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Apple Aims to Revolutionize Healthcare … for Free

By Billy Duberstein – Feb 6, 2018 at 9:22AM

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Integrating electronic medical records has been tried before, but can Apple use the iPhone to "think different" on this huge market opportunity?

Last week, Apple (AAPL -2.01%) announced another step forward in its health efforts. The upcoming update for its iOS operating system will include a new "Health Records" feature, which will store electronic medical records on the iPhone. Getting a central, easy-to-access platform for your medical records is actually quite the herculean task, with numerous logistical and regulatory hurdles. More than that, even if Apple manages to accomplish what others haven't been able to, the iPhone giant insists it won't be charging consumers for its achievement. Here's why.

closeup on a doctor's hands holding a red plastic heart.

Apple wants to bring your medical records to the palm of your hand. Image source: Getty Images.

Past attempts

Other formidable companies have tried this health records challenge before, without much success. Google (GOOG -2.74%) (GOOGL -2.44%) shut its health records initiative in 2012, Microsoft (MSFT -2.20%) ended its HealthVault Insights platform in 2014, and the U.S. government spent $40 billion in Stimulus Act money trying to digitalize and simplify the country's health records -- and we're still not at 100% adoption yet. 

The benefits could be big, however, as a more-streamlined records system has the potential to, in the words of former President Obama, "cut red tape, prevent medical mistakes, and help save billions of dollars each year."  

But the problems are numerous. Hospitals don't always have permission to share information, and not all medical records were digitalized -- and even if they were, they often were on different standards. In addition, the more complex your medical problem, the more difficult it was for digital data to be relevant, and thereby make a difference.

So some may wonder why Apple is getting into a game where big companies tried and failed, especially when, again, Apple claims it's not going to charge for it.

Different thinking?

Apple's old slogan was "Think Different," and some experts believe this time may, in fact, be different with respect to medical records.

First, the healthcare environment, while not ideal, is vastly improved. Hospital systems have consolidated, making the task of integrating different providers easier, though still no easy feat. Second, the $40 billion Stimulus Act incentives did improve electronic medical record (EMR) adoption over the past 10 years. In 2007, less than one-third of all medical records were electronic;  that's very different today, as roughly 90% of physicians use EMR systems, though only two-thirds of providers overall. Apple has already partnered with the two of the biggest such EMR providers, Cerner (CERN), and Epic, as well as upstart athenahealth (ATHN), to participate in the medical record initiative. Of course, these providers are only part of the market, and some hospitals still don't have permission to share data.

Apple has also been diligent in building the platform, adhering to the Health Insurance Portability and Accountability Act, which mandates certain privacy standards regarding the handling of a person's medical data, as well as Fast Healthcare Interoperability Resources, which uses APIs to standardize information from disparate providers and formats. Apple has devised a system whereby doctors can upload information directly to Apple's servers, fully encrypted, without the company ever seeing that data.

Apple is experienced

The health records initiative builds upon Apple's previous efforts in health. These include 2014's HealthKit app, which sought to integrate health and fitness data from the iPhone or Apple Watch in one place, and 2015's ResearchKit, which allowed smartphone users to sign up for clinical trials and send information to researchers via their phones. And in 2016, Apple acquired Glimpse, a start-up that collects and interprets medical records for consumers.  

On its last earnings call, Apple also unveiled the Apple Heart Study, whereby the Apple Watch might detect an irregular heartbeat that could be a sign of atrial fibrillation (AFIB). Apple hopes to submit the study to the FDA to make the Apple Watch an approved device for monitoring cardiac activity.

Apple's big bet

As you can see, making inroads in the healthcare industry is daunting, cumbersome, and expensive. But Apple is one of the few companies with the resources to give it a go. It was built, some would say, on packaging people's important outside data, like media and music, onto easy-to-use personal devices like the iPod. Apple is now trying to do with health data what it initially did with music.

Over the past few years, the company has hired hundreds of engineers, researchers, and doctors, and acquired small companies in order to gain a toehold in the $3.2 trillion healthcare industry. But even if Apple can link your personal health and wellness to your smartphone, it won't have to charge for it, as it will keep consumers hooked on its extremely profitable iPhone and Apple Watch franchises going forward.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Billy Duberstein owns shares of Alphabet (C shares), Apple, and Microsoft. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Athenahealth and Cerner. The Motley Fool has a disclosure policy.

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