With the new outsourced virtual care model, will the third time be the charm for Amazon?  - MedCity News

After announcing his plan to turn off Amazon Care, Amazon is taking a different route through its new Amazon Clinic model. Instead of building its own provider network and making it available to employers, as it did with Amazon CareAmazon Clinic is direct-to-consumer and outsources care to third-party providers.

And that’s likely to be the more successful direction for the retailer, one expert said.

“That’s what Amazon is really good at: the consumer experience combined with logistics,” said Daniel Grosslight, senior health technology research analyst at Citi. “It’s a solution that’s pretty easy to set up. They don’t actually build the network themselves, they just provide a marketplace. So they should be able to do that pretty well. Whereas with Amazon Care, I’ve always been very skeptical about it because it’s so difficult to scale a national network of providers.”

Amazon Clinic that was revealed Tuesday is a virtual service for more than 20 common health conditions, including allergies, acne and hair loss. Those who want to use it start by choosing their state and choosing a provider. After completing a questionnaire, clients connect with their clinician through a messaging-based portal, where they will receive a treatment plan and any necessary prescriptions. It does not currently accept insurance, but users pay about $30-$40 per consultation. Amazon Clinic has launched in 32 states and is likely to expand in the future, according to a news release.

The benefit of the whole model is the cost, Grosslight said.

“It’s a very simple way to do it, and that’s what Amazon does with other third parties on their website, third-party sellers,” he said in an interview. “It’s not Amazon selling direct, it’s a third party selling direct… It’s very difficult to recruit suppliers right now, it goes from very high level to nurses. So this is a way for Amazon to grow quickly without spending on suppliers.

Another industry expert agrees that this outsourcing model is the better and cheaper option for the Seattle-based Amazon.

“It’s probably less expensive and more efficient for Amazon to build a telehealth platform — something the retailer is already good at, distribution — rather than finding the providers and building its own virtual care model (something with which have twice fought arising from Haven and then more recently Amazon Care),” Blake Madden, founder of the industry newsletter Hospitalology, he wrote in an email. “Pretty great telehealth providers already exist in the wild in 2022. By outsourcing care delivery functions, Amazon can focus more on the consumer side of the Amazon Clinic model, including the obvious synergy with Amazon Pharmacy and potential downstream revenue from selling health and wellness products.’

For providers, partnering with retail companies allows them to expand, said Ashraf Shehata, partner and industry leader for health plan consulting at KPMG. He declined to talk about Amazon specifically, but discussed retail companies in general.

“The problem on the provider side is that it’s hard to scale across the country when you’re talking about doing something in 30, 40, 50 states,” he said in an interview. “That’s the beauty of the retail model, it has national scale and even international scale in some cases.”

The Amazon Clinic news comes after the company announced plans to acquire primary care provider One medical, which is likely why Amazon chose to shut down Amazon Care, as they are very similar, Grosslight speculated. The retail giant is also working Amazon Pharmacy, which delivers recipes to Prime members in two days. Amazon Clinic is a way for the company to drive even more consumers to its pharmacy, Grosslight said.

This will put the Seattle-based online retailer in direct competition with companies like His and Hers and Roalbeit with a slightly different pricing setup, Madden wrote in his newsletter Thursday.

It’s remarkable that Amazon charges for the consultation, given that Ro and Hims seem to provide it for free, but I would speculate that this pricing strategy could be a way to attract and pay suppliers more,” he said.

However, Grosslight doesn’t think Hims & Hers and Ro need to worry. While on the surface they look similar to Amazon Clinic, they actually have different models.

“At a basic level, it’s very similar, meaning you see a provider asynchronously and get prescriptions filled and mailed directly to you,” Grosslight said. “But with Hims and Hers, it’s a highly branded product, it’s customizable through their compounding pharmacy for many of their prescriptions in dermatology and even hair… I don’t think Hims and the other highly branded direct-to-consumer, virtual healthcare/pharmacies have a lot to worry about.’

While Amazon Clinic may prove financially successful given its initial focus, it likely won’t bring about lasting change in the industry.

“Centralizing and simplifying access to health care is essential to addressing health disparities,” Jack Stockert, Managing Director of Health2047, he wrote in an email. “Amazon Clinic has the opportunity to address fundamental issues in healthcare such as access, outcomes and costs. However, the types of conditions it chose to focus on initially are not necessarily significant drivers of health care costs, but rather issues of convenience, and are therefore unlikely to significantly change the way health care works or to really affect the actual prevalence of disease, which drives the majority of health care costs. At least not in the short term.”

Photo: Flickr, Cerillion Skyline

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