Five Takeaways from the Amazon/One Medical Transaction | Thompson Coburn LLP
On July 21, 2022, the most high profile healthcare acquisition in recent memory was announced, when Amazon announced the acquisition of One Medical, a primary care organization, for $3.9 billion. . Amazon’s interest in America’s massive healthcare industry has been no secret in recent years, but it’s arguably their biggest bet yet. One Medical’s core business is a subscription-based digital platform offering telehealth services, but it has also made inroads in the development of physical in-person clinics. One Medical also offers its own proprietary EMR system as an employer-oriented offering (with Google known to be a major customer).
Given the scale and ambition of Amazon, participants in the space will no doubt be watching this transaction closely and here are five areas we will be paying attention to:
1. Primary care is an attractive target.
As many commentators have noted, in order to reduce costs and improve the quality of patient care, innovators need a large population to collect data and spread risk. Amazon has already tried this once with its infamous joint venture, Haven. Between Amazon, Berkshire Hathaway and JPMorgan Chase, Haven had 1.2 million U.S. employees in its system, but because those employees were in widely dispersed geographies, it lacked enough market power to drive down service costs. health for its employees. Similarly, there was little incentive for health care providers to refocus on providing episodic (expensive) care to focus on overall health care outcomes based on value.
Unlike the Haven joint venture, the acquisition of One Medical represents a value-based primary care investment that offers distinct benefits. While many private equity investments focus on fee-based services and outpatient specialties, getting a return on such an investment often involves developing additional revenue streams by adding ancillary products and services. On the other hand, primary care providers are generally well placed to direct and manage the care of their patients due to the length and frequency of contact with them. Coupled with advanced data analytics to improve care management and provide evidence-based care, many in the healthcare industry believe that primary care has the potential to revolutionize the delivery of care in the states. States, moving from costly procedure-based care to patient-centred care. centered care led by physicians. Finally, and perhaps most critically, the existing Medicare lives attributable to One Medical provide Amazon with the opportunity to penetrate the value-based Medicare model on a scale that would be impossible with its own employees.
2. Health systems – beware.
The acquisition of One Medical has implications beyond the participants in the transaction. Direct Primary Care has seen an explosion of interest in recent years, and One Medical does not position itself as a competitor to healthcare systems. However, if One Medical is able to improve quality and access to care and better manage quality of care, it is likely to reduce the need for episodic care provided by hospitals and other more expensive actors.
3. Innovations in employer offers.
While this acquisition can be seen in many ways as a break from Amazon’s previous forays into healthcare, it’s important to note that the most valuable thing Amazon brings to this transaction is still its enormous employee base. If Amazon started with its employee base in Joint Venture Haven, here they start with a proven primary care model and plug their employee base into it.
Even beyond that, however, Amazon now has a tremendous opportunity to innovate when it comes to the role of the employer in the delivery of healthcare services without the pressure of that being at the heart of the activity. New opportunities in this space include the addition of localized clinics placed next to major workplaces (think Amazon warehouses). If Amazon can strategically create its own marketplace, it could make huge inroads into one of the biggest opportunities in the healthcare industry — about a quarter of Americans who don’t have a primary care physician.
4. Innovations in data and delivery.
Many medical practices, either as stand-alone entities or when operated by hospitals or health care systems, suffer from a lack of resources to develop and innovate in information systems, management data and the development of clinical protocols, particularly because, as noted above, there is usually a strong emphasis on providing more lucrative episodic care at the expense of preventative medicine. We have no doubt that Amazon will enhance One Medical’s data analytics capabilities in a way that enables it to manage healthcare data and costs across the healthcare continuum. Likewise, we anticipate that One Medical will continue to provide (and even expand) its telehealth offerings and other services that are cost-effective, convenient, and enable timely management of patient health to minimize costly subsequent interventions.
5. Attractive to doctors.
The One Medical practice model is likely to appeal to many primary care physicians because it puts them at the center of healthcare decision-making for their patients. It is widely documented that the number of physicians in independent practice is declining. At the same time, many primary care doctors fear being employed by health systems because a large part of the health system’s income depends on hospital services – which means that doctors are in a secondary position in terms of relates to their ability to control financial and managerial resources. Amazon and One Medical are well positioned to take advantage of this momentum. With One Medical’s existing infrastructure and Amazon’s market penetration and presence across the United States, they should be able to attract patients while relieving physicians of the administrative burdens that plague many healthcare providers. Health care.