Announcing our $225M Series D funding round led by Goldman Sachs, Viking Global, and BlackRock. Learn More.

Toggle Menu

Home/Blog/M&A

Acquisition Note: What Does ONEM Bring to AMZN?

Austin Moorhead | July 21, 2022

Amazon (AMZN) has long been feared in the telehealth market due to their obvious interest (PillPack, the failed healthcare initiative with J.P. Morgan and Berkshire Hathaway, Amazon Care, etc.) and potent capabilities. What is it about ONEM that caught AMZN’s attention? We try to answer that below using excerpts from expert call transcripts. These transcripts are worth the full read: access the Stream by AlphaSense library free for 14 days.

AMZN (Amazon) to Acquire ONEM (One Medical Group)

You could tell a story about ONEM like this. They started with a mission to improve patient outcomes by increasing access to preventative care, which would also reduce health insurance costs for employers. Those missions are contrary to the incentives of the healthcare system, which wants more appointments at higher prices, but ONEM effectively threaded that needle to reach individual doctors and patients, who nearly universally love the service. They should have been on their way to glory, but the January 2020 IPO followed by the pandemic severely impacted employee morale and company culture, ultimately leading to their (expected) acquisition by AMZN. Here’s that story according to former executives of ONEM:

ONEM had to simultaneously serve three groups with conflicting incentives

  1. They’re trying to say to employers, “Hey, we’re going to lower your cost of care. It’s worth it for you to pay $100 per employee because it’s going to be not only convenient for your employees to get in to see us, and they can get back to their desk faster, but they’re actually going to have better health care outcomes. We don’t refer as much and it’s going to be cheaper for you in the long run.”
  2. They’re also trying to say to the patient, “We’re going to make this convenient for you. We’re not going to bring you in if you don’t need to be brought in. Hop on the phone with us if you prefer to be on the phone and if you need a referral, you’re going to go wherever you want.” 
  3. At the same time, they’re saying to the health system, because of their economic arrangements with the health system, they’re saying “We are actually going to generate a whole bunch of office visits because people are very engaged with us.” It benefits health systems when One Medical actually brings folks through the door. While we don’t have to send referrals to you, basically you’re going to get all of our referrals and if you look at who One Medical’s partnered with: Mt. Sinai, Mass General, Duke, Emory, Ascension those tend to be the highest cost providers in the market so if you want to make Duke happy, you send all of your MRIs to Duke but if you want to make the employers in North Carolina happy, you send all your MRIs to a freestanding imaging center. “

One Medical Group – Vice President, Strategic Partnerships (Prior)

ONEM solved the conflicting incentives by focusing on doctor work-life balance, patient outcomes, and patient growth

That’s why they’re able to pay the 75 percentile. Doctors work four days a week and they see a maximum of 16 patients which is really hard to come by from a provider standpoint

Because they’re moving more to the outcome-based model with payers and then per member per month with hospital systems, they’re doing a great job strategically for how they’re getting reimbursed. If they had stuck to the fee-for-service model, that would have definitely been a problem”

One Medical – Senior Operations Manager (Prior)

ONEM’s service is beloved by employers and patients

“We had really strong retention numbers… we consistently heard from employers that One Medical was their number one benefit and that the fees are not particularly high. We consistently heard time and time again that this is our number one benefit. Employers, when they did the surveys, it would come back as, “Keep One Medical.

One Medical – Director of Client Success (Prior)

ONEM’s post-IPO retention plan caused a VP/Director level exodus

“[Post-IPO] there was no real attempt at retention. Basically, everyone was fully vested. They’d had their liquidity event. The cost-cutting was done on the back of vice president level, director level, and that just didn’t go over well. They were betting that they would have been fine or that folks won’t dare leave, but they happened to time it in one of the hottest job markets of all times and I think paid the price.”

One Medical Group – Vice President, Strategic Partnerships (Prior)

Public knowledge of ONEM IPO payouts, Covid, and “entitled” patients destroyed the morale of frontline workers

“On the employee side. The Frontline workers, these folks, called admins, are making just absolute crap wages. They’re making the equivalent of $15 or $16 an hour while living in downtown Chicago or downtown Manhattan and putting up with a very demanding, one might say, “Entitled patients.” They’re taking a lot of [guff] for $16 an hour and they’re burnt and they’re on the front lines of COVID. They didn’t really have much in the way of stock. They saw what [senior executives] made in the IPO, they can read. That made a huge dent in the culture.”

One Medical Group – Vice President, Strategic Partnerships (Prior)

Should We Have Seen this Coming?

When asked if Amazon should be considered a real player in telehealth, the former Senior Manager of Inside Sales Operations at ONEM said, 

“[Amazon] won’t move the needle [until they] look at One Medical and other competitors.”

The former Assistant Vice President, Global Benefits at AT&T highlighted two key gaps in the Amazon Care offering:

“[Amazon Care] is too geographically sparse. They need to deepen their navigation, deepen their geographic footprint, integrate with their Amazon Pharmacy side of the house, have a more curated network of potentially point solutions, more clinical navigation like expert opinion than they do today. I don’t think they’re there yet, but to me, geography is the biggest gap.

I don’t think that the solution they’re selling, whether they’re pitching it or not, is some big change for health care delivery at the front-end yet. I think the buyers on the employer’s side are just trying to buy a better primary care decision support telemedicine experience at this point. They’re not trying to say buy a health plan alternative.”

Those are just the first two clues I found in a cursory search. Imagine what you’ll find when you access the full library.

So, Is this Going to Work?

Give us a few weeks, and we’ll circle back with what the experts have to say about the acquisition. If you can’t wait, then sign up for a 14-day free trial here and set an alert for ONEM.

×

Request your free trial

Submit the form below and we will send you a trial login within an hour.

×

Become an expert

One of our specialists will contact you within the next 24 hours.