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Amazon’s Acquisition of One Medical Brings Needed Innovation to Primary Care

Amazon’s Acquisition of One Medical Brings Needed Innovation to Primary Care

August 2, 2022

An apple a day might be one way to keep the doctor away, but the use of artificial intelligence (AI) might be better. Amazon’s proposed acquisition of One Medical has the potential to bring needed innovation to the provision of primary care, yet critics are needlessly focused on the potential for harm. For example, Barry Lynn from Open Markets Institute claims that “the deal will expand Amazon’s ability to collect the most intimate and personal of information about individuals, in order to track, target, manipulate, and exploit people in ever more intrusive ways.” Illustrating concerns about potential data misuse, Senator Josh Hawley (R-MO) asked in a letter to the Federal Trade Commission (FTC) “if an individual is diagnosed with high blood pressure by a One Medical doctor, will he later be advertised over-the-counter blood pressure medications whenever he shops at Whole Foods Market?”

The Health Insurance Portability and Accountability Act of 1996, better known as HIPAA, prevents health care providers and health insurance plans from sharing protected health information without a patient’s consent. Despite the protections of HIPAA, Senator Hawley believes that after the acquisition, Amazon will exploit loopholes in HIPAA to misuse patient data. What the senator and others miss, is that Amazon could do this today. Amazon Care, which provides primary and urgent care services, is connected to around 75 percent of the U.S. population through a health information exchange. There is no reason to believe that Amazon’s acquisition of One Medical changes its incentives to break the law and violate HIPAA.

In addition to concerns about the misuse of data, critics also raise general concerns about Amazon’s size. Senator Elizabeth Warren (D-MA) tweeted that “Amazon already has too much economic power” and Krista Brown from the American Economic Liberties Project claims that the acquisition “will entrench Amazon’s growing presence in the health care industry, undermining competition.”

President Biden makes clear in his executive order on competition that increasing competition in health care is a priority for his administration. A dedicated listening forum on health care demonstrates that it is also a priority for the FTC and the Department of Justice as they seek to revise the horizontal merger guidelines. Instead of focusing on Amazon’s size and economic power, neither of which are significant in health care, the focus should be on how a company relentlessly focused on consumers has the potential to inject needed competition and innovation into the provision of basic medical care.

But beyond the immediate competitive impact, this acquisition also has the potential to improve the quality of health care through Amazon’s expertise in AI and machine learning. The use of AI in health care settings can improve patient outcomes and reduce the cost of care. For example, AI algorithms that use the structured data from electronic medical records (EHRs) along with natural language processing of clinical notes vastly improve the early diagnosis of sepsis relative to relying on physician diagnosis alone. This is important as sepsis is the leading cause of death in U.S. hospitals and the treatment of sepsis is highly time-sensitive.

Amazon invests heavily in R&D which it refers to as “Technology and Content” in reports to the Securities and Exchange Commission. In 2021, Amazon spent over $56 billion on R&D—an increase of 31 percent relative to its R&D spending in 2020. And, in 2020, its R&D spending was greater than any other U.S. company and was 55 percent greater than R&D spending by Google’s parent company Alphabet. AI and machine learning are an important part of Amazon’s R&D. In 2020, Amazon was granted 2,224 patents of which the majority “were in advanced technologies such as artificial intelligence (AI), machine learning, and computer vision.” Amazon researchers contribute to AI and machine learning academic conferences and produce award-winning research. Medical researchers already rely on the AI-related data, tools, and resources provided by Amazon. With Amazon’s vast AI expertise, its acquisition of One Medical would allow the AI tools applied in hospital settings to also be applied to primary care EHRs. As a result, physicians would be better able to predict disease risk and preventable hospitalizations would be reduced through earlier interventions.

Amazon potentially brings two critical ingredients to the U.S. health care system: innovation and scale. When it comes to innovation, there has been little, certainly on the business model side. To be sure, physicians have better equipment than a half-century ago, but in terms of deeper and broader innovation there is little that has changed. And when it comes to scale, apart from some models such as Kaiser and private equity roll-ups of physician practices, most physician offices are small, craft-like operations, lacking economies of scale and the ability to generate broad-based learning. As Harvard Business School Strategy Professor Michael Porter writes, “... we must replace today’s fragmented system, in which every local provider offers a full range of services, with a system in which services for particular medical conditions are concentrated in health-delivery organizations and in the right locations to deliver high-value care.” He goes on to note that “concentrating volume is essential if integrated practice units are to form and measurement is to improve.”

Amazon has been successful because it been able to combine three things that business strategists said could not be done—low costs, high quality, and customization. Current physician-based health care has high costs, variable quality, and customization. The “Amazonization” of health care to get more of all three could be really good. Instead of unfairly criticizing Amazon, we should cheer this acquisition’s potential for bringing needed innovation and scale to the provision of basic medical care. Amazon’s acquisition of One Medical will not only increase competition but also improve the quality of care. Beats eating more apples.

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