Amazon Care's First Customer
“Amazon but for health care” is seductive concept with a lot of potential. When Amazon announced last year, along with JPMorgan Chase and Berkshire Hathaway, that they’d be entering the health care space, it was hard not to be excited about the possibilities.
Yesterday came a seemingly minor announcement that they had rolled out a product called Amazon Care, for Amazon employees only:
Amazon has launched a virtual health clinic with in-home follow-ups for employees in Seattle, dubbed Amazon Care.
The company announced the program on a web site, Amazon.care, that is currently publicly accessible but did not formally announce the news outside the company. “Amazon Care is a benefit being piloted for Amazon employees and their families in the Seattle area,” the website reads.
This isn’t comprehensive care—the website mentions treatment for ‘colds, allergies, infections, and minor injuries.’ And it’s not a unique service; such arrangements are becoming common at some large companies.
But the article goes on to hint at what makes this service interesting, noting that Amazon ‘has experimented with new products on its employees first, before it broadens them out to the general population.’
The API Mandate
The consumer rollout would be the most Amazon thing ever: consider Jeff Bezos’ classic API Mandate. API stands for ‘Application Programming Interface,’ and it’s the mechanism by which programmers allow one application to talk to another. The Mandate is paraphrased at the link:
1) All teams will henceforth expose their data and functionality through service interfaces.
2) Teams must communicate with each other through these interfaces.
3) There will be no other form of interprocess communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.
4) It doesn’t matter what technology they use. HTTP, Corba, Pubsub, custom protocols — doesn’t matter. Bezos doesn’t care.
5) All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions.
6) Anyone who doesn’t do this will be fired.
Which is to say that anything that gets built for internal use must actually be built for external use in the open market. Furthermore, if you work at Amazon and want to use one of these internal service, you can’t just ask how it’s done - you absolutely must use the API just like a customer would, you experience the customer’s pain and live their full experience. It’s a radical and unique way for a company to actually live up to it’s ‘customer obsession,’ and it’s how Amazon’s internal tools become robust enough to be future products.
The Care API
It’s a pretty fair bet that Amazon Care is being built with the same idea in mind. That is, AC is not a product to provide health care services to Amazon employees; it’s a product to provide health care services to anyone. As a new service, it enjoys the luxury of counting all of Amazon’s massive Seattle-area workers as it’s first customers, and it will learn and grow from that experience before being exposed to the broader market.
The fact that those Amazon workers double as customers is extremely important - it shortens the AC’s feedback loop and accelerates its climb up the experience curve. Anyone who has a bad experience is likely also in a position to do something about it and fix it.
As part of Amazon, AC’s incentive is provide low-cost care, which lowers what is likely a massive employer health benefit cost borne by the company itself. It’s successful to the extent that it can provide similar care for a lower price than the existing providers.
Remember, the payer in this case is also Amazon, which is certainly large enough to be insuring its own employee population. So starting a clinic represents a move toward vertical integration in that sense. It’s pretty speculative at this point, but you have to wonder how far away we are from seeing that payer product also begin to expand—first to JPMorgan Chase and Berkshire Hathaway, and then beyond.
Profitability
Well, Amazon’s relationship to profits is complicated. Part of the formula that has allowed them to grow so quickly is their continued plowback of all profits into their business, allowing them to fund capital intensive experiments, while avoiding paying taxes. Because of the growth in their topline numbers and market share, capital markets continue to do their part to fund Amazon’s growth as well.
And I expect much the same in health care. If Bezos is focused on bringing down costs (as he did in his retail business, and as his customer obsession would dictate, and as AC is currently incentivized to do), then one way to accomplish that is to strip all of the profit out of providing care.
Where I think this is going: if Amazon can lower costs enough, they’ll be able to scale their health care business, because it becomes more attractive to consumers. As they scale, they gain negotiating power over suppliers like drug companies and hospitals, and can negotiate favorable terms with them. Recent consolidations in health care have resulted in more profit taking, but Amazon isn’t interested in that, so they’ll be able to scale further than anyone.
The Takeaway
To be sure, there is a long road from this small announcement to Amazon domination. But the playbook is there. It may not be Amazon, and it may not be soon, but this is one mechanism by which the current system, so dysfunctional but also entrenched, could be upended.
We’ll follow any further developments in this space. Later in the week, we’ll take a closer look at Haven.
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