Amazon has a new partner in its assault on healthcare
Amazon (NASDAQ: AMZN) just revealed his last step in the health industry , a multibillion-dollar opportunity that the tech giant has increasingly envisioned in recent years. Amazon has acquired a online pharmacy, PillPack, in partnership with JPMorgan Chase (NYSE: JPM) and Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) to found Haven, a healthcare joint venture. Last year he launched his Amazon care virtual care clinic in Seattle, its home market. The company is even developing COVID-19 tests to use on its workforce.
Now, the company is partnering with Crossover Health, a primary care provider, to open clinics for Amazon employees in fulfillment centers across the country in what it calls a center pilot program. district health.
Amazon has already opened a facility in the Dallas / Fort Worth area, where there are 20,000 Amazon employees, and plans to add 20 such healthcare facilities in four other cities nationwide, including Phoenix, Detroit, Louisville and the San Bernardino Valley. in California. In total, Amazon said the pilot program will provide primary care services to 115,000 Amazon employees and their families. If the pilot project is successful, the company plans to deploy similar facilities in other parts of the country. Amazon, including Whole Foods, has approximately 650,000 employees in the United States and is growing. If the company provided all of its primary health care in-house, it would likely serve around 2 million Americans, including the families of employees.
Darcie Henry, vice president of human resources at Amazon, explained, “In the United States, an increasing number of patients do not have easy access to a primary care physician and instead use emergency care options or emergency, which is not only more expensive for patients, but also neglects important opportunities for preventive care. We want to solve this problem for our employees, and the launch of these new neighborhood health centers will provide a range of quality primary care services to employees across the country. “
Like Amazon Care, Crossover Health will also provide virtual care, and its proprietary technology platform allows most visits and care needs to begin online before going in person when needed.
One more step to disrupt healthcare
Amazon has never made its long-term healthcare ambitions clear, but there are a number of reasons why this disruptive company is playing a role in the industry. First, healthcare is a huge market, accounting for almost $ 4 trillion in annual spending in the United States and accounting for about one-sixth of the national economy. Amazon will soon be the second largest company in the United States in terms of revenue (behind Walmart) and must find new ways to grow in order to meet the high expectations of shareholders who have offered its valuation to nearly $ 1.5 trillion.
Second, Amazon is used to testing new businesses in-house, as it has done with Amazon Web Services, its cloud computing juggernaut, and appears to be doing so with its nascent logistics operations. It could follow a similar path in the field of health, by opening up to the general public after having perfected it on its own employees.
Finally, as the second largest private employer in the country (also behind Walmart), employee health costs represent a significant expense for the company and that it could better control by integrating its internal health needs and expenses. Amazon’s first foray into healthcare was the joint venture with JPMorgan Chase and Berkshire Hathaway, and at the time CEO Jeff Bezos said, “As difficult as it may be, reducing the burden of care healthier economy while improving outcomes for employees and their families would be worth the effort. ”
However, since launch, Haven, as the company is now known, has been mostly a disappointment. The project got off to a slow start and is now looking for a new CEO after Atul Gawande announced he would step down in May but remain chairman. Amazon’s own initiatives also appear to have hampered Haven’s, as the two companies appear to be in competition in some ways. Amazon’s launch of Amazon Care and now its partnership with Crossover Health may also reflect its frustrations with the joint venture.
Crossover Health delivers much of what Amazon seems to be looking for with Haven and the Amazon Care initiative. It is a way to control employee health costs and improve bottom line, taking advantage of technology and breaking the usual process of health insurance complex. On its website, Crossover says it “offers a whole new model of care delivery for employer health advocates. We are integrating disconnected health and wellness benefits with technology services to increase access to healthcare. care, reduce expenses and deliver remarkable health to employees near and far. ”
Other statements on the site seem perfectly aligned with Amazon’s goals. Crossover says the “[c]The current fee-for-service system is extremely costly and highly inefficient for both patients and employers, ”and touts its ability to generate a high return on investment.
Crossover is still a small business. It only has eight locations, but it’s easy to imagine its partnership with Amazon turning into something big. This could include some acquisition or expanded partnership. If the initiative is successful, Amazon will likely seek to deliver primary care services to the general public, turning its own research and experimentation into a profit center. Primary care is a huge and highly fragmented market, and one that looks ripe for a disruptive innovator like Amazon.
This week’s news might just be the start.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.