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One Medical subscription likely to become Amazon Prime benefit, expert says

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Columbia University Health Care Policy Professor and Private Equity Investor Meghan Fitzgerald joins Yahoo Finance Live to discuss what Amazon acquiring One Medical means for health care, benefits for Prime members, the online patient-doctor experience, HIPAA constraints, and aggregating physicians.

Video Transcript

[MUSIC PLAYING]

JULIE HYMAN: We learned yesterday Amazon making a new push into healthcare with its $3.9 billion acquisition of One Medical. It marks the third largest buy for Amazon behind only Whole Foods and MGM and continues the e-commerce giant's expansion into the healthcare space.

Joining us now to discuss is private equity investor and healthcare policy professor at Columbia University, Meghan Fitzgerald, friend of the show. Meg, it's good to see you. This deal really got my attention yesterday because on top of the PillPack deal-- but this is even more so because this is, really, the first in-person services business that Amazon has gotten into meaningfully. How is this going to change the game for primary care? Or is it? Is Amazon going to kind of get swallowed up by it?

MEGHAN FITZGERALD: Oh, great question. I think it's the hottest topic in healthcare. I've never received so many emails on one deal. And I think the deal is important because everyone's trying to hypothesize what it means for everyone else in the game, right? We have other models. You have United and Optum.

They're vertically integrated. They also have an ability to have drugs and prescriptions through their PBM. Same for CVS and Aetna. And now you have Amazon, which is more in the physician enablement model, where they're aggregating primary care doctors. And I would imagine they're going to make that a prime benefit, as they did with the PillPack acquisition.

I also think Amazon has learned to be very resilient and fail fast. So everyone's talking about how Haven didn't work out. I think what they did with that strategic decision was they learned how to do this better by incubating Amazon Care within their own population. As I understand, in the Seattle office, up to a third of the Amazon employees use Amazon Care, use PillPack. And that's really what gave them the confidence to make this acquisition and try to aggregate physicians in 25 markets.

BRAD SMITH: What should customers expect of pricing once this is finally integrated fully into the business, especially for the Prime subscribers that would want to opt into this?

MEGHAN FITZGERALD: Yeah, it's a great question. I think right now, what One Medical has, which I think Amazon likes and there's a lot of synergy, is they have a subscription model. You pay, I think, up to $200 a year. And they have what's called a five-to-one model. You get five virtual telehealth visits and one in-person visit, right? Now that fits the Amazon model for possibly having an online experience.

So I would imagine they'll either add it to Prime, or there will be an upcharge to be a Prime One Medical subscriber. That's what I think they'll do in a lot of cases right now, employers, commercial pay employers, are paying the One Medical fee for their employees. And it's being used as a benefit.

BRIAN SOZZI: Meg, what are your-- do you have any fears on how Amazon might use One Medical's data?

MEGHAN FITZGERALD: Yeah, that also came up. What is the HIPAA constraint around that? I think it would be very dangerous and a massive footfall if they were to take that data and then try and upsell you things on Amazon. I think already, there's fears from current users that you do that already with consumer goods. And I think that would be crossing a river too dangerous for Amazon to start taking patient data, and then trying to monetize and use it.

But it's a fair question, I think, for consumers to ask Amazon how that relationship is going to be protected. And then, of course, HIPAA is a law. You can't violate what you do with patient data. So they know that, but it doesn't mean that people aren't worried at the fringes, what it can mean to have a total picture of you now as a consumer.

JULIE HYMAN: Meg, you said you got a lot of texts about this yesterday. Obviously, you have a lot of connections within the healthcare community, your former provider, yourself. Do doctors and nurses want to work for Amazon?

MEGHAN FITZGERALD: It's interesting. I think aggregating primary care physicians has been the most difficult thing to do in the United States. It's a difficult bunch to manage. There's a scarce number of them. When you manage them, it also means that you have to deliver quality at scale and lower cost. That's the game. And I think the text I got yesterday, there was skepticism around how you can scale and still deliver quality, which is really all that matters in healthcare, especially if you're on a value-based contract where you're only being paid for quality.

So Amazon is going to have to learn to put up those type of numbers. I also want you to know another text I got was from UnitedHealth that said, hey, Meg, we just want to remind you, one of your benefits is that you can have telehealth. I found that very coincidental that I got that text yesterday.

BRAD SMITH: OK, so what does that really tell us about how Amazon will operate One Medical? What changes might even come forth in the future, and particularly in the states that they operate as well, what that expansion even may look like?

MEGHAN FITZGERALD: Yeah, if I was running the deal and running strategy, I would let One Medical run this asset. They know how to do clinical care. They have a great management team. They have great physicians. I would not try and make this an Amazon-facing asset. I would try and help them market and reach more patients.

Right now, One Medical has about 1% market share in the commercial market. They have about under a million patients. They need to aggregate more patients and more physicians. So I think there's a symbiotic benefit to help One Medical scale. But I do not think the Amazon team should be the one running a clinical asset. They should leave that to the clinical experts. And I bet that they will do that.

BRIAN SOZZI: Well said. Meghan Fitzgerald, healthcare policy professor at Columbia University and author of "Ascending Davos." Talk to you soon. Have a good weekend.