Dr. Alexa? Do I Have Cancer?

Amazon opens new round in a long-term bid to disrupt a huge industry.

Amazon.com  (AMZN) – Get Amazon.com Inc. Report has a good problem.

The company is huge and diversified, between its online retail, brick-and-mortar groceries and tremendous cloud services businesses.

The problem is, if it wants to grow meaningfully bigger, it needs to tackle really large opportunities.

For several years now, it’s been going after healthcare. But it’s seen limited success.

Haven, its healthcare partnership with Alphabet’s  (GOOGL) – Get Alphabet Inc. Report Google, and Berkshire Hathaway  (BRK.A) – Get Berkshire Hathaway Inc. Report has already faltered, as TheStreet’s Managing Editor Daniel Kline noted in February.

And its Amazon Care service, which offers online health consultations 24 hours a day to members, has grown slowly since its launch in 2019. However, it’s also building up a diagnostics and pharmacy business as well.

Meanwhile, other players like CVS  (CVS) – Get CVS Health Corporation Report and Walgreens  (WAG)  are spending lots to ramp up their own healthcare services offerings.

Healthcare Is Not Consumer-Friendly

It’s easy to see why technology companies think there’s an opportunity in healthcare, given that the current U.S. delivery system stinks, to put it nicely.

Long waits for appointments, completely obscure billing and benefits information, battles to obtain coverage, even travel to and from medical offices to get care all beg for improvement.

But, as Kline pointed out, much of that is in the hands of highly profitable insurance companies with little to no incentive to alter the fundamentals of the industry.

That may be about to change, however.

Amazon announced this week that it’s acquiring One Medical for $3.9 billion including debt.

One Medical, based in San Francisco, offers a hybrid of in-person care in offices across the country combined with virtual-care services. That is supposed to make it easier to schedule appointments, renew prescriptions, access up-to-date health records etc.

One Medical also is a membership-style practice, where patients pay an annual membership fee, typically $199 a year, and receive such benefits as 24/7 on-demand video chat, in-app booking of same-day and next-day appointments, and other services associated with concierge medical operations. 

“We want to be one of the companies that helps dramatically improve the healthcare experience over the next several years,” said Neil Lindsay, SVP of Amazon Health Services, in a statement. “We believe we can and will help more people get better care, when and how they need it. We look forward to delivering on that long-term mission.”

Michael Abrams, managing partner of Numerof & Associates, says there’s a good chance they can.

“Amazon has been strategic in the spaces they move into and the assets they invest in, especially healthcare,” Abrams said in e-mailed comments. “Acquiring One Medical will dramatically expand their brick-and-mortar footprint, which they were planning to do in any case, so this will accelerate their growth.”

Amazon stock added 1.52% Thursday to close at $124.63.

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