How Will Amazon Approach U.S. Primary Care? – Daily - eComEmpireStore + Brought to You By: Robert Villapane Ramos



How Will Amazon Approach U.S. Primary Care? – Daily

Amazon has a playbook for reinventing businesses that it enters. It includes simplifying processes, experimenting to determine which new approaches work best, and continuously recombining its existing assets to come up with a better way to do things. It is likely to use this same approach in trying to transform primary care in the United […]

Amazon has a playbook for reinventing businesses that it enters. It includes simplifying processes, experimenting to determine which new approaches work best, and continuously recombining its existing assets to come up with a better way to do things. It is likely to use this same approach in trying to transform primary care in the United States. This means that its $3.9 billion acquisition of One Medical marks the beginning, not the end, of its efforts.
Amazon’s recent announcement of its deal to buy One Medical for $3.9 billion generated a wave of speculation on how the tech giant might transform primary care in the United States. Will it build a health care system that is as easy to access as Amazon’s website — one that offers products and services at the click of the button? Maybe it could employ artificial intelligence that can combine a wide array of individual patients’ data to help them identify and regularly receive the services, medicines, foods, and other supplies they need to recover from an illness or to stay healthy. Or use smart devices that would nudge people to take their medications or exercise.

Although the “Whither health care?” question is fascinating to ponder, it is the wrong one to ask. No one — not even Amazon — knows the answer to it.
Given the complexity of health care in the United States, any meaningful change will take time. As innovative as Amazon is with respect to creating seamless customer experiences, leveraging data, and developing new technologies, the most critical aspect of its playbook for entering new businesses is that it expects its work to take time. In fact, Amazon’s founder Jeff Bezos has famously and repeatedly noted this need for patience throughout the company’s history. (Disclosure: One of us, Robert Huckman, owns a modest number of Amazon shares.)
So what does this playbook look like and what does it imply for how Amazon might be thinking about the value of the One Medical acquisition? We see three key components.
Since its founding, Amazon’s overarching goal has been to simplify the process of getting products to customers. Simplification can have a direct impact on customers through increased access to products today (“Alexa, get me more toothpaste”) and an indirect one by reducing Amazon’s costs and enabling future growth.
Analysts cited this emphasis on simplicity as a reason Amazon acquired the Whole Foods chain of grocery stores in 2017. With the acquisition, Amazon not only gained a physical retail presence near many customers. In addition, the broad network of locations presented Amazon with opportunities to simplify customers’ daily retail transactions in a variety of ways: offering a delivery service tied to customers’ existing Amazon accounts, providing secure lockers within Whole Foods stores to which customers could ship items they purchased on Amazon’s website, and allowing customers to return their Amazon online purchases at the Whole Foods stores without needing to repackage the items.
For Amazon, simplicity emerges from experimentation. These are not necessarily formal or structured experiments but rather the results of allowing for trial and error.
The launch of Amazon Web Services (AWS) in 2006 highlights Amazon’s approach to new business experimentation. AWS began as a diffuse cluster of services that Amazon found useful in building its core businesses of online retail. Given the challenges Amazon faced as a growing, web-based company, the team that developed AWS — led by Amazon’s current CEO, Andy Jassy — was convinced that other small web developers might need similar help. Although the team correctly assumed there was broad demand for reasonably priced cloud-computing infrastructure, it did not pretend to know the specific ways in which developers would actually use that infrastructure. AWS was thus set up as a flexible “utility” that developers and entrepreneurs could draw upon to solve their most pressing problems.
As customers unearthed use cases, AWS was able to create packaged services for many of those development needs, whether for data storage, analytics, or transcribing speech into text. AWS has also been able to benefit from the sale of applications that AWS users create and offer on its AWS Marketplace.
The upshot of the AWS story is that a business Amazon thought might be helpful to nascent developers has now become the backbone for some of the largest companies in the world — several of which compete with Amazon’s other businesses — and the predominant source of Amazon’s profit (even though it only accounts for roughly 16% of the company’s revenue).
The final part of Amazon’s approach to new business expansion is a continuous recombination of its existing assets. Prior to the acquisition of Whole Foods, the company created Amazon Go, a chain of convenience stores that use sensors and deep learning to create a seamless and cashier-free shopping experience. Using Amazon’s “Just Walk Out” (JWO) technology, customers scan their phone upon entry, select products, and walk out of the store without needing to pay at a register.
In late 2020, nearly three years after acquiring Whole Foods, Amazon began opening its own grocery stores under the Amazon Fresh brand, which had previously served customers with same-day deliveries directly from its warehouses. These stores, which used a version of the JWO technology built into its shopping carts, carried many of the national brands found at larger grocery chains as well as Amazon’s own brands, while Whole Foods focused on smaller brands and organic products at a higher price point. Finally, in early 2022, Amazon introduced JWO in one of its Whole Foods locations in Washington, D.C., and plans to add the technology to a second store in Sherman Oaks, California, later in 2022.
What Amazon has built and acquired in the grocery space is a set of brands that target distinct customer needs but that are connected through common assets. Over time, they are being moved to a similar set of in-store technologies that make transactions simpler for the customer and Amazon. They can link a given customer’s activity across a range of product categories through a common identifier: a Prime account number. And, of course, most of these retail locations have the potential to serve as a warehouse to support same-day delivery of products — the ultimate simplicity that Amazon aims to create for its customers.
What will this agglomeration of grocery assets be called? Amazon, Amazon Go, Amazon Fresh, Whole Foods, something else? Perhaps even Amazon does not know the answer to that just yet. What is does know is that it has assets — locations, technology, and, yes, even people — that it can bring together in novel ways to serve varied customer needs.
To Compete with Amazon, Big-Name Consumer Brands Have to Become More Like It
So what does Amazon’s playbook tell us about its plans for One Medical and its broader aspirations in health care? Much like Whole Foods prior to Amazon’s 2017 acquisition, One Medical is plagued by significant operational and financial challenges. Also, as with Whole Foods, the answer does not appear to be that Amazon will simply aim to “turn around” the current One Medical model. That model is challenged by many institutional and regulatory complexities that even Amazon may not be able to change. Instead, we could imagine Amazon applying its playbook to make One Medical part of an evolving set of health care assets that Amazon can use to serve customer needs. Here’s how:
With One Medical, Amazon expands its ability to offer convenience to customers. Initially, this may be as straightforward as scheduling appointments at One Medical locations using Amazon’s panoply of access points (e.g., website, app, Alexa, etc.) or expanding telehealth access to individuals. Over time, perhaps Amazon plans to wrap primary care services into its Prime membership. This membership could be offered directly to consumers or their employers.
Skeptics will correctly note that such a model would push Amazon into the crowded and challenging business of health insurance where many other competitors, such as UnitedHealthcare and Aetna (owned by CVS) already have a head start. They will add that this is an area where Amazon’s internal efforts for its own employees, such as Amazon Care and the failed Haven joint venture with JPMorgan Chase and Berkshire Hathaway, have yet to bear fruit.
To be sure, One Medical still has not figured this market out either. There are large, entrenched players that can make entry difficult. However, simply scaling a broken system — as many would describe primary care in the United States — is unlikely to result in long-term success. Amazon likely views this complicated space with thin margins as one that offers ample opportunity for exploration and simplification. This is where Amazon’s willingness to experiment and recombine come into play.
Amazon’s quest for simplicity in health care is ambitious but will, undoubtedly and by design, take time. Gradatim ferociter — the Latin motto of Blue Origin, Jeff Bezos’s venture into commercial space travel — translates as “step by step, ferociously.” The motto could just as easily apply to Amazon. Its willingness to experiment will help the company learn how to proceed with One Medical.
In the coming months, expect to see numerous attempts to offer new and different services across Amazon’s many delivery channels. This experimentation does not require Amazon to fix the current limitations in the One Medical model, just as it has not mastered the online pharmacy business following its acquisition of PillPack or its pursuit of lowering employer’s health care costs through Haven or Amazon Care.
Changes will look different across One Medical locations, across consumers in different states, and across individuals who work at different employers that use Amazon’s services. That is, after all, part of using acquisitions to aid experimentation. As with Whole Foods, Amazon likely hopes to use One Medical’s network of location to — eventually — scale quickly. But Amazon’s experience, whether with web services or groceries, has shown that the key to scaling quickly is to start deliberately with significant upfront experimentation. To go fast, Amazon regularly starts slow.
One Medical provides Amazon with additional assets that can be recombined to address pressing problems in health care. For example, one of the banes of most Americans’ health care experience is the lack of portability of information. Electronic health records (EHRs) offer the promise of seamless coordination but rarely are connected across different health care organizations.
Amazon has its own EHR with Amazon Care and will acquire two new systems with One Medical: One Medical’s own EHR and another that was created by its subsidiary, Iora Health. Exactly how these EHRs come together and how they connect with EHRs at local health systems (many of which are already One Medical partners) remain open questions. Nevertheless, Amazon now owns several pieces that it can pick apart and reassemble with the goal of creating a more seamless experience for patients and providers.
This recombination could lead to innovation that goes beyond a simpler and better approach to keeping health records. For example, an EHR that links to other Amazon services might allow a doctor to prescribe not only future medical appointments but also medicines through Amazon Pharmacy (grown through Amazon’s own efforts and its acquisition of PillPack), durable medical equipment for home health, and even healthier foods (from one of Amazon’s grocery brands, of course) to address dietary concerns.
Significant recombination and reimagination will be required if the United States is to address the often-discussed health disparities and social determinants of health that serve as a barrier to effective health care for many. With its growing array of assets both within and beyond health care, Amazon has the potential to offer a subscription that meets a comprehensive set of social needs that include (and go beyond) the services covered by traditional health insurance. This would be a meaningful addition to what one commentator on the Whole Foods acquisition termed Amazon’s “life bundle.”
No doubt the implications of such a model for both privacy and market competition would require deep scrutiny and novel regulatory approaches. Still, if the returns for Amazon and society can be appropriately weighted, it would be worth discussing what value might be created by this type of comprehensive service offering.
Amazon has stated that it hopes to use the acquisition of One Medical to transform health care. Such ambition is not uncommon for Amazon’s long-term aspirations in any new business. That said, if Amazon knows anything, it is that it doesn’t know everything about a new opportunity at the time it begins to pursue it. So perhaps the right question to ask right now is “How will Amazon’s experimentation in health care change with its acquisition of One Medical?”
While the prospects for scaling the current One Medical model may not be particularly bright, that is likely not Amazon’s long-term goal. Rather, in One Medical, Amazon certainly sees pieces of a puzzle that may eventually fit with others that it already owns or may acquire in the future.
Though it is not yet certain what that puzzle will look like — that is, where Amazon will end up in health care — it is clear that the company is comfortable with taking some time to figure it out. We have argued previously that a “steady and consistent approach [to improvement] would be radical indeed for the U.S. health care system.” Only time will tell if Amazon can bring about this necessary change.