July 14, 2024


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Amazon to shut down Amazon Care at year’s end

Amazon to shut down Amazon Care at year’s end

Amazon plans to shut down Amazon Care, the medical care service it sells to employer health plans, at the end of the year.
“We’ve determined that Amazon Care isn’t the right long-term solution for our enterprise customers, and have decided that we will no longer offer Amazon Care after December 31, 2022,” Neil Lindsay, senior vice president of Amazon Health Services, wrote in a Wednesday email to Amazon Health Services employees. Amazon shared the email with Modern Healthcare.

Amazon Care isn’t a “complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term,” he wrote.

Amazon launched Amazon Care as a virtual health clinic for its employees enrolled in an Amazon health insurance plan in 2019, and signed its first employer-customers, including Hilton and Silicon Labs, last year.

The announcement is an abrupt about-face for Amazon. As recently as February, Amazon Care said it would expand its in-person services to 20 cities in 2022. The program’s virtual services are available in all 50 states, according to its website.

“I’m surprised,” said Paddy Padmanabhan, CEO of Damo Consulting. “But I can think of a lot of reasons why they would do that.”

Primary-care is a difficult business, and a “loss leader” for many healthcare organizations, he said. Hospitals don’t make money on providing primary-care services, but it serves as an entry point for patients in need of more complex care.

Amazon last month made a massive investment into its healthcare ambitions, announcing plans to acquire primary-care provider One Medical for $3.9 billion. Amazon Health Services also comprises Amazon’s diagnostics business and pharmacy service, which includes an online pharmacy it launched in 2020 that grew out of the company’s acquisition of PillPack.

And earlier this week, Amazon was identified as one of several companies reportedly bidding for Signify Health, a digital health company that specializes in at-home healthcare evaluations.

Padmanabhan said he’s watching to see if Amazon decides to exit the delivery of primary care—and if that means the offer for One Medical will get pulled—or whether Amazon will use One Medical as the foundation for its primary-care efforts.

Amazon did not immediately respond to a request for comment on whether the Amazon Care decision affects its plans to acquire One Medical.

In his email to employees, Lindsay said he still believes healthcare is “ripe for reinvention,” and the Amazon team will play a role in improving healthcare experience.

“Our work building Amazon Care has deepened our understanding of what’s needed long-term to deliver meaningful health care solutions for enterprise and individual customers,” he wrote. “This decision wasn’t made lightly and only became clear after many months of careful consideration.” 

Amazon is likely realizing it’s easier to sell to employers with an established brand like One Medical, said Jacob Effron, principal at venture capital firm Redpoint Ventures. He said Amazon Care and One Medical overlapped, so having both wasn’t necessary.

“When you’re selling to employers, you can point to dozens and dozens of other employers that are using One Medical,” Effron said. “That’s why it makes sense to consolidate the employer side around it.”

It’s possible Amazon determined Amazon Care couldn’t get “big enough, fast enough,” said Tom Kiesau, who leads the digital transformation practice at the Chartis Group. Focusing on One Medical could give Amazon a level of scale it hadn’t been able to reach with Amazon Care, without the confusion of trying to integrate the two businesses.

Others said Amazon Care’s shutdown likely wasn’t tied to its plans for One Medical.

“The deal for One Medical isn’t even closed yet so I would bet against that as a thesis,” said Dr. Justin Norden, partner at venture capital firm GSR Ventures. “It’s more likely that Amazon Care wasn’t working and someone just decided to pull the plug.”

Big tech companies are going to continue to struggle in healthcare, even as they make acquisitions, because they face challenges with the industry’s complex regulatory environment, low-margin businesses and hyperlocal markets.

“We’re still far away from this perfect, big tech-led healthcare system,” he said. “It’s clear Amazon hasn’t figured this out yet.”

Amazon’s decision could also be informed by patients’ declining use of telehealth since the early days of the COVID-19 pandemic, said Nathan Ray, a partner in consultancy West Monroe’s healthcare and life sciences practice. Amazon Care had highlighted its virtual care offerings, which were offered in more states than its in-person services.

“They’re just shutting down this experiment,” he said. “I think it’s clear that Amazon is buying in areas they think are interesting and novel—and that they don’t exactly have a final strategy of how all of these pieces come together.”