Amazon took a $3.9 billion step toward expanding its primary care options Thursday with the acquisition of One Medical.
One Medical is a publicly traded, membership-based primary care practice offering virtual and brick-and-mortar services to commercially insured patients.
Under terms of the all-cash deal, Amazon will pay $18 a share for One Medical. Amir Dan Rubin, One Medical's CEO, plans to stay on after the transaction. The deal must be approved by One Medical's shareholders and federal regulators.
The deal was announced before the stock market opened. One Medical, which closed at $10.18 per share Wednesday, is trading around $17.18 per share midday.
In 2022's first quarter, One Medical lost $90 million, although revenues increased 110% to $254 million. Last year, San-Francisco-based One Medical acquired Iora Health for $2.1 billion with plans to break into the Medicare Advantage market.
Amazon has been persistent in its healthcare push even after the company’s joint healthcare-specific venture with J.P. Morgan Chase and Berkshire Hathaway disbanded last year.
“It’s clear that … they’re not giving up on healthcare,” said Nathan Ray, a partner in consultancy West Monroe’s healthcare and life sciences practice. “They’re picking their points and they’re continuing to extend their fence-line.”
The One Medical acquisition builds on efforts Amazon’s already made with Amazon Care, Ray said. Amazon signed its first customers to Amazon Care, a medical care service it's selling to employer health plans last year. In February, Amazon said it was expanding Amazon Care’s virtual primary care and urgent care services nationally into 20 cities.
The acquisition “gives [Amazon] a lot of options to elaborate on what Amazon Care is and can be,” Ray said. He said he’s watching to see whether Amazon will continue to purchase other provider groups.
By acquiring One Medical’s in-person clinics, Amazon dramatically increases the services they’re able to offer patients, said Jacob Effron, principal at venture capital firm, Redpoint Ventures. Effron said the tech giant is trying to build an end-to-end patient experience in a way that can scale quickly due to One Medical’s size and scope.
At the end of March, One Medical had more than 750,000 members and 188 medical offices across 25 markets. It also has relationships with employers, health systems, consumers and within the at-risk contracting space, Effron said.
“I am interested to see what parts of [One Medical's] business Amazon decides to invest in and how they prioritize which goes first,” Effron said. “The surface area of what Amazon can do has increased a lot. From the day this acquisition goes through, Amazon is touching a lot of patient lives with the potential and platform to touch a lot more.”
Christina Farr, an investor at venture firm, OMERS Ventures, said the move reveals that Amazon is not afraid of low margin business lines, which is different from many competitors.
“It is definitely a foothold to more diverse patient populations, including seniors,” Farr said. “For startups, I think it sends a signal that Amazon could be an interesting partner if you’re in the world of primary care or consumer health.”
Buying One Medical illustrates how serious Amazon’s healthcare ambitions are, said Paddy Padmanabhan, CEO of Damo Consulting. “We’ve all known about their various experiments in the past,” he said. The nearly $4 billion deal shows that they’re digging in, he added.
Late last year, Amazon launched a central arm to consolidate its pharmacy, care and diagnostics businesses, tapping a former senior vice president of its Amazon Prime business, Neil Lindsay, to lead it. At the time, Amazon said centralizing its healthcare efforts would help the company develop new "customer-centric" ways for patients to access healthcare.
“We think health care is high on the list of experiences that need reinvention,” Lindsay said in a news release. “We want to be one of the companies that helps dramatically improve the healthcare experience over the next several years.
Amazon has been taking a two-pronged approach to healthcare—both partnering with and competing against traditional provider organizations, Padmanabhan said.
“That creates an interesting dichotomy,” he said. “It will be interesting to see how healthcare organizations respond and react to this.”
While Amazon is pushing into healthcare, industry incumbents like hospitals have also been “doubling down” on digital and consumer experience, trying to become more accessible and responsive to patients, Padmanabhan said.
“There’s going to be an interesting convergence of these competitive forces,” Padmanabhan said. “The ones who have the existing infrastructure in healthcare and can get the consumerism piece right—they have a really strong foundation.”
The price Amazon paid for One Medical, while likely lower than what it would have cost last year, led some experts without direct knowledge of the deal to predict there were multiple buyers at the table.
“There have been rumors about a potential One Medical buyout for a few days—maybe even up to two weeks,” said Matt Wolf, a director and senior healthcare analyst at RSM, a healthcare consultancy. “Generally, those numbers come out of a multi-party scenario. Not always of course, but often that is the case.” Wolf said multiple interested parties could “help explain” the higher price Amazon paid for the company.
We will have more on this story as it develops.
Gabriel Perna contributed to this story.