FAQ: Why Amazon is buying One Medical for $3.9 billion

FAQ: Why Amazon is buying One Medical for $3.9 billion
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Amazon will dramatically expand its healthcare reach with its proposed $3.9 billion acquisition of One Medical, a primary care provider with 188 offices in 25 markets across the country.

The e-commerce giant went big, bidding $18 a share for One Medical’s parent company 1Life Healthcare — up 77 percent from the previous day’s close. Sparks flew on Wall Street after Thursday’s announcement, sending the stock up nearly 70 percent.

And while it’s been growing rapidly, One Medical has yet to turn a profit since going public in 2020. In the first three months of 2022, losses exceeded $90 million.

So why is Amazon buying One Medical? Here’s a quick guide:

What does One Medical do?

One Medical is a subscription-based primary care provider that leverages technology to build what it calls a “seamless blend of in-person, digital, and virtual care services conveniently located where people work, shop, and live.” The company is headquartered in San Francisco and has operations in major metro areas such as Atlanta, Boston, Chicago, Los Angeles, New York and the District.

Amazon is seeing you now: Tech giant buys healthcare chain for $3.9 billion

How does a doctor work?

The focus is on an app and website that allows members to book appointments, track health data and renew prescriptions. Patients who self-enroll pay an annual fee of $199 for a suite of services that include 24/7 on-demand video health consultations and other benefits.

Observers immediately drew comparisons between Prime, Amazon’s retail membership system, and the kind of all-encompassing healthcare platform offered by One Medical.

Amazon spokeswoman Angie Quennell declined to comment on whether One Medical’s services will be integrated with other Amazon services such as Prime, Pharmacy or Care.

(Amazon founder Jeff Bezos owns the Washington Post.)

Why is Amazon spending so much?

In a press release announcing the acquisition, Amazon senior vice president Neil Lindsay said healthcare is “high on the list of experiences that need to be reinvented.” The Seattle-based tech giant believes it can expand and improve healthcare through a “human-centric and technology-enabled approach,” he said.

“Making an appointment, waiting weeks or even months for an appointment, taking time off work, driving to a clinic, finding parking, waiting in the waiting room and then in the exam room, which is all too often a few hasty minutes with a doctor, then another visit to a pharmacy – we see many opportunities to improve the quality of the experience and Give people some quality time back in their days,” Lindsay said in a statement.

Though One Medical is losing money — not uncommon for a startup — it’s growing fast: It posted total revenue of $254 million in the first three months of 2022, a roughly 110 percent jump from $121 million of the previous year period.

Perspective: Amazon just bought my doctor’s office. That makes me very nervous.

What does Amazon know about healthcare?

The acquisition is part of Amazon’s year-long foray into healthcare, though none of its previous moves had quite as much financial firepower.

Bought on Amazon PillPack online pharmacy for $753 million in 2018, which was converted into Amazon Pharmacy two years later. It built Amazon Care with the help of another acquisition, medtech start-up Health Navigator. The service offers telemedicine visits and home visits to employees of certain companies, including Hilton, in some cities.

In leaked audio of an all-hands meeting in November, Amazon CEO Andy Jassy told employees that Amazon Care is one of the company’s top innovations, stressing that the division aims to expand through partnerships and new services. insider reported this year.

The company’s cloud computing arm, Amazon Web Services, offers healthcare-specific products and a healthcare accelerator for startups. The company has also used its Amazon Business e-commerce offering to target hospitals, according to reports.

However, one of his first big steps failed. Known as Haven, it was an ambitious effort made in partnership with JPMorgan Chase and Berkshire Hathaway to manage rising healthcare costs and improve patient outcomes. But it closed last year after just two years.

What does this mean for patient data?

Quennell said the acquisition doesn’t change the fact that both companies “have strict policies in place to protect customer privacy in accordance with HIPAA and all other applicable privacy laws and regulations.”

Still, the deal was quickly scrutinized by some critics, many of whom are concerned that Amazon has control of numerous consumer-facing businesses. The company, which began as an online bookseller almost three decades ago, has expanded its business to a delivery network about the size of UPS, a dominant cloud provider that allows businesses to store data remotely, and a vast ecosystem of Alexa-powered devices. And it has grown its Prime membership program to more than 200 million worldwide.

Others raised privacy concerns, noting that monetizing consumer data is an important part of Amazon’s other activities.

“Amazon’s acquisition of One Medical is the latest shot into a terrifying new phase in the business model of the world’s largest companies,” said Barry Lynn, executive director of the left-leaning Open Markets Institute.

Lynn said he believes the deal will expand Amazon’s ability to “gather the most intimate and personal information about individuals to track, target, manipulate and exploit people in increasingly intrusive ways.”

Krista Brown, senior policy analyst at the American Economic Liberties Project, a nonprofit advocacy group that supports antitrust causes, called the acquisition “terrifying” in a statement.

“The acquisition of One Medical will solidify Amazon’s growing presence in the healthcare industry and erode competition,” Braun said. “It will also pose serious risks to patients whose sensitive data is being collected by a company whose own chief information security office once described access to customer data as ‘free.'”

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