Health Bytes is back!
This week, we are looking into Amazon’s acquisition of One Medical (NASDAQ: ONEM) and the implications of this agreement in the Direct Primary Care (DPC) sector of healthcare.
If you prefer to listen, our podcast episode is below:
Last year, Health Bytes released an episode on Amazon’s newest business unit, Amazon Care.
Amazon Care was started as an on-demand preventative service and telehealth provider for employers. Notable employers that used Amazon Care include Silicon Labs, Precor, Whole Foods, and Hilton. It was sold to employers as a benefit for that company's employees and it promised to streamline telehealth and home based healthcare for beneficiaries.
Amazon Care services included video care, in-app text chat with clinicians, mobile care visits, prescription delivery from a care courier and in-person care. For their in-person care offering, Amazon Care dispatched a medical professional to a patient’s home for services ranging from routine blood draws to listening to a patient’s lungs.
In a surprising twist of events, Neil Lindsay, senior VP of Amazon Health Services announced that it would end Amazon Care operations at the end of 2022 — stating that “Amazon Care wasn't a sustainable, long-term solution for its enterprise customers.”
There has been some speculation regarding this sudden move. Though Amazon representatives say that Amazon Care did not provide a “complete offering for customers”, others mention staffing issues in a tight-labor market for home-health aids that caused this business unit to shut down.
Even more surprising, Amazon announced their acquisition of One Medical a month before shutting down Amazon Care.
What is One Medical? Why is Amazon investing in this company? Is Amazon pivoting or retreating in their disruption of healthcare? These are all questions we hope to answer today.
One Medical was founded in 2007 by Tom Lee, a physician. Currently, it oversees 188 offices and has 767,000 members. It’s a primary care practice, but membership-based, and technology/mobile device centric. It relies on a subscription-service based model for primary care for patients. One Medical has expanded their offerings for employers like Google, NASDAQ, and more. One Medical has a variety of on-demand offerings like same/next-day appointment bookings, modernized view of health records, prescription managements, and lab services like blood panels, STI testing, vaccines, urine testing, and more.
Essentially, One Medical works as a concierge medical practice where you pay a $200 annual fee to access One Medical Services; however, your visits and services are charged to your insurance. Think of it as the country club of healthcare, but for yuppies. There is nothing new here, other than an Amazon twist to healthcare.
We are seeing an industry shift to Direct Primary Care Models. DPC is a practice and payment model where patients/consumers pay their physician or practice directly for a defined set of primary care services. AAFP writes, “DPC practices typically charge patients a flat monthly or annual fee, under terms of a contract, in exchange for access to a broad range of primary care and medical administrative services.” The DPC contract between a patient and his/her physician provides for regular, recurring monthly revenue to practices which typically replaces traditional fee-for-service billing to third party insurance plan providers. It’s like Netflix, but for your healthcare needs.
The patient benefits from this convenience and ease of access. One Medical also mentions how their offering has lowered overall costs for patients. For example,
“Members who utilized the One Medical care model for their primary care had lower overall health (risk-adjusted) (estimated around $167 less per month per member.”
Decreased utilization in expensive downstream categories: 45% lower total medical and prescription claims costs ($167 PMPM); 54% lower spending on specialty care ($11 PMPM); 43% lower spending on surgery ($14 PMPM); 33% lower spending on emergency department care ($16 PMPM); and, 26% lower spending on prescriptions ($5 PMPM);
Increased spending in less expensive areas, but were offset by the reductions 109% higher spending on primary care ($20 PMPM); and, 20% higher spending on mental health care ($1 PMPM).
It is becoming more common for groups of primary care physicians transferring from the traditional brick and mortar, go through your insurance company, patient model to offer this convenient subscription based modern service. Not all have reached the point of offering the full suite of digital, virtual, and in person healthcare (many are still just brick and mortar offices but operate under the DPC financial model). On the other side, there’s also been a large influx of telemedicine startups that might offer more specialized subscription based services, for example focusing on access to low cost prescriptions, or mental health services.
One Medical is facing stiff competition from companies like CVS that have walk-in clinics and similar services. Other companies are racing to capture this market and control where the patient enters the system. The One Medical acquisition gives Amazon a set of offices, providers, and the technology that enables primary care; whereas for Amazon Care, Amazon had to build out a lot of other infrastructure.
Unfortunately, concierge medical services like One Medical hurt the patient populations they promise to help. NPR interviewed past One Medical employees, who were concerned about the difficulties of maintaining the patient-centered focus. They mentioned things like a decrease in the appointment time limit from 40 to 30 minutes post IPO. Clinicians that were hired for their love for working with patients now state that time is just becoming a more and more scare resource as the company grows.
Concierge service leaves out patients who use Medicaid, Hispanic, African American, and people with diabetes populations.
If traditional primary care is left caring mainly for patients whose insurance pays at lower levels, investment in primary care will dwindle, widening the disparities between those who have access to the primary care services provided by companies like Amazon and those who do not, putting at risk the health of those who are older, or poorer compared to those with commercial insurance and access to companies like Amazon for care. - Katherine A. Gergen-Barnett and Russell S. Phillips
Thank for joining us for our latest episode on Amazon’s One Medical acquisition. If you enjoyed this read, share it with someone you know!