of the deal will require regulatory approvals.
"In response to an inquiry for this story, Amazon did offer the minimum level of assurance that it will abide by government regulations, under the Health Insurance Portability and Accountability Act (HIPAA), that limit how the company can use protected health information, or PHI. That includes all personally identifiable information as well as medical history, lab test results and other health data.
"'As required by law, Amazon will never share One Medical customers’ personal health information outside of One Medical for advertising or marketing purposes of other Amazon products and services without clear permission from the customer,' an Amazon spokesperson said in an email. 'Should the deal close, One Medical customers’ HIPAA Protected Health Information will be handled separately from all other Amazon businesses, as required by law.'
"In other words, everything One Medical knows about me is supposed to stay in that safeguarded silo. Whatever profile Amazon has built on me and my family, from our shopping habits and travel preferences to the shows we watch together on weekends, will not commingle with my health data."
But not everyone is convinced, and it is going to take time and a lot of effort for Amazon to put concerns to rest. For one thing, the company may have to do some work on its bedside manner.