Late last year, Amazon projected that its healthcare business would lose more than $1 billion in 2024, according to an internal planning document obtained by Business Insider.
The $1.08 billion loss forecast is an improvement from the previous year, when Amazon lost $1.28 billion in its healthcare segment, the document shows.
The December filing also contains more positive news: The tech giant expects healthcare revenue to grow nearly 30% to more than $3 billion in 2024, a sign of strong demand for new offerings such as pharmacy services.
Overall, the 10-page document reveals that Amazon is navigating a challenging and complex new industry while making tough decisions and steadily making progress. While the company doesn’t release financial data on the healthcare sector, investors will be looking for signs of success when it reports earnings on Thursday.
“We are excited about the tremendous progress Amazon Health Services has made to drive growth, build a sustainable cost structure, and most importantly, make quality healthcare better, easier, more accessible, and more transparent for patients,” a company spokesperson told BI.
Forecast for December
Amazon began expanding into the healthcare sector several years ago, including the acquisitions of online pharmacy PillPack in 2018 and primary care provider One Medical in 2022, spending a combined $4.9 billion on the two companies.
Tech companies have long tried to expand into the healthcare sector, with mixed results. Amazon’s experience has been similarly rocky.
According to the December filing, One Medical is expected to lose $506 million in 2024, compared with a loss of $597 million in 2023. That 2024 projection drops to $341.7 million when certain depreciation and amortization costs are excluded.
Amazon Pharmacy is expected to lose $420.2 million this year, compared to a loss of $515.2 million in 2023.
Amazon expects overall healthcare revenue to grow 28% to $3.16 billion in 2024, according to the December filing. That’s largely driven by Amazon Pharmacy, which is expected to generate $1.81 billion in sales in 2024, a 45% increase. One Medical, meanwhile, is expected to grow its revenue 10% to $1.34 billion.
The “Other Health Services” segment, which includes telehealth services, is expected to generate just $6.1 million in revenue but a whopping operating loss of $152.4 million in 2024.
The document was created in December and is marked “Amazon Confidential.” It is the second phase of the company’s operating plan for this year. The numbers may have changed since then, as the year has progressed and Amazon has taken steps to improve its healthcare business, including layoffs and other cost cuts. Still, the projections in the document likely haven’t changed significantly, said a person directly involved in the business plan. The person asked not to be identified discussing private matters.
“These numbers are incorrect and do not accurately reflect the financial performance of Amazon Health Services,” the Amazon spokesperson told BI, describing the December planning document as an “incomplete draft.”
Speaking specifically about the 2024 projections, the Amazon spokesperson said: “Amazon Health Services teams have not yet finalized year-end 2024 expectations, but those numbers are also incorrect.”
Still, the reduction in healthcare losses is an encouraging sign for Amazon, which has been focused on improving its overall profitability. CEO Andy Jassy has embarked on a cost-cutting crusade that has led to record layoffs and a series of abandoned projects. One Medical, for example, was asked to reduce its projected losses during last year’s planning phase.
“2024 will be a year of increased focus on economically sustainable growth, improved productivity, adoption of mechanisms to ensure better execution and integration with Amazon where it provides leverage,” the December document said.
“Accelerating the path to profitability”
Amazon has consolidated the different parts of its healthcare business, such as Pharmacy and One Medical, into a single group, led by Neil Lindsay, senior vice president of health and brand.
The mission of the new group is to “make it much easier for customers to find, choose, afford and engage with the products, services and professionals they need to get and stay healthy,” the December document said.
One way it’s continuing that mission is by making it easier for customers to “get care,” the document says. As part of that, Amazon launched a new telehealth marketplace in 2022 called Amazon Clinic, which was recently rebranded as Amazon One Medical Pay-per-visit. One Medical also provides access to in-person visits at offices across the country.
More recently, Amazon has focused on “how to strengthen the financial viability and accelerate the path to profitability” of its healthcare business, the document said.
One of One Medical’s key areas of focus is reducing fixed costs, such as headcount and management levels. The company also wants to improve the cost of care by reducing the cost per visit from $372 to $322 and increasing the average number of visits per provider from 1,456 to 1,597, according to the document.
In February, Amazon cut hundreds of jobs at Pharmacy and One Medical, while reshuffling its teams to find further savings. One Medical also suffered a setback when it lost a major client, Google, this year.
Better prices for GLP-1 drugs
Additionally, Amazon Pharmacy was able to improve its terms of sale on GLP-1 drugs for treating obesity and diabetes, allowing it to obtain better prices, the document said. Amazon Healthcare is slowing its investments in smaller initiatives by delaying hiring for some projects and reducing spending on contractors, it added.
Amazon continues to invest to expand into the healthcare sector, according to the filing. One area of investment is back-end technology to improve the customer experience. The company is improving the enrollment process, such as insurance card capture technology, and simplifying the linking of One Medical and Amazon Pharmacy accounts. The company is also looking to improve member navigation and employee workflows for One Medical’s virtual care service, as well as strengthening security measures.
“We recognize that simplifying business priorities, reducing fixed overhead, and aggressively managing service costs are necessary to support accelerated growth,” Amazon said in the document.
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