The $4 Billion Bet

Long before he founded One Medical, the healthcare startup recently acquired by Amazon in a $3.9 billion deal widely expected to reshape the business of medicine, Tom X. Lee imagined that he might become an artist. But after graduating from Yale, Lee, who grew up in Seattle in a family of doctors, opted for what seemed like a more reliable career path. “It was harder to make a living in graphic design,” Lee recalled last year. “So I ended up going into medicine.” 

He soon found, though, that working in healthcare did not conform to his expectations. As a medical student at the University of Washington and a resident at the Harvard-affiliated Brigham and Women’s Hospital, in Boston, Lee became passionate about patient care. He was training to become an internist and saw the full spectrum of human infirmity, from anxiety to the last stages of terminal illness. But whether he was in a hospital, a clinic or a physician’s office, the healthcare system, with its emphasis on volume, appeared designed to prevent doctors from doing their best work. “Our mission was to care for patients in a thoughtful manner, but what we were doing seemed antithetical to that,” Lee has said. “I just started noticing dissonance with what we were doing from what we thought about why we had joined the profession.”

The United States spends more on healthcare than any other nation in the world, but has worse outcomes than any other high-income country — the lowest life expectancy at birth and the highest rate of people with multiple chronic illnesses. The system is dangerously overburdened, with some 63% of physicians reporting symptoms of burnout and emergency room stays often exceeding two hours. Primary care, the most essential component of any functional healthcare system, is in crisis. General practitioners are paid much less than specialists, like orthopedists and dermatologists, and new doctors increasingly gravitate toward more remunerative fields. Ideally, a primary care physician should carry a roster of fewer than 1,000 patients, but many see well over 2,000 patients a year. According to the Association of American Medical Colleges, by 2034, the U.S. will face a shortage of as many as 48,000 primary care doctors.

David Blumenthal, formerly a primary care physician, Harvard Medical School professor and president of the health and social policy nonprofit the Commonwealth Fund, told me, “Obviously, I’m well connected, but I don’t know if I could find someone for me or my wife if we needed new primary care physicians.” Blumenthal went on, “Nobody, nobody is taking new patients. And I’m talking about Boston, which is a medical mecca in the world.” For patients who are poorer, sicker and less well connected, finding access to primary care is more difficult still.

Lee had these systemic problems in mind when, after completing his residency, he enrolled at the Stanford Graduate School of Business, intent on learning the tradecraft of entrepreneurship and management that might allow him to create a more functional healthcare model. “I was so used to dealing with organs and bodies and people,” he has said. “Then you get the concept of business, and it didn’t make any sense to me when I first started. But then I figured it out.”

With two classmates, Lee conceived his first company, Epocrates — a mobile medical reference app for physicians — as a student project in the late 1990s. Epocrates caught on, and Athenahealth acquired it for about $293 million in 2013. By then, One Medical, a small chain of primary care practices that emphasized accessibility and patient experience, had been up and running for six years and generating laudatory headlines. The New York Times dubbed it a more affordable twist on high-end concierge care: “a new model for primary care that aims to set a nationwide example.”

“We know that at least doubling investment in primary care will result in huge benefits to health outcomes,” Katherine Gergen Barnett, a family medicine practitioner and the vice chair of primary care innovation and transformation at Boston Medical Center, told me. “I see One Medical almost as a petri dish for: more investment in primary care equals better outcomes.”   

Beginning with a single location in San Francisco and quickly expanding across the country, the company drew lessons from the hospitality industry. Located primarily in urban centers, One Medical practices deployed a design palette that would not have been out of place in the coffee shops, spas and boutique hotels that often stood nearby. Their offices had a clean, modern look, and none of the back issues of Highlights or Family Circle frequently found in old-fashioned primary care waiting rooms. With the help of technology, Lee drastically reduced administrative costs and spent more on doctors and patients. One Medical physicians saw about 15 patients per day, not 30, and spent roughly half an hour with each one, rather than the more typical 10 to 15 minutes. Contrary to most concierge practices, One Medical accepted insurance, including Medicare. The membership fee, which is now $199 per year, comes with a mobile app that allows users to book same-day appointments, check medical records, request prescription refills and access providers 24 hours a day — including for basic diagnoses.

When Lee stepped down as CEO in 2017, One Medical had 60 offices nationally; today, it has 193, including in New York, Austin, Charlotte and Chicago, and major companies like SoulCycle use the service for their employees. At the time of its founding, interest in primary care from for-profit investors was limited. “Anyone we talked to said there’s no way you can make primary care work — there’s no margins,” Lee once said. But One Medical eventually attracted more than $530 million in funding, including from Google Ventures and the Carlyle Group.

Corporate behemoths such as CVS and Walmart have lately made massive investments in primary care, too, and some industry analysts describe Amazon’s acquisition of One Medical, which closed in February, as potentially revolutionary — a catalyst that could force traditional providers to up their game.

Michael Abrams, Co-founder, Numerof & Associates

One Medical complements Amazon’s existing healthcare offerings, notably Amazon Pharmacy and RxPass, which provides Amazon Prime subscribers with access to a wide variety of generic medications for $5 per month. Sari Kaganoff, general manager of consulting at the healthcare venture capital firm Rock Health, imagines that with One Medical, Amazon might also leverage data from wearable devices — blood pressure and sugar levels, for example — to help subscribers manage chronic diseases. 

Katherine Gergen Barnett, Vice Chair of Primary Care Innovation and Transformation, Boston Medical Center

It’s not difficult to see how the same data could be used for targeted sales of food and wellness products. “You have your Prime subscription, RxPass, then you have Amazon Pharmacy, and on top of that you have coaching and other chronic disease management solutions as part of your subscription,” Kaganoff mused. “It’s like your whole life could be wrapped up in Amazon.” Abrams added, “It is taking the friction out of the process of healthcare. It also happens that it promises to dramatically increase the potential of Amazon to sell its products. I call it a win-win.”

Not everyone is so sanguine. Despite assurances from Amazon that customers’ HIPAA-protected information “will be handled separately from all other Amazon businesses, as required by law,” skeptics worry about data privacy. “I don’t think there is anything Amazon could do to make people trust the company with their healthcare information,” Caitlin Seeley George, of the technology and digital rights advocacy group Fight for the Future, told CNBC last year. “Pushing forward into healthcare raises some serious red flags, especially in the post-Roe reality where peoples’ data can be used to criminalize their reproductive healthcare decisions.” 

There’s also the fact that One Medical has yet to turn a profit. In August, CEO Amir Dan Rubin announced he will leave the company later this year. (Rubin will be replaced by One Medical’s COO Trent Green.)

Amazon’s previous forays into healthcare have also been rocky. Amazon Care, the company’s employer-focused digital and telehealth primary care service, closed shop in December 2022, after just three years in operation. Haven, its joint venture with JPMorgan Chase and Berkshire Hathaway, which had promised widespread industry disruption, similarly shuttered, having made little headway in solving the challenges of rising costs and of a dizzyingly convoluted insurance system. According to Abrams and Kaganoff, One Medical offers a big advantage in the form of a turnkey solution — some 836,000 subscribers and dozens of primary care practices in markets across the country. “That’s hard to build,” Kaganoff said. “It takes time, especially because of how fragmented the system is. With One Medical, they could buy all that in one fell swoop.”

But to be successful, Blumenthal told me, Amazon will likely have to drastically change the One Medical model, coordinating with insurers and health systems to reduce the cost of hospital and specialty care, which account for a large portion of healthcare expenditures, and funnel the savings to primary care. “That to me is going to be the question,” Blumenthal said. “From a business standpoint: Can you find a way to make money? From a societal standpoint: Can you find a way to attract practitioners into this field and organize them in a way that meets the demand?”