Amazon revealed plans to shutter Amazon Care in an Aug. 24 letter to Amazon Health Services employees. But that doesn't mean the end of healthcare services from the nearly $470 billion technology behemoth.
"Organizations as large as Amazon and Alphabet can afford to try things in many different ways," said Saad Chaudhry, CIO of Luminis Health in Annapolis, Md. "They do not have to buy into the fallacy of sunk cost due to their scale and resources. If their foray does not yield results that could be channeled into something bigger or aligned with a larger plan, it can be wrapped-up and its data analyzed to garner lessons and knowledge for other activities in that industry."
Citi analysts shared a similar message, saying in an Aug. 24 flash note that Amazon Care's closing "is far from the death knell for [Amazon's] healthcare ambitions" and could be "more like just the beginning," according to Seeking Alpha.
"This may strengthen Amazon's resolve for it, if they would rather provide care through an established provider network instead of something in-house," said Mr. Chaudhry. "Or, this may reset Amazon's approach as to which focused area within healthcare they are interested in."
Amazon built its first foray into telehealth with Amazon Care from the ground up, but the company is now looking for outside expertise to iterate and improve upon its offerings. Amazon reached an agreement to buy virtual and in-person primary care company One Medical for $3.9 billion in a cash transaction announced July 20 and has placed a bid on home health and technology company Signify Health, which was valued at $5 billion in mid-August.
Executives outside of Amazon may have been surprised by the announcement, but internally there have been signs. One of Amazon Care's top leaders went on a leave of absence in early August, and The Washington Post published an article quoting nurses and other staff members outlining issues with the company's business model.
"It comes as a shock to those on the outside, of course, but I have to imagine that those in the boardroom at Amazon arrived at the conclusion after evaluating and weighing outcomes from the initiative," said Mr. Chaudhry. "And I imagine that the learnings from it will be applied directly to other healthcare ventures at Amazon. Whether this impacts the One Medical acquisition, of course, remains to be seen."
Health system tech executives are watching Amazon's moves closely, alongside other disruptors like Google and Walmart, to meet patient needs.
"At [University of California San Francisco], we believe that patient care and experience are better with a broad spectrum of patient choices including convenient, on-demand care in addition to chronic, longitudinal care, so Amazon's statement and conclusions resonate," said Aaron Neinstein, MD, vice president of digital health at UCSF Health and senior director of the UCSF Center for Digital Health Innovation. "I remain interested in seeing what investments Amazon makes in building the One Medical practice network and rationalizing it with its other healthcare products and services."
This isn't the first time Amazon has pivoted away from a healthcare venture with lessons learned. Amazon was part of a three-way joint venture with JP MorganChase and Berkshire Hathaway to revolutionize healthcare coverage and delivery. The venture, Haven, folded in 2021 after nearly four years of existence.
"It looks like Amazon is following a rigorous innovation process where they test a hypothesis, experiment, learn and pivot," said Dr. Neinstein.
Amazon's statement about Amazon Care's closing noted the company deepened its understanding of the healthcare industry and what is needed to deliver meaningful healthcare solutions in the long run. Amazon Care wasn't able to deliver services for the large enterprise customers the company was targeting, a gap One Medical could fill.
"Every healthcare leader in the country says [telehealth] is an important part of the future transformation strategy, but despite that, people are still reticent to over-invest in it because it's not being paid for," said Rick Shumway, president and CEO of Stanford Health Care-ValleyCare in Pleasanton, Calif. "It's a disparate pay structure. But you look at this deal between Amazon and One Medical, that's going to push the payment models and payment providers in a different direction. Payers are going to have to rethink their current strategies. Delivery systems are going to have to change the way they do business and force these partnerships with potentially previous opponents to remain competitive."
Tony Ambrozie, senior vice president and chief digital and information officer for Coral Gables-based Baptist Health South Florida, said the moves make sense because One Medical "seems like a broader and stronger brand than Amazon Care."
"It is not impossible that the acquisition was triggered by how Amazon Care was performing — or not — against the strategy," Mr. Ambrozie said. "It is therefore logical that they would want to consolidate the brands to eliminate consumer confusion, through the right positioning and messaging. I can only suspect that behind the scenes they will also consolidate and enhance the technologies supporting the brand."
"What we need to see next is if and how they are going to expand and deepen the offering in ways that are meaningful to more consumers," Mr. Ambrozie added.