Why are we skeptical about Amazon’s Healthcare Aspirations?

Amazon acquired One Medical, an operator of primary-care clinics, in July last tear. With a comprehensive network now in place, Amazon has gained entry to 180 medical offices throughout US markets and established ties with 8000 companies that provide health benefits through One Medical.

(The intention of this blog: Exploring the strategies and initiatives of Amazon Healthcare will enhance your strategic acumen as a product manager.)

This was a significant purchase during the leadership of Chief Executive Andy Jassy.

The agreement further accelerates the efforts of technology and retail giants to penetrate the nation’s $4 trillion healthcare economy.

Why is Amazon desperate to enter the healthcare space?

✅Amazon had ambitions to take a slice of all economic activity.
✅ Amazon’s approach was to build infrastructure for itself and make it available to others as a service.
✅ Amazon’s goal was likely to build a front end for its employees to access healthcare services and create a marketplace to fulfil those services.

They say, “If short-term profit isn’t the goal, long-term goals become much more realistic.”

There is no more patient company than Amazon.

Did Amazon make previous attempts to enter healthcare, and were they unsuccessful?

A previous healthcare expansion effort called Haven, established by Amazon, Berkshire Hathaway Inc., and JPMorgan Chase & Co., failed to sustain itself and dissolved after three years. They closed down in the year 2021.

That time Wall Street Journal wrote :

Haven, the joint venture they set up together in 2018 to use technology and find new ways to reduce costs for their combined 1.5 million employees, will end operations next month. The project cost the three companies roughly $100 million combined, people familiar with its budget said.

Haven struggled to aggregate and analyze information on healthcare costs for the three companies employees. Data concerns from the partners and resistance from insurers stymied Haven’s efforts to determine how much the companies paid for medical care and why, the people said.

What insights can we glean from the above press article regarding strategy?

From a product manager’s perspective, what do you identify as a recurring strategy in Amazon’s approach?

As we have stated above :
✅ Amazon’s approach was to build infrastructure for itself and make it available to others as a service.

And you can see that Wall Street Journal that time quoted :

Haven, the joint venture they set up together in 2018 to use technology and find new ways to reduce costs for their combined 1.5 million employees, will end operations next month.

Amazon wanted to use the cumulative employee strength of 1.5 million to launch a product.

If they succeed in this endeavour, they plan to make it public.

What could be the reasons for their failure?

The failure of Haven made us realize that healthcare was too complex even for a company like Amazon at that time.

According to the same Wall Street Journal article, there existed an alternative explanation for the failure of Haven:

“While leaders of the founding companies were initially optimistic about Haven’s potential, the challenge of applying for its work across three sprawling corporations slowed progress and added complexity, the people close to the venture said. Eventually, the companies realized they could implement many projects more efficiently, they said.”

Is the current CEO of Amazon, Andy Jassy, dedicated to the healthcare initiative of the company?

The leaked information cited by Business Insider reveals the commitment of CEO Andy Jassy to Amazon’s healthcare initiative.

“During a November all-hands meeting, an Amazon employee asked CEO Andy Jassy to share the “innovations” that most excited him at the company. Without much hesitation, Jassy mentioned Amazon Care, the company’s new primary-care business, as one of his top picks, according to audio of the meeting that Insider obtained. Calling Amazon a “significant disruptor” in the medical-care field, Jassy expounded on the potential benefits of Amazon Care, which connects patients with doctors over text and video — and in some locations, mails prescriptions and dispatches a nurse to people’s homes for exams and labs. He said its on-demand telehealth capabilities could significantly improve the medical-care process, which relies on long wait times, unpredictable scheduling, and additional stops at pharmacies to pick up medications. He added that ten years from now, the standard experience of seeing a doctor today would look “crazy.”

Knowing Andy’s perspective on the healthcare sector can greatly assist those in the healthcare industry or working on healthcare startups.

Amazon believes that the next step for patients is not a nurse visiting the home but rather a network of physical clinics.

Does Amazon have any plans related to One Medical’s EHR offering?

As far as my understanding goes, One Medical’s EHR system, although relatively lightweight compared to major players such as Epic Systems, serves as a foundation for Amazon to expand upon. Importantly, unlike Epic, which primarily caters to hospital administrators, it was specifically designed to prioritize direct patient access.

If you’re curious to glimpse the strategic moves of Epic Systems and learn how to apply them in your product engineering, be sure to follow us.

Why do we feel Amazon purchased One Medical?

While it is beyond my area of expertise, One Medical’s network of clinics offers a more scalable and cost-effective solution compared to Amazon Care’s approach of providing healthcare services at people’s homes. What is evident, however, is that Amazon is acquiring a substantial base of medical providers, which is noteworthy.
One Medical has a substantial customer base comprising individuals and companies and the capability to collaborate with various insurance providers, including Medicare.

What are the reasons behind our scepticism regarding Amazon’s healthcare aspirations?

Amazon undertook a similar endeavour with Whole Foods, but it did not succeed.

From my perspective, it harks back to the Whole Foods situation. While the upscale grocery chain provided Amazon with a new customer base and an opportunity to expand in the fresh food industry, the outcomes haven’t been particularly substantial. Brick-and-mortar operations are fundamentally distinct from e-commerce, and the healthcare sector, even more so.

Healthcare diverges significantly from e-commerce, despite the existence of telehealth services.

Amazon Retail was, in retrospect, a magnet for mistakes.

Amazon.com was built on the idea that the Internet allows for a wider selection and better prices, eventually evolving to prioritize convenience.

AWS was founded on the principle that the Internet enables a single company to centralize the backend operations of multiple companies, resulting in significant economies of scale. This consolidation allows for operational flexibility in exchange for redirecting capital IT budgets.

The development of Fulfillment by Amazon and the expansion into logistics were driven by the belief that Amazon.com could serve as its best customer, delivering unmatched scale, performance, and customer accessibility.
Retail stores had none of these advantages.

Healthcare doesn’t seem to fit in this rubric. Yes, it’s a massive market, but its complexity, particularly regarding insurance, makes building a business that “scale[s] across the entire addressable market” impossible.

While it may seem obvious that Amazon will defy our expectations, it will certainly encounter these challenges. It will be fascinating to observe how Amazon Healthcare tackles these obstacles.