According to Credit Suisse, https://www.credit-suisse.com it was reported on December 16, that Amazon (AMZN) https://www.amazon.com is looking to offer online and in-person care for other large employers. This move would be an extension of Amazon Care, a health benefit currently offered to AMZN employees across Washington State.
Currently, there are 300 workers at AMZN dedicated to Amazon Care. It remains unclear how widely AMZN has pitched the service to employers, Zillow was reportedly approached, however nothing came of it and the talks are on hold.
The potential offering to employers would be to include in-person visits to employees who live near AMZN’s headquarters in Seattle, but employees who live in other cities and states would have access only to virtual visits. AMZN would charge employers a technology fee in addition to fees based on how many employees are using the service each month.
According to Credit Suisse, telehealth use among large employers is already highly penetrated at +90%. See Credit Suisse’s note (HCIT-Related Takeaways from Our Annual Employer Benefit Survey.) AMZN’s efforts to sell to large employers will therefore require market share shifts for an employee benefit offering that tends to be quite sticky, especially since telehealth benefits make up a small fraction of the overall spending for employers.
The key differentiator for employers when offering telehealth benefits to their employees is not vendor contract pricing but more around the employee engagement/utilization and the magnitude of medical cost savings (including downstream savings) a telehealth vendor can generate for the employer.
Another important trend is that telehealth benefits are also increasingly becoming a carved-in benefit where employees have access to a telehealth vendor contracted through their health plan (most of which partner with large telehealth vendors). According to Credit Suisse’s benefits survey, 81% of employers had a carved-in approach to telehealth in 2020 versus an expected 83% in 2021. Further, employers/health plans are also looking for further integration of expanded offerings such as management of chronic conditions, behavioral health etc.
Large employers are more likely to work with vendors/partners who have well-established platforms with proven solutions versus becoming a pilot project on just basic telehealth offerings from a new market entrant, which is competing with them such as employers in some way.
Additionally, widespread concerns around AMZN collecting health data could even demotivate employees’ willingness to use telehealth. With COVID pulling forward, the consumer/employee awareness of telehealth could be 3-4 years. Credit Suisse’s analysts do not see large employers disrupting the momentum. Amazon Care currently uses Care Medical, a medical practice licensed in Washington State to provide care to AMZN employees both in-person and virtually.
However, due to interstate healthcare provider licensing laws, (although most have been relaxed during the pandemic) combined with the fact that large employers tend to have a presence across the entire U.S., analysts see AMZN as likely expanding their provider network to offer virtual care to other large employers.
One potential route would be for AMZN to leverage their recently announced partnership with Crossover Health, a national medical group working with self-insured employers. The two companies plan to open several primary care clinics across the U.S for AMZN’s employees.
Finally, there are implications for AMZN and Teladoc (TDOC)https://www.teladoc.com. From TDOC’s perspective, the acquisitions of InTouch Health and Livongo have significantly diversified the company away from just providing urgent care visits to employees/health plan members.
For the Livongo deal in particular, analysts expect it to create an additional stickiness component for TDOC as the company continues to cross-sell. Further, even for TDOC’s core offering, the company is now pushing for a broader suite of services (multiple products offering).
As for AMWL https://business.amwell.com , analysts think the company is largely shielded from AMZN going after large employers given, AMWL’s focus on providing white-labeled telehealth platforms to hospitals/health systems as well as through health plans. The direct-to-employer business for AMWL is very small with only a handful of contracts.
Credit Suisse analysts reiterate their Outperform Ratings on both TDOC and AMWL. The analysts like TDOC for their Livongo combination and ~35% revenue CAGR over the next several years. The analysts like AMWL for their strong presence in the provider market (a market which has gained strong momentum post-COVID), their white-labelling approach (providing revenue visibility), various upside drivers to current expectations, etc.
For more information and/or to provide feedback, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.