|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Becerra confirmed at a pivotal moment
On Thursday, the Senate narrowly confirmed the appointment of California Attorney General Xavier Becerra to serve as US Secretary of Health and Human Services (HHS), by a 50-49 vote that saw only one Republican, Sen. Susan Collins (ME), vote in favor of the nomination. Although Becerra’s candidacy was supported widely among health industry groups, the nominee drew criticism from Senate Republicans for his lack of healthcare experience, his views on abortion rights, and his track record of legal opposition to the Trump administration. Becerra takes the helm of the Biden administration’s healthcare team as it hits a key milestone, reaching the promised 100M vaccines administered well ahead of schedule—on day 58 of Biden’s presidency. A new vaccine goal is expected to be announced next week, as more states move to open up vaccine eligibility beyond the elderly and high-risk categories that have been the focus of the campaign to date. The accelerating pace of vaccinations—this week reaching 2.5M shots per day on average—is welcome news, given the emergence of new virus hot spots in Michigan and New York, which have raised concerns among public health experts about a variant-fueled “fourth surge” of COVID. Much of Europe is now contending with just such a surge, although vaccine rollout across much of the continent has lagged the US pace, with European regulators struggling to boost confidence in the AstraZeneca shot after concerns it was linked to a small number of blood clotting problems. The next few months of the pandemic will likely play out as a battle of vaccine versus variants, with hope that growing vaccination rates can outpace new surges as states continue to loosen restrictions.
Another big merger in the virtual care space
The virtual care space continued to heat up this week, with the announcement that Doctor on Demand, the telemedicine company founded in part by Phil McGraw (“Dr. Phil” of TV fame), and Grand Rounds, a patient navigation service targeted to the employee benefits market, planned to merge. The two venture-backed companies were most recently valued at $820M and $1.34B respectively, and the all-stock merger will not entail a new valuation of the combined entity. Doctor on Demand competes with other telemedicine companies like Teladoc (which acquired disease management platform Livongo last year for $18.5B), Amwell (which went public last year and is valued at $5B), and MDLive (which was acquired by insurer Cigna last month). Grand Rounds competes with Accolade, which went public last year and is valued at $2.5B, to provide concierge navigation services to help employees find the right care. The newly combined company describes itself as an “integrated virtual care company”, which is a moniker of increasing interest to a range of incumbents and disruptors in the wake of the COVID crisis, when patients increasingly turned to telemedicine to substitute for or supplement in-person visits. While telemedicine visit volume has declined since its mid-pandemic peak, the popularity of virtual care is likely not lost on employers, many of whom will look to add lower-cost virtual offerings to their employee benefit packages. The ability to provide convenient, online doctor visits—for both physical and mental health needs—is almost certain to become a must-have element of any health benefits package, and will be a key tool for insurers and providers who hope to lock in purchaser loyalty. The ability to link virtual visits to a broader care ecosystem, whether through vertical integration (as insurers and health systems can) or by managing referrals (as Grand Rounds and Accolade do), will be central to success. Expect more acquisition activity in this hot space as the battle for virtual hearts and minds intensifies.
Amazon reveals its next step in healthcare
Now add America’s second largest private employer to the list of companies vying for those employee hearts and minds. In an announcement that was surprising only in its tardiness, Amazon revealed plans this week to roll out its virtual care offering, Amazon Care, to all of its US employees this summer. The company has been developing the telehealth service for the past two years as a pilot program for its Seattle-based employees, in partnership with local provider Care Medical (formerly known as Oasis Medical). Earlier this month it was reported that Care Medical had filed to expand its services across 17 additional states, foreshadowing this week’s launch of Amazon Care as a nationwide platform. In addition to virtual care, the company provides in-home visits for Seattle area employees, and plans to do the same in the Washington, DC area—home to its new “HQ2”—later this year. More significantly, the company also previewed plans to sell virtual care services to other employers starting this fall.
The Amazon Care venture is separate from Amazon’s recently acquired PillPack online pharmacy business, and from its 17-clinic primary care partnership with Crossover Health (available only to Amazon employees in key markets)—although the company is surely evaluating an eventual integration of all its healthcare services into a more comprehensive offering. The question is, for whom? For a company best known for its consumer-centricity, it’s interesting that Amazon has chosen to target Amazon Care at the employer market, a crowded space in which it will have to contend with existing broker relationships, insurance networks, and HR managers. That choice likely signals a decision to grow the offering slowly, climbing the healthcare learning curve gradually, rather than diving in the deep end by, for instance, offering telemedicine as an add-on to its Prime membership. Perhaps the long-awaited Amazon play in healthcare will be more like Amazon Web Services—a B2B offering that sells something to other companies that Amazon originally built to meet its own internal needs. Time will tell, but one thing’s for sure: it’s never safe to bet against Amazon. Their entry into the telemedicine space—even with baby steps—is a big moment for healthcare, and will force other players to quicken pace to expand their own digital offerings.