Here's why Amazon and Apple are betting on medical clinics

Many companies with large offices offer medical clinics for their employees. However, a new trend is popping up in regards to these employee-exclusive primary care medical offices: Companies are trying to operate them on their own, without contracting with third-party companies, reports CNBC.

The most notable companies that have sidestepped third-party help are Apple and Amazon. Instead of working with another provider or clinic operator to staff or run their employee-exclusive clinics, they are embarking on the ventures internally.

Amazon  will launch a primary care clinic in the coming months for a small number of employees at its headquarters in Seattle. After considering outsourcing clinic operations and hearing proposals from vendors, Amazon decided to develop the clinics internally and began hiring staff in July.

Meanwhile, Apple is establishing AC Wellness, a group of primary health clinics for its employees and their families. In August, Apple announced it had hired more than 40 people to staff the clinics.

So why are Apple and Amazon betting on primary care clinics when it's not their core competency?

Here is a breakdown of three reasons, according to CNBC:

1. To control health costs. The main reason Apple and Amazon are pushing into the primary care space is to manage out-of-control healthcare costs. Companies across the U.S. realize that to make a difference and stop unnecessary hospitalizations, they must intervene early. One way to ensure an early intervention is establishing a relationship between the patient and the primary care provider who can help manage patients' lifestyle habits, steer them to in-network specialists and stop them from taking expensive medications — all factors that can cut costs for an employer. 

"Employers generally have become extremely frustrated about the enormous expense of the healthcare system as well as the inconsistent, at best, quality experienced by their employees," Micah Weinberg, PhD, president of the Bay Area Council Economic Institute, a think tank focusing on local policy issues, told CNBC. "So seeing our $2  trillion  companies making this investment is not shocking."

2. Testing new products, interventions without risking leakage. Both Amazon and Apple see enormous opportunities in the healthcare sector. But in order to disrupt and make a difference, they must focus on what they are good at. For example, Amazon is focusing heavily on the supply chain, something they disrupted a long time ago when they established the Prime two-day shipping standard. For its move into the healthcare supply chain, Amazon recently purchased online pharmacy PillPack for about $1 billion. Analysts expect this acquisition to change online-pharmacy standards in a major way.

Apple, on the other hand, is looking to get into the healthcare space by emphasizing what its technology can do. It is currently testing health-tracking tools for the iPhone and Apple Watch.

And, as CNBC asks, where better to try out these new products then their own clinics, with their own physicians and their own patients?

"If Amazon and Apple had considered these clinics for internal use only, they would have likely outsourced to any of the number of clinics that offer on-site clinic services," Nikhil Krishnan, a health-focused analyst with CB Insights, a market research firm, told CNBC. "The fact that Apple and Amazon are testing it in-house means they want to test the model with employees, iterate, and eventually release this product to their respective customers."

3. Expensive upfront costs, but a great investment. While it is expensive to get employee health clinics up and running, it may be an investment that pays off in the future. Healthcare is complicated. However, those that do well in the space are rewarded, said Dr. Weinberg.

Read the full report here.

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