Today in health, it could Amazon be headed for big healthcare losses. I think everyone knows the answer to that question. My name is bill Russell. I'm a former CIO for a 16 hospital system. And creator of this week health set of channels and events dedicated to transform health care. One connection. At a time. Today's show is brought to you by Panda health. Digital health is hard and panned.

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Despite these claims and Amazon spokesperson refuted the accuracy of the figures, attributing them to incomplete draft documents and asserting strong ongoing progress is enhancing cost structure. And healthcare accessibility. These developments come and missed. Amazon's expanding healthcare ventures, including the acquisition of PillPack and one medical and its continued growth. Through strategic partnerships and service expansions. The company will report its next quarterly earnings on August 1st.

So I guess we'll know fairly soon. If Amazon has headed for big healthcare losses, that's the summary. And the answer to the question is of course, that they're heading for big healthcare losses. They have an incomplete model and that incomplete model creates gaps. And it doesn't allow them to capture the revenue. That they need to capture.

So PillPack, absolutely great acquisition. The pharmacy expansion absolutely just fits their business model really well. You can get your. Your medications delivered to your home very quickly in a form that is very easy to follow. And that is a good business model for Amazon. Makes perfect sense. It leverages what they already do. One medical on the other hand is an island. It's a complete island unto itself, and it may work in some markets.

It's not going to work in other markets. It's. It's a, again, an island is the best metaphor I can come up with. It's it's incomplete in terms of a medical care offering. And so they are going to continue to grab. Bits and pieces of a market. It's going to cost them a lot to grab that market. And they are not going to be able to leverage that to anything bigger because they have nothing bigger to leverage it to. Or to link it to I've said a long time ago. In fact, there's an article.

You can find it out on the web. If you search for it. What Amazon should do in healthcare. And I'm sure, it needs some research because I'm sure there's limitations to them doing this. But they needed to get into the the risk-bearing insurance market. Essentially is what they need to get into.

Now, this model would have been way outside of Amazon's current offerings. But think of it like a Amazon prime for healthcare. So if they could put it into the surfaces, it doesn't fit. I will. Be the first to tell you from a business model standpoint, it's a stretch, but it But what it does is it gives them a model.

They're not getting the first dollar of the healthcare spend. And because they're not getting that first dollar and they have no way to capture the higher margin items on the backend. They're not doing imaging, they're not doing surgeries. They're not doing, they're not doing the things that make money in healthcare. And they're only doing primary care on the front end or even urgent care or emergency care. Maybe concierge service on the front end. And they're not even doing it at scale in many markets. Because again, healthcare scale, isn't measured by what you can do nationally.

It's measured by what you can do in that local market. Do you have a scale in that local market, which gives you the ability to hire enough? Physicians and other things in that market and just scale allows you to do things, but. Generally I would measure it regionally, not nationally. It's one of the mistakes that we've made in healthcare over the years is that if we scale regionally, That we are going to be in a better position.

The reality is, and I can say this because I'm not the FTC is not going to come after me, but the magic of scaling has nothing to do with actually driving down the costs. It has everything to do with. Asserting monopoly power within. The individual markets. So when you see. When you see health systems grow into markets are generally looking for. Essentially reality.

They're looking for health systems that are essential in certain marketplaces. And there are still great health systems to be had with this kind of makeup. You go into a market. And they have greater than 40% market share. They are the player for healthcare in that market. And so that's the mistake that we made getting back to Amazon, though. Amazon has to get that first dollar of care in order to direct the care. And they believed that they were going to do that through primary care. And that has not materialized. In a meaningful way.

Therefore if they post anything close to break, even on this, that would be a major win. It will be losses in the hundreds and hundreds of millions. And billions is probably what makes more sense to me. Based on the scope of what they've tried to do. Within the one medical acquisition in terms of delivering primary care. So I ramble a little bit.

So let me summarize what I'm saying here. Of course, they're going to post big losses in healthcare. They have an incomplete model. They have not leveraged things that they're already really good at one medical leverages, almost nothing that they're already really good at. And it doesn't build off of anything that they have a competitive advantage in.

It is literally a launch into a market that they have almost no business being in, and it doesn't grab the first dollar of spend in healthcare. And because it doesn't do that. It is a flawed model from the get-go. I think you'll see this go the way of a Walmart and I think you'll see this go the way of CVS and others. That have attempted to capture market share through. Essentially primary care retail. Setups and those kinds of things and have realized that that's not a sustainable model.

They need. The specialty services on the backend. Or they need the first dollar of spend, which is the insurance market and the risk bearing market. On the front end without those two in our model, as it currently exists today. It's not going anywhere. Yeah, so they will post the loss there.

You have it not really a technology. Question per se. I will say this. They have a great. Technology platform and a great workflow. And it's beautiful and it's nice. And it's a good experience for the consumer and all those things. And you know what, at the end of the day, if you marry that to a bad business model, it does not. Matter, you still need a good business model.

Just like if you married a phenomenal experience on top of bad care or a bad experience. At the end of the day, people are going to go somewhere else. If you are a health system leader of thinking that you can make up for things with digital front end. You can't, you still have to do the basics of delivering health care.

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