Amazon will leverage One Medical’s ‘5-to-1 model,’ professor explains

Amazon (AMZN) remains redefine its reach with its latest acquisition of healthcare provider One Medical (ONEM) for $3.9 billion.

The healthcare e-commerce giant’s latest expansion follows a pattern of procurement companies that complement its existing digital services, from its acquisition of Whole Foods in 2017 to its deal with MGM completed this year.

“What One Medical has — which I think Amazon likes and there’s a lot of synergy — is they have a subscription model,” Meghan Fitzgerald, a professor of health care policy at Columbia University, told Yahoo Finance Live (video above). “They have what’s called a 5-to-1 model. You get five virtual telehealth visits and one in-person visit, right? That fits the Amazon model of potentially an online experience.”

FILE – This February 14, 2019 file photo shows people in the lobby of Amazon offices in New York. (AP Photo/Mark Lennihan, File)

Amazon entered the healthcare sector in 2018 when it acquired PillPack, which was then renamed Amazon Pharmacy in late 2020. The platform is now a hub for ordering prescription drugs at discounted rates.

The tech behemoth also found success when it created Amazon Care, a telehealth benefit that allowed Amazon employees to consult doctors through accelerated screening processes. The Amazon Care pilot program began in Seattle in 2019 and has since expanded to 20 other cities and other companies such as Hilton (HLT), TrueBlue (TBI), and Silicon Labs (SLAB). As of 2021, the program had coverage of up to 40,000 employees.

But not all of Amazon’s health initiatives have materialized. In 2019, Amazon, Berkshire Hathaway and JP Morgan started a joint venture known as Haven that was intended to disrupt healthcare. Instead, it was disbanded in 2021.

“Amazon has learned to be very resilient and fail quickly,” Fitzgerald said. She added that the company’s success with PillPack and Amazon Care “really gave them the confidence to make this acquisition and try to bring doctors in 25 markets together.”

Prime member benefit

It remains to be seen how Amazon’s One Medical deal will affect competitors such as UnitedHealth Group (UNH) and its subsidiary Optum Health or CVS Health’s Aetna.

Fitzgerald characterized One Medical’s membership-based coverage, which starts at about $200 a year, as an asset that “fits the Amazon model.”

“I imagine they will either add it to Prime, or there will be a surcharge to be a Prime One Medical subscriber,” Fitzgerald explained. “In many cases, employers with a commercial reward are currently paying the One Medical allowance for their employees and it is being used as a benefit.”

Tareco Timothy receives information after getting the monkeypox vaccination at the Northwell Health Immediate Care Center in Fire Island-Cherry Grove, in New York, US, July 15, 2022. REUTERS/Eduardo Munoz

Tareco Timothy receives information after getting the monkeypox vaccination at the Northwell Health Immediate Care Center in Fire Island-Cherry Grove, in New York, US, July 15, 2022. REUTERS/Eduardo Munoz

The move would add value for Amazon Prime members, who saw subscription costs increase by $20 to $140 per year in the US and up to 43% more in Europe, varying by region.

However, the deal, which is “more in the arts-enablement model,” poses a challenge even to Amazon’s logistics prowess, Fitzgerald said. Practices that opt ​​for telehealth consultations continue to have mixed success in addressing scale and availability issues for growing patient lists.

“I think gathering primary care physicians is the hardest thing to do in the United States,” Fitzgerald said. “There was skepticism about how you can scale and still deliver quality, which is really all that matters in healthcare, especially if you have a value-based contract where you’re only paid for quality. So Amazon will have to learn to handle that.” sort of numbers.”

In other words, while the clutter of healthcare presents a huge opportunity for Amazon and other investors who have been trying to make money, it’s also full of potential pitfalls.

“There is a symbiotic advantage to help One Medical’s scale,” Fitzgerald noted. “But I don’t think the Amazon team should be the one to manage a clinical asset — they should leave that to the clinical experts.”

SAN RAFAEL, CALIFORNI - JULY 21: A sign is posted in front of a One Medical office on July 21, 2022 in San Rafael, California.  Amazon has announced plans to acquire healthcare provider One Medical for an estimated $3.9 billion.  (Photo by Justin Sullivan/Getty Images)

SAN RAFAEL, CALIFORNI – JULY 21: A sign is posted in front of a One Medical office on July 21, 2022 in San Rafael, California. Amazon has announced plans to acquire healthcare provider One Medical for an estimated $3.9 billion. (Photo by Justin Sullivan/Getty Images)

‘A river too dangerous’

There are also concerns about patient data privacy.

Some have speculated that Amazon may be able to use medical records to sell products on its e-commerce platform, with leading experts like Fitzgerald wondering, “What’s the HIPAA restriction on that?”

Amazon stated that, as required by law, it would never share health data of One Medical patients without their consent, a spokesperson told MarketWatch.

But that doesn’t mean Amazon’s foray into the medical space won’t fuel existing concerns about data usage.

“It’s a fair question, I think, for consumers to ask Amazon how that relationship will be protected,” Fitzgerald said. She explained that while HIPAA is enshrined in law, “it doesn’t mean people don’t worry about the fringe.” [about] what it can mean to now have a complete picture of you as a consumer.”

“I think that would be crossing a river too dangerous for Amazon to collect patient data and then monetize and use it,” Fitzgerald warned.

Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.

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