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Amazon Makes a Big Change in its Healthcare Strategy

Amazon shifts its emphasis as it plans to halt one of its key health initiatives by the end of 2022.
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Amazon  (AMZN) - Get Free Report has been trying to find the right approach to disrupt the healthcare industry for several years.  

Now, it's changing course by dropping one key initiative to focus on others in the works.

The surprising announcement came this week as the company said it plans to shut down its telehealth company, Amazon Care.

The internet giant said on Aug. 24 it is closing the telehealth venture by the end of 2022.

What Amazon Care is

While this came as a surprise, Amazon acquired One Medical, a primary care company, back in July, only a few weeks ago.

Amazon spent $3.9 billion to purchase One Medical  (ONEM) - Get Free Report, which could signal a stronger push into the healthcare industry. This deal follows its 2018 acquisition of PillPack, an online pharmacy that delivers medication.

Amazon Care's corporate customers included TrueBlue, Silicon Labs as well as Whole Foods Market, which it acquired in 2017.

The venture was intended to provide primary care across the U.S. for telehelath and as an employer health benefit. Amazon Care, which was started in 2019, had said it would send registered nurses to perform medical care such as blood tests.

Amazon spokeswoman Christina Smith confirmed the decision to the Washington Post.

“This decision wasn’t made lightly and only became clear after many months of careful consideration,” said Amazon senior vice president of health Neil Lindsay in an email to staff. “Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”

Amazon Care was still searching for healthcare workers in employment ads in August.

The abrupt change may not be a surprise after the company's most recent acquisition.

Wall Street firm Bernstein noted the impact of the news for customers and investors.

"I get the sense that investors are a bit confused about Amazon’s strategic priorities when it comes to healthcare and today’s announcement does nothing to alleviate the issue" the firm said.

Why Amazon Bought One Medical

Acquiring One Medical was a way for the internet giant to move into the primary care industry as healthcare costs have risen exponentially.

Health insurance, pharmacy chains and even retailers have targeted primary care clinics as a way to diversify and increase their revenue stream.

UnitedHealth Group  (UNH) - Get Free Report, CVS  (CVS) - Get Free Report, Walgreens Boots Alliance  (WBA) - Get Free Report and even Walmart  (WMT) - Get Free Report now all run primary care clinics.

One Medical owns clinics and has 188 offices and about 730,000 members. 

Patients can shell out $199 a year to use its clinics and see their doctors as well as have access to telehealth medicine via its mobile app.

The company went public via 1Life Healthcare Inc. in January 2020. One benefit is that people with Medicare Advantage plans through Iora Health, which it bought for $2.1 billion a year ago, can also become members.

CVS Health had reportedly looked into acquiring One Medical, Bloomberg reported. CVS also operates Aetna, a health insurance company.