CVS Health vs. Amazon Clinic: An Update
The Latest in the Race to Reimagine the US Healthcare Market
By: Jim Bialick & Robert J. Horne / Published December 6, 2022
Part 5: Disruptive Innovations in Health Series
Key Takeaways
In September, we explored the race between Amazon and CVS Health to establish retail-centered medical service offerings to compete with physician-owned practices and some medical facility business models. In that piece, we forecasted an increase in M&A and strategic partnerships from both companies over the coming months as each develops their respective models.
Last month, both companies made public announcements in this vein that offer further insight into the role digital technologies will play in both Amazon and CVS Health’s retail medical care business models:
Amazon (AMZN) announced Amazon Clinic, a message-based virtual care service now available in 32 states that connects customers virtually with Amazon for telehealth or digital care options.
On its most recent earnings call, digital therapy company Dario Health (DRIO) announced a partnership with CVS Health/Aetna (CVS). We believe this partnership is part of CVS’s new Virtual Primary Care medical services model, planned to go live nationwide in January 2023 (details are yet unannounced).
Takeaway #1: CVS will leverage the Dario Health partnership to address systemic workforce challenges.
For CVS Health, the partnership with Dario Health is a coup in that it has new access to digital medical services and mature artificial intelligence capacity capable of equitably replicating some of the services medical workforces currently provide. Digitally-enabled workforce alternatives, such as telehealth services or leveraging medical paraprofessionals in place of traditional medical visits, will allow consumers timely access to appropriate, quality healthcare while reducing the costly utilization of specialty and emergency medical care.
Next up for CVS Health is the expected rollout of a complete medical services model, covered by insurance and capable of competing with physician-led businesses in January 2023.
Takeaway #2: Amazon is poised to have a massive footprint in the healthcare market
As forecasted in our previous article, Amazon has new and significantly expanded medical workforce capabilities via the $3.9 billion acquisition of One Medical. This new capacity, paired with expected insurance coverage for Amazon Clinic services, means insurance plan M&A and strategic partnerships are a likely potential future for Amazon as it looks to complete its own medical and insurance offering.
Takeaway #3: Expect more disruption in payer markets
Health insurance plan activity over the last twelve months suggests that market disruption from digital health companies may already be underway. Critical changes in consumer purchasing behaviors and medical workforce employment preferences are driving this disruption and are very compelling from an investment standpoint.
Takeaway #4: Medical workforce M&A activity in the healthcare sector will likely continue
Virtual care and digital medical service companies will continue to be targeted for M&A and strategic partnerships to dominate the retail-centered medical service market. Given current and expected national medical shortages, workforce M&A will likely continue, and primary care and related service areas, such as behavioral health and physical wellness, will initially be the lead focus of these models. As workforce specialization and technological innovation continue, expect M&A targets to disproportionately include auxiliary workforce service providers, medical staffing agencies, health technology, data service providers, and companies with medically licensed and prescribing workforces.
This article was originally posted on Medium - December 6, 2022