Amazon's acquisition of One Medical is among the biggest investments in care delivery by a non-health care entity. The acquisition has kicked off an arms race for physicians, with organizations like CVS announcing their own massive deals.

Radio Advisory's Rachel Woods sat down with digital health experts John League and Ty Aderhold to discuss why Amazon's investments—and failures—are a catalyst for the rest of the industry (and where they are going next).

3 scenarios: Exploring Amazon's One Medical acquisition and what it means for the future of health care

Read a lightly edited excerpt from the interview below, and download the episode for the full conversation.

Rachel Woods: Let me tell you the two reactions that I'm hearing from the market, and I want you to gut check me on these. The first is almost this bring it on attitude. "Amazon, you try to get into our industry. I've seen you fail and try again and fail again because look, health care is complicated and I just want to see you attempt to do what we can do in our business."

And on the other end is another extreme reaction which is "well, we're screwed. There's nothing that any of us can do to actually keep up with Amazon." Now those might be extreme reactions, but are those anywhere near what you are hearing?

Ty Aderhold: I think this week I've mostly heard the former, where people aren't that concerned, and I think it's the boy who cried wolf effect here. There's been years and years of Amazon's doing this in health care. Amazon's attempting this. They've rolled out a new X, Y, Z. And I don't think people have the capacity to freak out once again at this latest move.

Woods: Or with everything else happening in the world? We just don't have the capacity to freak out anymore. Our cortisol levels are too high already.

Aderhold: Exactly. But I don't think that means there aren't people out there who are freaking out. I think there's probably some very specific organizations and leaders who definitely are on the more "we're screwed" side of things.

Woods: But those are the reactions from, when I say traditional incumbents, I'm mostly meaning providers. I'm talking about health systems. I'm talking about frankly employed medical groups, not even independent medical groups that fall into those two extreme spaces. But we've also already seen some pretty significant reactions from the rest of the market, especially people in the market that have money to spend. What has that reaction been?

League: Well, this is where it gets interesting and I think the path forward to some sort of long-term transformation is incredibly path dependent, meaning Amazon has made this move. Now, what are UHG and CVS going to do? Well, we saw what CVS is going to do—they just won the bidding war for Signify Health, paid about two-and-a-half times what the company was going for back in June. Actually got it back above its IPO price for the first time in a year-and-a-half on that sale.

I don't think they command that premium value if Amazon is not in the market, if there aren't others looking to build out more assets and continue to differentiate and diversify their portfolios of offerings and what they can control and how they can guide patients and members through the care continuum. I think that is really where we're looking.

You've had the health plan folks on the pod before to talk about health solutions companies—this is exactly what this is designed for. And I think the next phase is maybe even more daunting for a lot of the kind of players that you just mentioned, Rae, when you look at Walmart and UHG partnering on an MA plan in Florida. Is the next phase of partnership not between my small regional medical group and a big player that I can assist in the market I'm in, but the next phase of partnership in health care is actually between these gigantic companies, Amazon and Humana?

I'm just making that up. But let's just throw out some big logos. UHG and Walmart, Amazon and Humana, L Events and Verizon. If the next phase here this sort of like the titans all pair up and then maybe everybody is screwed.

Woods: Well, and again, those partnerships that you're describing, this comes back to an insight that we've been talking about on this podcast for years—they do not include hospitals. These are giant companies trying to come together to build a different in kind health care system that includes a physician arm, an ambulatory physician arm, but does not necessarily include an acute care enterprise.

And what I have just been amazed by as I'm watching the news is, who is reacting? Well, let's just change that, I'm not amazed at who's reacting, but I'm amazed at how quickly folks are reacting and how much money they're willing to spend.

I think it was the day after the Amazon One Medical announcement was made, CVS said, "Hey, hey, hey, we're going to buy somebody, too. We're going to buy somebody, too." And then they spent how much money on Signify?

League: $8 billion.

Woods: Oh, my goodness.

Aderhold: I know. And I mean it's important to note, Amazon might be the headline-maker here, but I don't know if they kicked off this arms race. Looking back, I think the Walgreens VillageMD acquisition is just as important to kicking off this run on acquiring physicians.

Woods: In general, and push back on me if this is the wrong way to characterize it, but I think what I keep talking about are frankly extreme reactions from the market. On the incumbent side, there's the extreme reaction of putting our head in the sand or saying, "Just you try," the extreme reaction of fear, the kind of shuddering that happens when Amazon hits the headlines.

But then there's also this extreme reaction of, "We've got to buy up as much of the market as possible. Make sure that we have a caregiving arm and being willing to spend a ton of money to do that." And I wonder, what in your mind is the ultimate conclusion of some of these extreme reactions? I have a sense of what it is, at least for the providers. I don't know about what the conclusion is for the big players, but for the incumbents, I think the conclusion is the same. They both end up doing nothing.

Aderhold: In my mind, for some of these big players the conclusion has to be that physicians, especially physicians who are willing to work in a hybrid model or a mostly virtual model, are going to come at a premium, and that is going to stay true for the foreseeable future.

Woods: And we haven't mentioned yet on this episode the other big player that's trying to buy up docs, which is private equity, not to mention other very powerful entrepreneurial independent physician practices that we call super practices that are looking to get bigger as well. Maybe they're not paying in the billions, but they're certainly willing to pay a premium for the right kinds of partners.

Aderhold: And Rae, when you mention private equity, I think it's important to also think about the life cycle of private equity and where some of these practices might end up when and if private equity decides, "Okay, it's time to sell here."

A natural landing spot could be some of these existing big players who have bought physician practices. So you could see an Amazon or a CVS become in 10 years, 15 years, a natural exit point for some of these private equity-owned physician practices.

League: I love that you said life cycle, Ty, because when we think about those extreme reactions, I think people are overlooking how this evolves over time. In the short term, Ty is absolutely right. This is largely going to continue to be focused on that direct-to-consumer, maybe into that employer market that One Medical is already trying to partner with.

When I ask people, when I'm out on the road giving presentations, I ask folks, "Do you think we're going to wind up in a world where nothing really changes? Is it a world where Amazon has a pretty robust consumer offering that is also attractive to employers?" Or, the third option, "Do you think this is super transformative for the industry?" Almost all the time, two-thirds, three quarters of the people fall in that middle market.

They think there will be some sort of bundle of Amazon offered services that attract a lot of consumers who are willing to pay One Medical's $199 a year. You could see a world where it's part of Amazon Prime in some markets or something like that. That's relatively easy to see. I think the challenge is understanding how these things evolve over time, and I say that for a couple of reasons.

One is the path dependent thing that I'd said before. How do all of these other players respond? The other element is, what if Amazon really does do something on its own that is substantially more transformative than this? That could be amazing.

I've heard people posit, "Maybe they buy an insurer. Maybe they try to come up with their own plan." I'm not sure they have that kind of appetite for risk and certainly regulation that they've never had before.

But the thing I wonder is, what if they do this and they don't wind up staying in the market? What do we wind up with then? Because if they're willing to drop these assets like a hot rock if they don't fulfill their potential now, what if that sort of remorseless disinvestment happens farther down the road when they're even bigger?

I'm not saying that's going to, but that's something I don't think we've even considered here and that to me could be potentially scary because one of the things that I hear is the sense of loss that a lot of the folks who used Amazon Care are already starting to feel.