Even Amazon will have a tough time disrupting health care

Amazon (AMZN) this week announced its plans to shutter Amazon Care, its telehealth offering. The timing doesn’t seem like an accident — the tech giant recently announced its $3.9 billion acquisition of primary care provider One Medical (ONEM), which offers, among other things, broad telehealth capabilities and a substantial footprint of in-person clinics.

Amazon’s health care deals are important enough to merit headlines, sure. But, in the scheme of a highly regulated and competitive industry, Amazon still has a long way to go when it comes to being a major player, some experts say. That group includes Susan Lang, CEO of XIL Health, a health care-focused analytics and tech company.

“Amazon is typical of many tech giants who considered disrupting health care,” she said. “In general, they grossly underestimate how difficult and complex the $4 trillion health care industry is to disrupt. So in terms of their importance in health care, they are still not a significant factor, especially in the delivery of actual care, which is where Amazon Care sat.”

A number of tech giants, including Amazon, and corporate stalwarts have attempted to move into health care in recent years with varying degrees of success. For example, Apple (AAPL) has in recent months shown signs of doubling down on the health-related applications of its Apple Watches, even publishing a report on its health care plans. Amazon, for its part, has been making health care deals for years, acquiring PillPack in 2018, and even partnering with JPMorgan Chase and Berkshire Hathaway on a health care initiative called Haven, which shuttered last year.

Physician John Jones, DO tests administrative assistant Morgan Bassin for the coronavirus disease (COVID-19) at One Medical in Scottsdale, Arizona, US June 17, 2020. One Medical employees receive testing every two weeks.  REUTERS/Courtney Pedroza

Physician John Jones, DO tests administrative assistant Morgan Bassin for the coronavirus disease (COVID-19) at One Medical in Scottsdale, Arizona, US June 17, 2020. One Medical employees receive testing every two weeks. REUTERS/Courtney Pedroza

This year, Amazon’s been looking to make deals in quick succession in health care and beyond. Recently, the company also acquired Roomba-maker iRobot and is reportedly bidding for home health services company Signify Health (SGFY).

However, it’s still important to remember that, from a deal-making perspective, Amazon’s acquisition of One Medical is significant because it’s Amazon — not because the deal is by definition re-making the health care landscape, said Arjun Kapur, managing director of VC Forecast Labs firm.

“As a general matter, Amazon’s health care deals are no more important than any other health care deals,” said Kapur. “At the end of the day, consumers will opt for affordable health care with good doctors who are available to resolve issues when needed. The benefit of an Amazon-owned health care system, however, is having a tech-first mindset, with a bias to scale, in delivering health care.”

Why Amazon Care couldn’t cut it

Amazon Care, ultimately, was a misfire, according to experts like Lang, who said she wasn’t surprised by the news that the company was shuttering the service. Amazon Care offered a 24/7 telehealth platform that could be linked to your health insurance and, though consumers could enroll themselves, the company sought to appeal to employers.

“Amazon came late to the table with a slim offering of telehealth combined with at-home physician visits,” she said. “The services were not new or innovative for a market constantly under pressure to push through new models of care combined with technology.”

Amazon Care suffered from the pervasiveness of telehealth, Lang added. To be sure, telehealth has skyrocketed in both providers and adoption throughout the pandemic. In a 2021 McKinsey survey, about 40% of consumers said they were using telehealth, and planned to continue using it moving forward — that’s up from about 11% pre-COVID.

But don’t expect the shutdown of Amazon Care to deter Amazon from its health care ambitions. There’s another way to think about this — that this is another step towards success, and that Amazon is making its moves in the service of the company’s famed “customer-obsessed” approach, said Itzik Cohen, co-founder and CEO of PayZen, a fintech that focuses on health care affordability.

“Amazon’s culture embraces failure, and if you’re really innovating you’ll have many failures,” he said. “The common thread is they try to understand what the consumer wants and iterate until they find something that works, and I expect that approach to apply in their health care business as well. Putting the patient experience at the center is key to success — that’s true for Amazon and for all companies innovating in health care today.”

One Medical is key to the future of Amazon’s health care push

The One Medical deal signaled a major shift, one in which Amazon sought to buy into a more complete offering, rather than build from the ground-up. But that will have its own challenges.

One Medical’s $199 annual subscription offers 24/7 access to primary care and includes telehealth services, same-day appointments, and an app. The company had 188 US locations and more than 750,000 members, as of a May filing.

“Primary care is diffuse with its success based on complex relationships between physicians and patients,” she said. “Throwing technology and algorithms at clinics haven’t worked in the past.”

Kapur agrees, adding that competition in primary care and telemedicine isn’t just coming from incumbents, but from a world of startups that have jumped in, including telehealth platforms Amwell and Teladoc, and cancer detection startup Thrive Earlier Detection.

“The startup rush for general care and telemedicine already has this market overcrowded with new entrants,” he said. “A majority of the innovation still left untapped is in specialty care, medical insurance, and portable healthcare for gig economy workers, as well as better patient care and management platforms for institutions. That’s where we envision a lot more deals to happen in the future.”

In the end, health care isn’t a winner-take-all sort of space.

“Health care is a massive multiplayer industry and we don’t expect that to change just because Amazon made an acquisition in this sector,” said Kapur. “It’s akin to the Whole Foods acquisition — it’s a large enough market for many players to thrive with varying levels of offerings.”

Health care is also a space that ultimately continues to hold a lot of promise for Amazon, as many have said it desperately needs and struggles with innovation.

“True innovation often comes from having an outsider’s perspective: a fresh outlook and an ability to transfer specific expertise to a new problem set, can move the industry forward and transform patient experiences,” said Cohen.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.

Click here for the latest trending stock tickers of the Yahoo Finance platform.

Read the latest financial and business news from Yahoo Finance.

Download the Yahoo Finance app for Apple or Android.

Follow Yahoo Finance on Twitter, Facebook, Instagram, LinkedInand YouTube.

Related Posts