Prime healthcare: How Amazon’s $3.9B One Medical deal could boost its subscription program

Amazon Prime shipping containers stack up at the Port of Seattle in advance of the 2021 holiday season. (GeekWire Photo / Todd Bishop)

Will consumers order up healthcare through Amazon Prime as easily as they stream The Boys or buy an Echo speaker?

That’s one question raised by Amazon’s planned $3.9 billion acquisition of One Medical, announced last week.

The deal is “setting the stage for a Prime health subscription service,” said industry veteran Mike McSherry, CEO of Seattle digital health company Xealth.

One Medical already operates on a membership model. It is an employee benefit at more than 8,000 companies, enabling virtual care and same-day appointments at clinics in more than 15 metro areas. Individuals can also purchase a yearly membership for $199.

Amazon Health Services head Neil Lindsay previously helped run Prime, which offers free shipping along with perks such as streaming media for $139 per year in the U.S. There are more than 200 million Prime members worldwide, according to Amazon’s latest update from last year.

It’s still unclear if Amazon will offer One Medical services under Prime or something separate, said Andrea Leigh, CEO of e-commerce training company Allume Group and a former Amazon general manager.

“But I think Amazon has proved that memberships work really well for them,” Leigh said.

Allume Group CEO Andrea Leigh. (Photo courtesy of Andrea Leigh)

Adding healthcare services to Prime could attract more people to Amazon’s membership program and boost the company’s revenue. Prime subscribers spend substantially more with Amazon than non-members.

Amazon’s subscription services revenue, which includes Prime memberships, came in at $8.7 billion for the second quarter this year, up 10%. According to estimates from Consumer Intelligence Research Partners, about 172 million people in the U.S. were Amazon Prime members in 2021 and the renewal rate after two years was 98%.

See also  Life sciences entrepreneurs offer advice on launching and building startups

“Prime builds loyalty,” said McSherry in an interview. “If you start paying a subscription to a primary care service you’re going to become more and more loyal to that brand and service.”

In a blog post last year, Trilliant Health executive Sanjula Jain noted that the huge number of Amazon Prime customers far outweighs the number at any single healthcare company. “Businesses like Amazon with a national customer base have a unique opportunity to expand their share of wallet with loyal customers,” she wrote.

Amazon already has existing healthcare services. In the last few years it acquired online pharmacy PillPack; expanded employee-based primary care service Amazon Care; unveiled a new Halo View health band; and developed a COVID-19 test kit. Amazon Web Services also provides tools to healthcare companies, such as software to extract medical information from doctor’s notes.

Accolade Chief Medical Officer Shantanu Nundy. (Accolade Photo)

About a quarter of Americans don’t have a primary care provider, said Shantanu Nundy, chief medical officer of healthcare company Accolade, based in Seattle and Philadelphia. He said Amazon acquiring One Medical “is an example of a new care model that I think has the potential to reach more people, and I think that’s a good thing.”

“The idea generally of a subscription model in primary care is really positive,” said Nundy, who also commented on the acquisition on LinkedIn.

Accolade similarly offers virtual primary care services through employers, along with bundled services like diabetes care and mental health. Another Seattle-based company, Vera Whole Health, also offers employer-based memberships.

One Medical offers tech-enabled healthcare through its app. (One Medical Photos)

Healthcare membership models often include services such as follow-up texts or reminders about prescription refills, said Nundy, though they generally don’t cover advanced care with specialists. On top of membership fees, they often pull in revenue from insurance companies for services, he said.

See also  How Amazon’s tech and logistics prowess may disrupt healthcare — and spark concern

Longer term, Amazon might even purchase an insurance company and roll that into Prime, McSherry told GeekWire.

According to its first quarter 2022 financial report, One Medical receives 10% of its net revenue from memberships and 16% from fee-for-service payments, mainly from insurance companies. Fifty percent is from Medicare and 20% percent comes from partnerships, such as with healthcare networks that provide speciality care.

One Medical recently acquired Iora Health, which brought in an elderly population supported mainly by Medicare Advantage, a program that emphasizes “values-based” care over fee-for-service payment.

A Prime-like model for healthcare delivery also could potentially provide an accessible option for the uninsured.

“I don’t think it is the long-term solution for providing universal access to care for people, but it certainly chips away at the problem,” said Nundy of models that make primary care easier and more affordable.

On the flip side, Amazon’s acquisition of One Medical has the potential to squeeze out the most vulnerable by focusing mainly on healthier patients in more urban areas, said Boston University physician Katherine Gergen-Barnett and Harvard professor Russell Phillips in a commentary in STAT News.

In the end, trust is fundamental to medical care, especially for marginalized communities, said Nundy. And that’s more important than any set of bundled solutions. “Ultimately, if you really want to scale and you really want to serve patients, you have to have trust,” he said.

Other retail giants that offer primary care services include CVS Health, which has more than 1,000 clinics, and Walmart, which offers services in rural areas.

See also  Promising data from large Alzheimer’s study bodes well for this Seattle startup

Leave a Reply

Your email address will not be published. Required fields are marked *

Block "video-noi-bat" not found