Amazon's latest health care obsession

My thoughts on one of the bigger stories that happened over the summer

The following also appeared on the Washington Monthly website today.

Concierge care for the well-off will not save the American health care system, but it could prove lucrative for Amazon.

The world’s second-largest retailer stunned health care observers late last month when it folded its start-up primary care practice just three years after it was unveiled as “the future of medicine.” It was Amazon’s second failed health care experiment, the first being a 2019 joint venture with JPMorgan Chase and Berkshire Hathaway that aimed to provide “employees and their families with simplified, high-quality, and transparent health care at a reasonable cost.”

Amazon’s latest retreat from direct involvement in health care came less than two months after it announced plans to acquire San Francisco-based One Medical, a subscription primary care service now in 25 major markets across the U.S. The main clients for One Medical’s suite of digital and in-office primary care visits are the well-off and the well-insured.

Amazon Executive Chairman Jeff Bezos has run this playbook before. Should the Federal Trade Commission approve the $3.9 billion acquisition, we may start seeing One Medical clinics popping up inside Whole Foods stores, his high-end acquisition in the grocery store space.

A recent analysis of One Medical’s 182 medical offices showed they are located in the top 10 percent of America’s most fortunate communities. Its clientele, which stood at 736,000 individuals at the end of 2021, is overwhelmingly urban, wealthy, non-Hispanic white, and college-educated.

The firm charges $199 a year to already insured individuals or their employers in exchange for what the firm bills as “seamless digital health and inviting in-office care, convenient to where people work, shop, live and click.” It bills insurers or self-insured firms for its services. More than half its $255 million in revenue in the most recent quarter came from Medicare, largely through contracts with Medicare Advantage insurers, many of which also cater to younger and healthier elderly beneficiaries.

The one thing One Medical doesn’t do much is take on full risk for treating its patients. The rapidly expanding firm absorbs all the health care expenses, including paying for costly specialty care and hospitals, for less than five percent of its patients.   

Concierge care is not the answer

The nation’s ailing primary care system desperately needs a shot in the arm. Bezos launched Amazon Care three years ago with claims the start-up medical service would provide that boost. Now it’s gone and One Medical isn’t the answer.

The well-insured members of the upper middle class attracted to concierge providers like One Medical are not the main reason U.S. health care spending is the highest in the world. However,  those patients’ overuse of certain procedures (think lower back, cardiac stent, and minor skin lesion operations, for instance) are certainly contributors. About five percent of patients account for half of all health care spending. These health care frequent flyers are disproportionately poor, less educated, and suffer from multiple chronic conditions that require intensive specialist treatment and lead to frequent hospitalizations.

A recent National Academies of Sciences, Engineering and Medicine report identified a well-functioning primary care system as key to getting better outcomes and lowering costs for these seriously ill people. Empowering primary care physicians to coordinate their care, and giving their practices expanded staffs options for dealing with those patients’ most serious social problems like poor or no housing and food insecurity, will reduce hospitalizations, improve their overall health, and in the long run lower the overall cost of care.

It is significant Amazon dropped its Amazon Care venture because its 1.6 million employees should have been an instant clientele. Its workforce has a disproportionate need for intensive primary care advice.

Amazon, which aggressively fights every attempt by its workforce to unionize, pays its workers significantly less than workers at competitor firms like FedEx and UPS. They are subjected to significantly more stress on the job and suffer workplace injuries at twice the rate of other firms. Just ahead of last year’s holiday season, over 200 public health experts sent an open letter to Amazon CEO Andy Jassy begging the firm to improve conditions for warehouse workers and drivers because “injuries among Amazon workers increased dramatically during ‘peak times’ like the holiday season and Amazon’s Prime Day.”

"This decision by Amazon to throw in the towel must come as vindication to those who believed that the healthcare business is just too complex, even for a company like Amazon," Paddy Padmanabhan, CEO of Damo Consulting, told the Washington Post. "This raises the question of whether anyone can ever be successful as a stand-alone primary care provider in healthcare or whether you need to be part of an integrated health system to make it work."

The consultant speculated Amazon might withdraw its bid for One Medical. But, while the firm is still losing money in its expansion phase, its researchers claim that intensive primary care saves money for its business clients.

A JAMA-published study of its in-house health clinic at Elon Musk’s SpaceX venture in Hawthorne, Cal., showed company workers (average age 27, 62 percent male and highly educated) who used the clinic reduced their use of emergency rooms by 33 percent and hospital admissions by 16 percent compared to employees who did not. Savings from those reductions more than offset the increased spending on primary care, the study, whose authors included One Medical clinicians, claimed.

That should encourage Bezos and his expansion-minded staff to the stay the course. Rather than focusing on the hard-to-treat, like his own employees, One Medical will likely become another offering in Amazon’s growing portfolio of business services aimed at high-end technology companies – like AmazonWeb Services (AWS).

There’s one other reason One Medical may continue to appeal to Bezos. Publicly traded since January 2020, the primary care practice has been fighting off a unionization drive by its 500 support personnel. “The minute we went IPO, we pivoted away from patient care to membership volume,” an administrative staffer told a National Public Radio reporter. “Ever since we went public as a company, profit matters over employees and patients.”