Amazon is (Health) Infrastructure

The managed care revolution is coming

I bought stock in Amazon.Com stock almost a decade ago, and it’s one of the best investments I have ever made.

Not for the return. My Apple shares have done better. My Microsoft shares have done better. And over the last year, all three have tanked.

It’s because of what Amazon is, a secret no other financial analyst I’ve ever read seems to understand.

Amazon is Infrastructure.

Cloud data centers are infrastructure. Delivery vans are infrastructure. Warehouses are infrastructure. Amazon buys them for cash, then rents them out, which cuts its own costs and lets it buy more infrastructure.

It’s no secret. Amazon even puts its cash flow statements first in its quarterly reports to shareholders.

The last year, however, has demonstrated another Amazon trick. Amazon husbands its cash. It doesn’t hand out dividends, it doesn’t buy back many shares. It keeps its cash for a rainy day, so it can keep buying infrastructure even when cash flow turns negative, as it did in the last few quarters. It also uses debt to get it through tough times but is careful to pay that debt down as quickly as possible. At the end of March, Amazon had $36.5 billion in cash.

The reason I’m writing this is because Amazon has found yet-another type of infrastructure worth buying. It is paying $3.9 billion for One Medical, a primary care company.

Why is this infrastructure? Because Amazon now has 1.6 million employees. (Walmart has 2.3 million.) Instead of seeing health care as something it buys from an insurer, Amazon is seeing it as infrastructure.

This is being plugged into Amazon Care, a mainly online wellness service almost three years ago. One Medical will be able to provide front-line care, not just for Amazon employees, but for others as well.

I’ve been writing for years that 75% of America’s health care costs are for chronic conditions. These are preventable diseases that require lifelong treatment, like Type 2 diabetes and hypertension. Billions can be saved if people get the support needed for early diagnosis and regular treatment. Billions more can be saved if wellness services are easy to access.

Once Amazon builds infrastructure it always rents it out. That’s already happening with Amazon Care. I think it will happen with One Medical. The company then can go up the stack, toward critical care and managed care. This represents 20% of America’s GDP, a $5 trillion opportunity.

That’s why I’m proud to own Amazon.