Apple Inc.(NASDAQ: AAPL) is hiring healthcare providers and experts to develop technology-based healthcare plans for patients treated at healthcare clinics owned by a newly created subsidiary. The clinics will initially only be open to Apple employees and their families. However, they could eventually become a key component of the company's long-stated goal to transform the sector.
In this clip from The Motley Fool's Industry Focus: Healthcare, analyst Kristine Harjes and contributor Todd Campbell explain Apple's latest endeavor.
Todd Campbell: Private companies are very interested in figuring out whether or not they can do healthcare better. And obviously, there's a major need, Kristine, because we spend so much money on healthcare every year.
Kristine Harjes: Yeah, a lot of these major tech companies have so many employees that it ends up being a fairly large expense item just to take care of them. Studies report that health problems result in 69 million workers reporting missed days each year, and that reduces economic output by $260 billion. So, this is just one more indication, this Apple initiative, that the large tech players have skin in this game and they want to throw some of their brains and some of their financial muscle around to try to cut down on those expenses, and give people a better experience, too.
When you look at what Apple is trying to do with these wellness centers, it's not just dispensing drugs, it's not just going in for a regular checkup. It really does seem, from early indications, which would be the website that they've propped up and some of the job postings that they've announced that they're looking for people to fill, it's more comprehensive than that. They're looking for people who can do population health management, and people who can design lifestyle plans for these Apple employees and their dependents, in order to have a more holistic view of wellness.
Campbell: And that dovetails very nicely into what we've seen out of Apple in the course of the last couple of years, talking about their plans for healthcare. Obviously, they have the Healthcare app, and they're trying to get more and more people to figure out new ways to use their ecosystem to create healthy lifestyle type solutions. They're also internally spearheading all sorts of things. We've talked in the past about what they're trying to do with wearables, the Apple Watch, being able to use that, use the heart study in December that they announced, use that to try to ferret out whether or not you might be at risk of an atrial fibrillation. Last year, we also heard Tim Cook say that he was experimenting with an Apple Watch to track his blood glucose levels. Clearly, Apple believes that technology can contribute to improving preventive medicine. Given the fact that we spend $3.3 trillion a year on healthcare, anything that can reduce healthcare costs, such as preventative medicine, would be a welcome advance.
Harjes: And for now, much like the JPHathAzon project, this is going to be limited just to Apple employees and their dependents. But, who's to say what could come out of it?
Campbell: Yeah. You know, what's really interesting is, if you go back last year, CNBC was actually reporting that Apple was chatting with a venture-backed company called Crossover Health. They are a start-up that's developing clinics for various private companies, and actually, Facebook and Apple were customers of theirs. That deal fell through. But, if they were talking to Crossover, it certainly makes me feel like, while it may start out for Apple employees, they're thinking much bigger than this. They're thinking, how can we use healthcare to drive more people into our ecosystem?
Harjes: Yeah, it's so Apple of Apple. They want to provide this start to finish type of experience where, once you're a part of this ecosystem there's no reason that you would leave it, because it only gets more and more beneficial as they add more services. So, say you have an Apple Watch, and you're monitoring your glucose through it. If you then also have the ability to go see somebody in a medical center that will look at that data with you and help you develop a comprehensive plan for how to approach your diet and your exercise to better manage those glucose levels, that's huge, and that's super sticky. This is exactly what you see when you look at both their hardware suite of products and also the services that they're adding on top of that. This is a really nice parallel with that typical approach that Apple has taken to their revenue.
Campbell: Let's take that one step further, too, Kristine, and think about how many resources they have and their ability to analyze data, and the steps that they're taking in artificial intelligence. In January, they announced a deal now where you can have your electronic health record in the Apple ecosystem. They cut deals with athenahealth, with Epic, with Cerner, to tie it all together. Now, holding your smartphone, tying it in with your Watch, having your entire electronic health record in one place, and then being able, theoretically, someday, to walk into an Apple clinic with all of that insight? Wow. That could definitely shake things up.
Harjes: Yeah, it's super interesting to watch this all develop. I'm particularly excited looking at the upcoming South by Southwest Conference, which we'll be sending some Motley Fool analysts to. Every year, it seems like there's more and more health news coming out of this typically tech-centric conference, so I'm sure we'll only be getting more news items to cover, both on this show, the Healthcare show, as well as the Friday Tech show.
Campbell: Yeah. You know what does scare me a little bit, though, Kristine?
Harjes: Yes.
Campbell: [laughs] We know that Apple likes to have a contained silo ecosystem. It's not like you can access iTunes with your Android phone. And we know that Apple is a "premier" product. In Q4, Gartner said that Apple's iPhones accounted for about 20% of total smartphone sales, and their iPhone X is basically a break-the-bank premier product.
Apple is investing a lot of money in their healthcare initiatives. And Tim Cook has said in the past that he feels that these are business models, which is a contrast to what we're seeing with Amazon, JPMorgan and Berkshire's consortium, which, they've said they're going to make a non-profit. One worry, one thing we'll have to watch, is make sure it's not a case of Apple being able to go out and hire the best and the brightest minds in the industry and then put them into a siloed ecosystem that really only people who have access to Apple phones are going to be able to gain access to. And I will admit, Kristine, I'm a Samsung user, and when they announced the heart study, I was so intrigued that I may indeed switch over myself. But, maybe that's not the case for everybody.
Harjes: Yeah. That's a sample size of one, but I still think that's fairly indicative. And that's kind of the point, too, of this business model. If you can lock up the best of the best in hardware or software or whatever it is, you're going to attract customers. And then you build this sticky web and you catch them and keep them within your chamber, which is both brilliant, and also, as you point out, kind of frightening.
Campbell: Yeah, and it kind of makes you wonder what's going to end up happening with players like Samsung and some of these other large providers. Are they also now going to start trying to figure out ways that they can partner up in healthcare, to try to make sure they don't get left behind? Apple is brilliant, and what they're doing here is brilliant, and it could significantly disrupt healthcare in fantastic ways. But, like anything else, we'll have to wait a few years and see how this all plays out.
Harjes: Yep, absolutely. We'll keep reporting back in the meantime.
Kristine Harjes owns shares of Apple. Todd Campbell owns shares of Apple and Facebook. The Motley Fool owns shares of and recommends Apple, Athenahealth, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short March 2018 $200 calls on Facebook, and long March 2018 $170 puts on Facebook. The Motley Fool recommends Cerner and Gartner. The Motley Fool has a disclosure policy.
