The all-cash transaction has a $3.49 billion equity value.
One Medical, a subsidiary of 1Life Healthcare Inc., operates 182 medical offices in 25 markets across the United States. Customers pay a monthly subscription fee to gain access to its physicians and 24-hour digital health services.
"We believe healthcare is high on the list of experiences that need to be reinvented," said Neil Lindsay, Amazon's senior vice president in charge of its healthcare push.
Following its acquisition of mail-order pharmacy PillPack Inc., Amazon has launched an online drug store, as well as a primary-care clinic for its employees and some other companies, among other health-related initiatives. The One Medical acquisition would be Amazon's third-largest, trailing only the organic grocer Whole Foods Market and the film studio Metro-Goldwyn-Mayer.
Primary care, one of the least profitable areas of medicine, has attracted investment from retailers, health insurers, and drugstore chains. CVS Health Corp. and Walgreens Boots Alliance Inc. both fell on the news that they are adding primary-care services to their stores. Walgreens, which agreed to pay $5.2 billion for a controlling stake in clinic chain VillageMD last year, fell 3.1 percent as the New York market opened, CVS fell about 2.7 percent, and Teladoc Health Inc. fell 7.9 percent.
Amazon shares increased by less than 1%, while 1Life Healthcare increased by approximately 66%.
One Medical began as an early attempt to modernize primary-care services with slick clinics in urban areas that patients or their employers paid a fee to join. The company promised easier access to appointments and virtual consultations, as well as a higher level of customer service than typical medical practices, in exchange for an annual fee. It entered into referral agreements with large health networks such as Mount Sinai Health System in New York.
However, unlike other investor-backed clinic chains like Oak Street Health Inc., One Medical has historically focused on fee-for-service medical care rather than the new payment models that the industry is transitioning to. That changed last year with the $1.4 billion acquisition of Medicare-focused chain Iora Health Inc., which is known for attempting to reinvent senior care by improving quality while controlling costs.
Despite billions of dollars invested in companies attempting to reinvent primary care, clinic operators have struggled in public markets, with valuations plummeting in recent months. One Medical was trading below the price of its 2020 initial public offering before the deal was announced.
Bloomberg reported earlier this month that One Medical was considering its options after receiving takeover interest from companies such as CVS.
The transaction is subject to customary closing conditions, including shareholder approval and regulatory approval from One Medical. After the transaction is completed, Chief Executive Officer Amir Dan Rubin will continue to lead One Medical.