Amazon Poised to Disrupt Virtual Care For a Niche Few

WITH ITS CONSUMER-CENTRIC BUSINESS MODEL, AMAZON COULD DISRUPT VIRTUAL CARE

The technology giant has become nearly synonymous with convenience, with users ordering goods at the click of a button and having their purchased items show up at their doorsteps within two days. During the COVID-19 pandemic, dependence on Amazon grew, sending its profits skyrocketing.

This association with convenience will benefit the company as it makes further inroads into the healthcare field, especially as consumers' out-of-pocket healthcare costs increase.

"I suspect that's a big reason why Amazon moved into the space," said Chrissy Farr, a principal at OMERS Ventures, in an email. "When consumers are shielded from cost, there's less of a need for consumer-oriented models. Even a decade ago, few investors believed that consumers would ever pay for healthcare. That's been proven false."

In the press release announcing the One Medical acquisition, Neil Lindsay, senior vice president of Amazon Health Services, said that healthcare "is high on the list of experiences that need reinvention."

The company's expertise in giving consumers what they want will likely be the basis for this reinvention.

"Amazon executives have stressed over and over again to the media that they're a 'customer obsessed' company," Farr said. "What Amazon could do is build a front door for care that navigates people to the right [care] they need – whether it be in person or at home. And hopefully, provide true transparency around price (one of the holy grails for health tech)."

Farr believes that while Amazon will primarily offer healthcare services to those with insurance, it will also provide cash-pay options and help consumers determine the best price point between the two.

"That's effectively what they did with PillPack/Amazon Pharmacy," she said.

Further, because of its Amazon Prime membership service, the company already has a relationship with millions of Americans — approximately 44 percent of the population, according to market research firm Trilliant Health.

"You contrast that with the largest health system in the country, let's use an illustrated example, so take HCA Healthcare," said Sanjula Jain, PhD, senior vice president and chief research officer at Trilliant Health, in a phone interview. "They really — best case scenario —serve about 1 percent of Americans. So just taking that back-of-the-envelope map as one data point, Amazon is very well positioned to disrupt the telehealth market in the sense that they already have a relationship with the consumer."

Not only does this existing relationship bode well for Amazon's virtual care offerings, but there is also a great deal of overlap between the typical Amazon customer and telehealth users, according to Jain.

"… they tend to be commercially insured, they tend to be in the 20 to 30s age range, they tend to be slightly younger, tend to be tied to the employer population," she said.

Thus, Amazon may be able to scale its virtual care services faster than other telehealth companies and compete on price, she added.

WHO WILL BENEFIT MOST FROM AMAZON'S GROWING VIRTUAL CARE PRESENCE

As Amazon expands its virtual care offerings, some consumers will benefit more than others.

When looking at Amazon's acquisitions and playbook, it appears that the company is targeting primary care and low acuity services for a specific set of Americans, according to Jain.

"They're trying to package, for lack of a better word, a one-stop shop for a particular segment of the population," she said. "We're not talking about high acuity needs here; we're talking about people who are looking for more shoppable type healthcare services — more commodity/good in the healthcare market."

Amazon has also been strategic in expanding its virtual care services. The residents in the markets that Amazon has chosen to launch its services — large urban areas like Los Angeles or Seattle — tend to be extensive users of telehealth.  

Research by Trilliant Health into the five psychographic profiles of consumers shows that the residents of these markets mostly fall into two profiles, called "willful endurers" and "self-achievers," which are also the profiles that are more likely to use telehealth. Willful endurers tend not to focus on future health and are more likely to use urgent care services than consistently engage with primary care. On the other hand, self-achievers are proactive and keep up with their checkups and health screenings.

"So, we already are seeing innately that the markets in which Amazon has a presence have a high proportion of individuals that will naturally have a propensity to want to engage in virtual care," Jain said.

These markets also tend to have a large employer presence, including several Fortune 500 companies.

It is this niche — the commercially insured/employer health plan population who already have good access to healthcare — that Amazon appears to be focused on at the moment, Jain said.

But this leaves a whole swath of the American population out of Amazon's purported "reinvention" of the healthcare experience.

"I hope they do more in rural areas," Farr said. "One Medical is really oriented around urban locales with a lot of density with its clinics. It's hard to imagine true equity if Amazon doesn't scale from there."

Amazon's niche focus may also create opportunities for competitors, like Walmart, that are more focused on building health clinics in rural and suburban areas.

The narrow lens also raises questions about its effects on the utilization of health services and patterns of care delivery.

While Jain believes Amazon will be able to reinvent the healthcare experience for the sub-section of the US population it is focused on, it is unclear how that experience will connect with the broader continuum of care.

"How does that connect to specialty service?" said Jain. "How does that lead to downstream surgical care and referrals to hospitals and health systems? Because Amazon will not be well positioned to tackle that market."

This may result in further fragmentation of care — where people use Amazon for certain services and then go to other facilities and organizations for various other services — which begs the question: what impact will fragmentation have on care quality overall? 

"How are all these experiences and data points about the individual patient or consumer going to be connected to make sure the quality of care being delivered across all their care needs is actually at the right standard that it needs to be, and it's not just [about] a consumer experience," she said.

WHAT AMAZON'S NEXT MOVES COULD BE

Though it is impossible to predict where Amazon will go from here, at least one point is clear: the company believes that while telehealth is here to stay, it cannot fully replace in-person care.

Along with recently expanding its virtual care service to new businesses, Amazon announced plans to extend in-person care services to 20 new cities in 2022. Even the One Medical acquisition comes with a sizeable number of in-person offices.

"I think it's also a recognition that not all care can be administered virtually," Farr said.

With this investment in hybrid models of care, Farr thinks that Amazon may look at care navigation in the near future "to ensure that patients are getting the right level of care they need in the most convenient manner – and at the right price."