Is Healthcare Amazon's Next Big Thing?

It's been a long time since Amazon was just an online retail giant. It's now in everything from streaming videos to grocery stores to cloud computing. And last week, the company made a big move into another industry. It bought a chain of doctor's offices. Now Amazon's latest salvo, buying a primary care provider one medical for $18 to share that. Values the primary health provider at around $3.9 billion. The deal expands, Amazon's growing presence in healthcare, adding debt. The company and its CEO have been looking for their next big thing, and they've identified healthcare. Well, the CEO, Andy Jassy, has laid out that it's a really big priority. Obviously, this investment shows that our colleague Sebastian Herrera covers Amazon. This is the first big investment under Andy Jassy. That signifies that this is a really serious thing for him and for Amazon. And it just shows where his head is at in terms of healthcare and how much of a priority he wants to make it. But this is an Amazon's first try to get into healthcare. And its previous tries haven't turned out great. Welcome to the journal, our show about money, business, and power. I'm Kate Limbaugh, it's Monday, July 25th. Coming up on the show, we'll healthcare be Amazon's next big thing. This episode is supported by Anthropic, the team behind Claude. In business, a wrong answer can cost you more than a slow one. That's why nine Fortune 10 companies now run on Claude, for the work they want to get right. Safety and accuracy are not just line items for Anthropic, that's their whole mission. See how Claude can support your business at Claude.ai/thejournal. This episode is brought to you by Indeed. Running a business means dealing with a dreaded hiring process. And the stakes are high when the right hire could make or break your business strategy. But good news, Indeed, sponsor jobs is here to make things less painful and nerve-wracking. It gives your job post a boost to reach quality talent faster. Plus, it can help put your job in front of exactly who you're looking for based on criteria you set. Like if you need certain skills or certifications. And it works! Sponsored jobs posted directly on Indeed are 95% more likely to report a hire than non-sponsored jobs. So spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at Indeed.com/podcast, that's Indeed.com/podcast, Terms and Conditions Apply, Need a Hiring Hero? This is a job for Indeed Sponsored Jobs. Amazon has wanted to disrupt healthcare for a long time. Like in 1999, it bought a stake in the website Drugstore.com, which sold everything from toothpaste to Prozac. So it's sort of dabbled here and there in the healthcare space for a little while. I mean, one of its most notable efforts was when it launched an online pharmacy business after buying online pharmacy pill pack. So it's sort of shown like a vague interest in the space for years now. Amazon's approach to healthcare has evolved over the years and it keeps trying to find a way into an industry that accounts for nearly a fifth of the U.S. economy. For the last few years, it's focused on a telehealth service called Amazon Care. So Amazon Care was launched in 2019 and it started out as a service for Amazon employees. It started out in Seattle and it's branched out from there. And what the service offers is basically a telehealth service mixed a little bit with an in-person service. So the idea is U as an employee can contact Amazon Care through an app, have a chat with a medical provider. And if you need someone to come to your home, the idea is that Amazon Care can dispatch a medical personnel to your home and it can also dispatch any medicines you need. That's sort of the original idea of Amazon Care. But a few years in, Amazon Care is still pretty small. It's mainly used by Amazon employees. Amazon Care right now only has like a limited amount of customers which include Hilton and semiconductor company Silicon Labs. So it's funny because Amazon actually sites on their website that one of their customers in Amazon Care is Whole Foods which is kind of telling that they don't have that many customers right now if they're signing Whole Foods which they own as one of their customers. And Sebastian says the people that have used the service haven't used it all that much. What's been interesting with Amazon Care is that so far a lot of employees that have mostly used it as one of urgent care, those type of scenarios. And Amazon is hoping for that to become more of a long-term relationship with these patients. Amazon imagines a world where as an employee you can go to an app and have that first touch point there with a medical provider, they can dispatch medical services, medical personnel to your home if needed as along with medicine. And if you want you can also go visit an office and get services there and have a long-term relationship with the doctor there. And for Amazon they always talk about we want more convenience for our employees, we want more convenience for our customers, we want to make things as easy as possible for them, we want to lower costs like they have in retail. To lower costs Amazon needs scale, scale its head trouble achieving on its own. So Amazon decided to buy that scale and announced its deal to acquire one medical. What is one medical? So one medical operates more than 180 medical offices in 25 US markets and works with more than 8,000 companies to provide health benefits to employees. This includes in-person and virtual care. One of their biggest clients is Google, so a lot of Google employees have probably used their services. Beyond a big customer base, one medical has something else Amazon wants. One medical has the doctors, providers, suppliers in the medical industry and the relationships that come with that. So I think for Amazon having those established relationships with other employers and with the medical industry to them was a big deal. And the sort of big cherry on top was that one medical has all these office spaces that they can now utilize. How would the purchase of one medical build on Amazon care? Well one medical is a primary care service and so it would build on it by trying to establish more of those long-term relationships with doctors, with providers, offering person services and it would just transition from basically just being a telehealth service to a more full service offering for a patient to see people in person at medical offices. It shows that Amazon is really going all in on health care. It signifies that Amazon is no longer just dabbling in health care, it's really committed to seeing this play out long-term and seeing how successful they can be in it. But success is far from guaranteed. Amazon has tried to make a big splash in health care before and it didn't work out so well. That's coming up. AI is moving fast across the enterprise, but without visibility it's just chaos, different tools, different models, different teams using AI in completely different ways. This now turns that chaos into control. With the AI control tower, you see all your AI across the business in one place. What it's doing, what it's done, and what it's about to do, so you stay in control. To put AI to work for people, visit servicenow.com. In 2018, Amazon made headlines with a high profile health care project. Just some breaking news that's out right now, retightens of industry, Amazon, Berkshire Hathaway, JP Morgan Chase, teaming up to upend the entire health industry. Warren Buffett, Jeff Bezos, and Jamie Diamond are teaming up and going private to reduce healthcare costs for the combined one million employees. The goal of that project, which was named Haven, it was to quote unquote use technology and find new ways. to reduce costs for those companies specifically, and when they announced it, it was sort of vague, but I think because it was Amazon and Brookshire Hathaway and Chase doing this, it was seen as like, "Oh my gosh, these companies are going to really disturb the healthcare industry." Haven was a major endeavor. The three companies invested a lot of money into it and hired big names from the healthcare industry to lead it. And yet, just three years later, the project folded, costing the company's $100 million. Sebastian says there were several reasons it didn't work out. For example, the company struggled to figure out the exact cost of care. Essentially, the companies had a lot of challenges and obtaining certain data they were trying to get. They had a lot of staff turnover. They didn't work together, I think, as well as as they had hope to. And so just various reasons why that one didn't work out. But one of those reasons had to do with Amazon Care, which launched in 2019 and was a surprise to Amazon's partners. Amazon, while it was doing this Haven project, was at the same time working on Amazon Care, which actually had a lot of similarities to the Haven project. It sort of like was confusing, I think, to see Amazon kind of doing its own thing with healthcare while also trying to do it with those other two companies. What did people say about that when it failed? Was it a sign that healthcare is so unwieldy, that even these three huge players can't fix it? Yeah, I think that's how a lot of people took it. They invested a lot into that initiative, and they hired well-known people in the medical world, and so when they failed, it was like, wow, these companies can't do this and who can? And I think there is a lot of questions with Amazon specifically of, do they understand this market? Where's your place in this? Amazon didn't give up on healthcare despite the failure of Haven. And Sebastian says that wasn't a surprise because Amazon doesn't give up easily. Look at what happened with groceries. So before Amazon bought Whole Foods in 2017, it had sort of dabbled in the grocery industry in different ways. It sold groceries online, had the Amazon fresh delivery service, and then Whole Foods market was its big splash. That's when I really went all in. And I think some Amazon observers have seen this purchase of one medical as Amazon's Whole Foods purchase of the healthcare industry. I think a lot of people thought that, wow, Amazon is going into grocery, they're going to just, you know, dominate potentially. There's just going to change grocery forever, and I think a lot of people thought, you know, your trade or Joe's of the world were just like doomed, and Amazon was going to complete takeover. I mean, the markets went into a frenzy that day, and it's just, it's interesting to see how things were then, and sort of where we are five years now later. I think a lot of people would say they haven't quite met those lofty expectations, they haven't really changed Whole Foods market, or the grocery industry in a significant way. And so then to sort of take that experience and apply it potentially into the future for one medical, it's like Amazon's success in building these other businesses may or may not be replicated in the healthcare space. Only time will tell. Right, only time will tell. I think Amazon obviously has reputation. It's so big that when they try something, it, you know, it causes a lot of market reaction, it causes competitors to get worried. And I think a lot of people hype up what Amazon can do. But we've seen that just because Amazon enters an industry or try something out, it does not guarantee at all success. And I think that people who are in this space will tell you, you really have to form these relationships with doctors, insurers, suppliers. You can't just like halfway get in and expect to succeed. And I think for Amazon, they're fully going into it. They really want to be fully present in this industry. And so they're not, it's not just providing some sort of tech solution. It's really trying to become a healthcare company. And that's, you know, really significant. And it's going to be fascinating to see five years down the road where they're out with that. That's all for today. Monday, July 25th. The journal is a co-production of Gimlet and the Wall Street Journal. Additional reporting in this episode from Melanie Evans. Thanks for listening. See you tomorrow.