Amazon believes the healthcare industry needs “reinvention.”
The company—which recently announced plans to expand its local base via a new office in Irvine—frequently looks to Orange County to find businesses powering the next generation of healthcare products, medical devices and medical services.
The e-commerce giant, which has a $1.4 trillion market cap, on July 21 announced it would pay $3.9 billion to buy One Medical (Nasdaq: ONEM), which operates a network of primary-care health clinics, including five in Orange County, one of its first and larger markets.
One Medical, whose San Francisco-based parent company operates under the 1Life Healthcare Inc. name, permits users virtual visits 24/7 as well as in-person visits to its 188 medical offices in 25 markets. Membership, which costs $199 annually, rose to 767,000, a 28% increase from the same period a year earlier. About half of its revenue is from Medicare while the other half is from about 8,000 commercial businesses.
One Medical entered Orange County in 2020, calling it one of the company’s 13 main markets. It has locations at many of the area’s larger malls, including Irvine Spectrum Center, Bella Terra, Pacific City and Irvine Crossroads.
“When we entered the Orange County market, we were confident One Medical would be a hit,” Michael Lee, district medical director of One Medical Orange County, told the Business Journal last year.
“We think healthcare is high on the list of experiences that need reinvention,” Neil Lindsay, senior vice president of Amazon Health Services, said in a statement. “Booking an appointment, waiting weeks or even months to be seen, taking time off work, driving to a clinic, finding a parking spot, waiting in the waiting room then the exam room for what is too often a rushed few minutes with a doctor, then making another trip to a pharmacy—we see lots of opportunity to both improve the quality of the experience and give people back valuable time in their days.”
One Medical isn’t alone among firms with local ties looking to change the way healthcare is practiced.
Several OC companies are using technology to reinvent healthcare, and some have caught the attention of the world’s most valuable public companies.
Self-Insured Biz Option
Crossover Health, a privately held medical group in San Clemente, caters to the self-insured employer market.
It has a “care team concept” that provides primary healthcare—meaning urgent, in-person and online care—to self-insured employers nationwide, who save about 15%.
Some of the largest employers in the country make up Crossover’s members, including Apple, Facebook, Microsoft and Amazon itself.
Last September, Crossover launched Be Well, a digital health content library catered to younger employees. Each of its podcasts, webinars and videos is created by its providers.
Other services include mental health, Crossover’s fastest-growing service line “given the nature of the pandemic.”
Last year was also Crossover Health’s “best year ever,” growing to nearly 430,000, said founder Scott Shreeve, who is expecting similar growth this year.
Last year, Shreeve won a Business Journal Excellence in Entrepreneurship award.
Consumer Experience Focus
Newport Beach’s Tebra Technologies Inc. is on a $200 million annual revenue run rate by providing independent healthcare practices with a complete operating system including modern websites, scheduling, billing and marketing.
“Like Amazon, we share the sentiment that healthcare is a consumer experience that needs reinvention,” CEO Dan Rodrigues told the Business Journal.
“At Tebra, we are simplifying and modernizing this experience through a platform of tools built for the new era of healthcare. With nontraditional players entering the healthcare market, we expect to see the consumerization trend accelerate and believe it will lead to more innovation in healthcare. Companies well-positioned to benefit from these trends are likely to grow faster than the market.
Rodrigues, who told the Business Journal last month that he wants Tebra to be the Shopify of healthcare, recently raised $72 million for a valuation topping $1 billion.
Will Amazon’s purchase of One Medical help increase the valuations of other tech firms in the healthcare industry?
“I’m no expert at predicting valuations,” Rodrigues said.
“That’s a tricky exercise that is probably best left to investment bankers and other capital markets experts. But what I would say is that, generally speaking, successful companies that are growing faster than the market create more value for shareholders over time.”
Orange-based Alignment Healthcare Inc. (Nasdaq: ALHC) has developed technology to help seniors get customized Medicare health insurance plans that can include coverage for things like vision, dental and hearing exams.
The company on Aug. 4 reported second-quarter revenue climbed 19% to $366.5 million, topping the Zacks consensus estimate for $338 million. It also reported a narrower loss of 6 cents a share while analysts expected a 26-cent loss.
“Alignment Healthcare’s strong performance in the second quarter showcases the replicability of our model and resulted in one of our best quarters since taking the company public,” founder and CEO John Kao said in a statement.
“Our business model is structurally advantaged to provide the best care for the lowest cost to members and also positions us to deliver value directly back into the hands of consumers by crafting differentiated products with richer benefits that personalize the member experience,” Kao added.
By the end of the year, the company expects to have as many as 99,000 members in its health plan.
Kao was recognized as a Business Journal Businessperson of the Year after taking his company public last year, where it now sports a $3.2 billion market cap. Its shares have almost tripled since January.
Care Up, Costs Down
Costa Mesa-based CareConnectMD Inc. works with physicians to develop a model to take care of “high-risk seniors.”
In July, it raised $25 million, which it will use to improve its technology platform, analytics and clinical command center as well as hire more to expand in California and enter new markets in Georgia, Ohio and Texas.
Founder and Chief Executive Kim Phan describes her company as providing “concierge services for patients.”
“We’ve developed a highly repeatable care model that has proven to improve both care and quality of life while also reducing costs,” she said.