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Retail and technology giant Amazon (Nasdaq: AMZN) last month announced plans to acquire primary care innovator One Medical for an astounding $3.9 billion.
The transaction doesn’t immediately affect senior-focused in-home care providers, but it’s another major stepping stone on the path toward disrupting the current U.S. health care system. What’s more, the deal reflects the ongoing consumerization of health care and steady emergence of nontraditional players, many of which have already revealed their home-based care designs.
“I think the future health care is all about thinking about how you can keep people healthier and deliver better outcomes, with reduced costs,” Erin Ney, an expert associate partner at Bain & Company’s health care practice, told Home Health Care News. “And being able to engage with people in their homes.”
Once finalized, One Medical will give Amazon substantial primary care capabilities to pair with its existing health care assets, which include Amazon Care and an online pharmacy. Additionally, on top of its 188 medical offices and about 790,000 members, One Medical owns Iora Health, which delivers value-based care for older adults enrolled in Medicare Advantage (MA) and alternative payment models.
Amazon hasn’t publicly disclosed plans to cater to the senior market, though these and other reasons suggest doing so certainly makes sense for the Seattle-based company. In this week’s exclusive, members-only HHCN+ update, I examine the broader implications of Amazon’s One Medical move for in-home senior care providers, including:
– The role of nontraditional players in shaping health care’s future
– How consumerization and value-based care are driving change, particular in the primary care space
– Senior care’s vast appeal to a company like Amazon
Amazon and other ‘nontraditional providers’
Four years ago, health care executives picked Amazon as the “disruptor” most likely to shake up the status quo, with other identified companies including Apple (Nasdaq: AAPL), Google (Nasdaq: GOOGL) and Walmart (NYSE: WAL).
Amazon has lived up its disruptor label since, with the launch and expansion of Amazon Care being a prime example of its evolving health care strategy. Amazon Care launched in September 2019 as a hybrid in-person and virtual care model mainly targeting the employer market. As of early 2022, Amazon Care’s in-person services were available in more than 20 cities, with its virtual services available nationwide.
Yet the business originally formed as an online marketplace for books isn’t the only nontraditional player making waves in America’s $4.1 trillion health care sector. Numerous disruptors with the capabilities of redefining in-home senior care have stepped up since 2018, in fact, and they can be categorized into three main groups:
1. Retailers
In addition to Amazon, Walgreens Boots Alliance (Nasdaq: WBA), CVS Health (NYSE: CVS), Best Buy (NYSE: BBY) and Walmart have all invested in their health care strategies. Walgreens has arguably been the most aggressive in the area of senior-focused in-home care, securing sizable stakes in VillageMD and CareCentrix.
2. Payers
Although their motives are different, payers have similarly worked to reshape health care by acquiring, partnering or building health care services of their own. UnitedHealth Group’s (NYSE: UNH) Optum is attempting to close its $5.4 billion purchase of LHC Group (Nasdaq: LHCG), pairing the home health and hospice leader with its existing assets naviHealth, Landmark Health and Refresh Mental Health. Meanwhile, Humana (NYSE: HUM) has methodically created a whole new segment called “CenterWell,” which includes home health and senior-focused primary care services, as well as pharmacy services. Further examples include Elevance Health (NYSE: ELV) and SCAN Health Plan.
3. Advanced primary care providers
Primary care is the linchpin of health care, and there are plenty of advanced primary care providers making their mark on senior care as well. Humana’s CenterWell Senior Primary Care, a joint venture with Welsh, Carson, Anderson & Stowe (WCAS), dually fits under this category, as does VillageMD. There’s also, of course, ChenMed, Oak Street Health and groups such as CareMax (Nasdaq: CMAX), an MA organization with a full complement of health and wellness services for seniors.
Ney, who in addition to her role at Bain & Company is an internal medicine physician with a primary care background, described these three nontraditional-players categories in a recently released research brief. What they all share in common: a shift from a generalist approach to a population-specific approach.
“Unlike traditional providers, who have a very heterogeneous patient and payer population, the newer, more disruptive players, those nontraditional players, … they are really coming at this with a population-focused approach,” Ney told HHCN. “There’s the senior-focused group and the providers there – the Oak Streets, the Ioras and the ChenMeds of the world. We’re starting to see more interest in the Medicaid-focused population, with Cityblock being an example. And then there’s the major providers who are really honing in on the employer population.”
By 2030, 30% of primary care could be delivered by nontraditional providers, Bain estimates. In other words, with greater frequency, retailers such as Amazon, payers such as Humana and advanced primary care providers such as Oak Street will be the ones directing their patients toward in-home care.
The consumerization of health care and taking risk
There are several reasons why nontraditional players are getting more involved in health care that in-home senior care providers should be aware of.
On their end, retailers are looking to bring their skill set and ability to deliver streamlined experiences for consumers into health care. Finding, coordinating and receiving care in the U.S. is often a stressful endeavor – and retailers believe they can simply “do it better.”
“Retail players think that they can really deliver on the convenience part and the customer-experience part,” Ney said.
Making health care easier, in part, means changing how and where individuals receive services. As Amazon and other retailers build around their primary care capabilities, they will likely turn to home health care and non-medical home care services, especially those with a “concierge” mindset. This is yet another reason why service diversification is so important for the home-based care providers of today.
“‘Home’ is going to be increasingly important,” Ney continued. “We’ve already started to see it.”
Many in-home care operators are themselves working to bring consumerism to senior care, knowing that baby boomers, more than previous generations, demand a streamlined, personalized exchange.
Payers, on the other hand, are motivated by a desire to improve health outcomes and bend the cost curve.
By building around the Kindred at Home assets it acquired, social determinants of health and CenterWell Senior Primary Care, Humana has been able to lower the hospitalization rates of its MA members and produce more “healthy days at home.” UnitedHealth Group believes it can likewise boost quality and efficiency by having LHC Group under its Optum arm.
“The bringing together of LHC within the overall Optum organization is really important to us, and we’re very committed to that transaction,” UnitedHealth Group CEO Andrew Witty said last month. “We believe it really is going to be a significant enhancement of the quality of care that can be delivered. And we think it can really contribute towards improved value-based delivery for patients.”
A 2019 study found that patients who received home health care in-home immediately after going to the emergency room had a total 90-day cost of $13,012, compared to $20,325 for patients who were treated in the hospital.
A 2017 study found that patients who received home health care after a hospital discharge saved the U.S. health care system about $6,500 over the course of a year.
More recently, a new Guidehouse analysis found that hospitals could generate nearly $4 million in annual value by providing improved care experiences through hospital-at-home models.
“There’s an increased recognition from payers that to really bend the curve on health care costs and better manage medical costs, you have to have meaningful reach and care delivery [capabilities],” Ney noted.
Population-specific approaches
Nontraditional players such as Amazon share multiple commonalities, including their focus on the home. Another commonality is their focus on specific populations, as Ney previously explained.
With Amazon and One Medical, it’s too early to say whether they’ll target the employer market – or perhaps turn their attention to serving older adults. Given One Medical’s control of Iora, the latter seems more than possible.
“Will they build it out more, recognizing that where there is a high degree of innovation and potential financial upside in the Medicare Advantage space, which is where Iora is focused?” Ney said. “Will they focus there? Or will it be an employer and consumer push more? It’s all up in the air right now.”
In 2021, there were 54 million adults 65 and older living in the U.S., according to the Census Bureau. That accounted for about 16.5% of the nation’s total population. Additionally, by 2030, all baby boomers will be 65 years old or older.
And while the sheer size of this group makes it a worthwhile opportunity for a company like Amazon, seniors also bring an immense amount of buying power to the table. The “mature market” last year had an estimated $1.6 trillion in spending power and a net worth that was almost twice the U.S. average.
By the numbers: One Medical
One Medical released its financial results for the second quarter of 2022 on Wednesday. Here are a few key highlights:
– Total membership count as of quarter-end was 790,000, compared to 621,000 in Q2 2021 (a 27% increase).
– Net revenue was $255.8 million, compared to $120.4 million a year ago (a 112% increase).
– Loss from operations was $97.4 million, or 38% of net revenue; net loss was $93.8 million, or 37% of net revenue.
