Opinion | What Led to Amazon’s Big Bet on Primary Care?

The news of Amazon’s acquisition of One Medical captured mainstream media attention, shaking the healthcare and tech industries along the way.

This deal is perceived to be so transcendent and disruptive that reaction to the news is still reverberating. There has been a flurry of commentary on what Amazon intends to do with One Medical, whether or not Amazon’s involvement is a good thing, and what the deal means for the future of healthcare.

But this deal marks something bigger. It is part of a more than a decade-long story of primary care in the U.S. To fully grasp the significance of the deal, we have to take a step back and adhere to the Confucian brilliance of Ferris Bueller.

If you don’t stop and look around once in a while, you could miss it.

Recall the state of healthcare — the zeitgeist — around 2008. At this time, experts were sounding the alarm on the lack of primary and preventive care in the U.S., particularly in the context of the emphasis on specialty care and soaring healthcare costs and insurance premiums.

There was a growing belief that investment in primary and preventive care would mitigate downstream costs. This sentiment was central to Barack Obama’s successful presidential campaign and grew as Obama took office, ultimately culminating in the passage of the Affordable Care Act (ACA) in 2010.

Increased access to primary care and encouraging preventive and wellness services were two key tenets of the ACA. The landmark legislation committed an unprecedented investment in primary care, aiming to increase access by expanding insurance coverage and increasing the supply of primary care providers (via increased primary care compensation and subsidized training costs).

In the decade since the passage of the ACA, there have been numerous policy initiatives attempting to incentivize investment in primary care. This era has largely been marked by an accelerated trend toward value-based care models, often involving risk sharing by payers or providers.

The first Accountable Care Organizations (ACO) began under Medicare in 2012. Two years later, the Medicare Access and CHIP Reauthorization Act (MACRA) was passed in 2015, leading to the establishment of the Merit-Based Incentive Payment System (MIPS) in 2017. Though these models are applied to specialties beyond primary care, investment in primary care is foundational to improving patient outcomes (and limiting patient costs).

These policy initiatives have dangled a carrot for investors looking to capitalize on the new primary care-centric incentives. Health systems see there is money to be made by buying private primary care practices, and have further consolidated by bringing disparate primary care groups under their increasingly large system umbrella.

From 2010 to 2016, the fraction of primary care physicians working in a hospital or health system owned practice increased from 28% to 44%. But health systems are not the only ones seeking the rewards of primary care.

An array of nouveau primary care conglomerates now exist that strive to capitalize on the policy incentives and improve the delivery and profitability of primary care. One Medical, founded in 2007, is one such venture. Others include Oak Street Health (founded in 2012), VillageMD (founded in 2013), Galileo (founded in 2014), and Firefly Health (founded in 2017).

These startups, among a host of others not listed, were created and have found success because of the value that exists in primary care. Who knows if these startups would have even been founded, let alone succeeded, without the evolution of federal policy in the 2010s.

The Amazon-One Medical deal is the latest frontier in this journey toward revolutionizing primary care. In some ways, it marks the summit of the goals of the ACA and other early legislation. Primary care is now incentivized enough for blue chip behemoths like Amazon to make One Medical its third-largest acquisition of all time. This deal represents one of the most successful companies in history placing a nearly $4 billion bet on what has historically been one of the least lucrative areas of medicine. It deserves the attention.

Admittedly, there are nuances as to the precise assets Amazon is valuing at this sum. The “data” of over 700,000 patients? Primary care market share to crowd out Google and others? Whatever it may include, Amazon sees $4 billion worth of value in this chunk of the American primary care market. And if that is indeed Amazon’s valuation, I’m inclined to believe there is truly money to be made there.

It remains to be seen whether outside investment in primary care will continue at the same magnitude. It’s possible that Google resurrects its healthcare ambitions and looks to match Amazon’s big move. Or perhaps other Big Tech titans will decide to take the plunge.

Private equity has been quietly getting in the game, too. From 2010 to 2020, private investor-backed deals related to primary care organizations have increased in number from two to 46, with the total investment increasing from $15 million to $3.83 billion. Simply put, companies renowned for making money are investing in primary care. Primary care has been sufficiently incentivized. The legislation has worked.

The question now is whether the policy levers that incited this investment need to be adjusted. With consolidated health systems, private equity, and Amazon reaping the financial rewards, policy may need to be reworked with the goal of directing resources toward the expansion of primary care access, rather than the pure profitability of it. There continues to be a primary care physician shortage. Even though primary care may be more profitable now, individual physicians aren’t able to reap the financial benefits as the owners of the practices are the ones taking and capitalizing on the risks.

Some predict there will be a reversal in trend, with physicians trending back toward privatization and reclaiming more ownership. This may very well be the next area for policy: transferring the now lucrative incentives to physicians as a means of primary care recruitment.

In truth, these things are already happening. For example, the American Rescue Plan has $10 million earmarked specifically to fund residency programs in rural areas with primary care shortages. More efforts will certainly be made to address the shortages. This primary care journey will continue for as long as health outcomes remain substandard and costs remain high.

The Amazon-One Medical acquisition is but the latest development in the arc of this primary care story — a product of the policy and investment that has come before. You have to slow down and look back to see it, otherwise you might miss it.

Logan Cho is a medical student at the Icahn School of Medicine and an advisory board member of MedPage Today‘s “The Lab.”