Perspective on Amazon’s Purchase of OneMedical

Today’s guest post is written by Greg Judd, President at Benefits Information Group.

Amazon’s recent purchase of OneMedical is not generically about primary care – or even direct primary care. It’s about Medicare. Specifically, Medicare Advantage.

Just about this time last year, OneMedical bought – for $2.1 billion – Rushika Fernandopulle’s Iora Health, a care provider focused, yes, on primary care – but on primary care for Medicare beneficiaries, and with a stated intention to get into the Medicare Advantage plan business.

$2.1 billion is just over half the stated value of Amazon’s $3.9 billion all-cash OneMedical purchase, one of the largest in Amazon’s history. And yet its Medicare component is scarcely mentioned in most of the reporting on this big Amazon deal. Most of the time OneMedical is blandly described as “a membership-based primary care service that promises customers “24/7 access to virtual care.”, and the acquisition as providing Amazon “access to physical health clinics and “payer and hospital system relationships.”

Iora/OneMedical’s plan for building out a Medicare Advantage business seems a much more tangible near-term-monetizable component of the deal, and Amazon’s secrecy about that aspect of the acquisition only reinforces my confidence in this hunch.

MA plans now enable members to buy up to $25-$50 per quarter to buy all the pharmacy sundries you desire, typically through a pharmacy partner (looking at you, CVS/Aetna),  ordering & fulfillment is typically more clunky & uncertain. Imagine what Amazon can/may do with that one small element of typical Medicare Advantage plan design — essentially harvesting hundreds per Medicare customer in “free” annual revenue, at no out-of-pocket cost to those Medicare beneficiaries & courtesy of the federal government (CMS/Medicare).

Another revenue extraction avenue: offering an extra-generous, market-leading Medicare Part B premium “giveback”. One of Broadway Joe’s most alluring pitches, the giveback option has actually gotten whittled down in most places to $50-$60/month. What would keep Amazon from doubling that paltry sum as a customer acquisition/retention outlay, simultaneously bombarding that captive audience with news of great deals available at Amazon to squander that “free” money on?

Tie these into their other Amazon purchases to amplify the benefits of their purchasing, and, well, you can imagine the possibilities better than I can.