Amazon buys San Francisco-based One Medical for $3.9 billion; plans to reinvent heath care "experience"
SAN FRANCISCO -- Amazon announced Thursday it will acquire One Medical -- a group of primary care clinics across the U.S. available through membership -- for $3.9 Billion signaling to industry experts the company hopes to disrupt the sector.
"We think health care is high on the list of experiences that need reinvention," said Neil Lindsay, senior vice president of Amazon Health Services, in a news release. "We see lots of opportunity to both improve the quality of the experience and give people back valuable time in their days,"
Amazon will acquire San Francisco-based One Medical for $18 per share in an all-cash transaction, the news release explained. Completion of the transaction is subject to customary closing conditions, including approval by One Medical's shareholders and regulatory approval.
"The opportunity to transform health care and improve outcomes by combining One Medical's human-centered and technology-powered model and exceptional team with Amazon's customer obsession, history of invention, and willingness to invest in the long-term is so exciting," said Amir Dan Rubin, One Medical CEO in the news release. He will remain CEO after the deal is complete.
This acquisition is one of many Amazon has pursued over the past several years including buying Whole Foods. That move helped the company to expand its presence in the grocery business, beyond what customers can experience inside Whole Foods stores.
"This is potentially a very important deal," said Robert Chapman Wood, a professor of strategic management at SJSU. "Amazon is looking at the other parts of the economy it can make a real contribution."
Professor Wood says no one has transformed health care in a way like players in the grocery industry had already started to change that business when Amazon formally got into that sector. He says this move not only helps it compete in a field that would benefit from innovation but also gives it more access to businesses and customers looking for high quality service.
"The medical system has much more inefficiency in it than the grocery system," Wood told KPIX 5 on Thursday. "There's a lot of people who have the sense that health care could be better managed than it is now."
While consolidation usually can threaten competition, he does not see that being the case since Amazon is a new player in this field. Other experts agree the initial impact will be limited, focused mainly on those already using One Medical or able to afford their services.
"This is certainly the healthy and wealthy end of the health care marketplace," said Kristof Stremikis, the director of market analysis and insight for the California Health Care Foundation. "They are not an in-network provider for most Medi-Cal plans."
Stremikis points out that one third of Californians use Medi-Cal and that this deal is worth only a fraction of what is spent in the state for health care, giving the sense that it is just a slice of the industry. He says access, quality, and cost won't change in California from this merger. But he does see the potential for Amazon to create improvements in convenience for the sector. The long-term impact will take more time to understand as it's still early to know what Amazon will do next in health care.
"There are fundamental problems with health care, and we need to increase access for everybody to the health care system and we need to improve quality for everyone," he told KPIX 5 on Thursday.
In morning trading, shares of 1Life Healthcare surged 68% to $17.13.
