#45 - Apple is a hardware/services company
Apple’s doing services, Omron’s blood pressure watch, and Verily, warily.
|Isaac Krasny||Jan 13, 2019|
Things That Happened
Miscomprehend. My last newsletter, back in the heady days of 2018, discussed the implications of Amazon’s Comprehend Medical service. Should it work as described in their blog post, Comprehend Medical is the medical scribe of the future. Should it work as described. One intrepid Handout reader/cardiologist got in touch to say he’s been testing the new service and, while it’s better than previous attempts at automated documentation, it’s not living up to AWS’ promises.
Watch your blood pressure. Omron’s blood pressure watch is now available for purchase. Don’t get me wrong; this is a technical achievement and will make it easier than ever before for people to regularly check their blood pressure. But don’t expect it to become more than a niche product for those who have $500 to spare and need to regularly check their blood pressure on-the-go. Let’s get excited when Apple puts the same functionality in their next watch.
And in case you were wondering, Dr. Topol approves:
Warily, Verily. Stop me if you’ve heard, but Verily raised a cool billion. You may be asking yourself: but what does Verily actually do? Their business model can best be described as collecting information. They’re gathering up data through partnerships and their own projects like Baseline. What they’re planning on doing with it? Anyone’s guess. Can collecting information be a lasting business model in health? We’ll have to wait and see. Here’s some of my speculation from March when Verily was rumored to be getting into the insurance business. And here’s a recent interview with Verily’s CMO Jessica Mega.
Whole Lotta Whole Foods. WSJ is reporting that Amazon plans on adding new Whole Foods locations throughout the country. While the move is reportedly focused on extending the reach of their 2-hour delivery service PrimeNow, it’ll also put physical Amazon locations nearer to more Americans. If Amazon does decide to get into care delivery, these locations could serve as their beach-heads.
Speaking of Corporate Care… CVS CEO Larry Merlo laid out the company’s vision for the future at the JP Morgan conference, and care delivery is a big part of it. Here’s his deck from the conference. They’re building a concept health hub in Houston:
Listlessly Listing Prices. A new law has gone into effect requiring hospitals to post their price lists online. Here’s the chargemaster from my local hospital. 500 pages, largely meaningless (to me) procedure and device names, and the prices themselves don’t reflect the discounts my insurer has negotiated, nor how much I’d actually owe after co-insurance, deductibles, etc. Let’s hope nobody is considering this progress.
Things Worth Understanding
It’s a fairly safe prediction that Apple will become much more of a services company in 2019. iPhone sales growth appears to have peaked amid a larger trend in mobile where hardware is no longer the key differentiator - it’s the power of a phone’s virtual assistant, the variety of its app offerings, and the larger device ecosystem in which it exists that increasingly drive demand for phones.
One reason this is such a safe prediction is that Tim Cook has said as much: “You will see us announce new services this year. “ At least some of these services will have a health focus, as Apple grows on the base of their health records service and Apple Watch EKG. Don’t forget Apple has an expansive health lab and has “dozens of doctors” on staff to guide healthcare efforts.
Ben Thompson and James Allworth dive into Apple’s uncertain future in the most recent episode of Exponent. In it, Thompson makes the argument that as the larger ecosystem becomes more important in defining the user experience of a device, Google and Microsoft, with their much closer ties to users’ calendars and professional lives, have a distinct advantage. Perhaps Apple is attempting to leapfrog these two by focusing on health, an aspect of our lives equally if not more important than scheduling, and one without a dominant digital player.
Apple may see health as their wedge for creating a unique user experience. Specifically, they can become the consumer-oriented digital health platform that doesn’t yet exist. One thing is for certain: while we’ve been able to evaluate Apple’s moves in the past as those of a firm primarily focused on selling hardware, this may no longer be the case.
Things To Read
Of the $1.18 billion invested in health tech companies in the fourth quarter of 2018, the vast majority, ~$900M, went to services companies. A whopping $500M is split between just Devoted Health and Bright Health, both of which are applying technology to improving insurance and care delivery. In this case, the market seems to be a solid indicator of systemic priority: the biggest problems to be solved in healthcare lie in the basics of how we deliver and pay for care. Mobihealthnews has the complete Q4 funding list.
While we’re talking about venture capital, you probably saw this NY times piece on the many startups choosing to bootstrap rather than take venture investments. Especially for digital businesses, it’s easier to bootstrap than ever before; you can grow a business from minimum viable product to fully-featured powerhouse all while bringing in revenue to support operations and growth. But does this hold true in health? Given the predominantly b2b sales environment, and stringent regulations, it’s infinitely more difficult for digital health companies to develop iteratively and earn early revenue. Perhaps one of the reasons venture capital investment in health tech continues to grow is that it’s one of the sectors where venture investment is still nearly a requirement.
Undeerwhelming-Horowitz. Ben Horowitz (of legendary VC firm Andreessen-Horowitz) interviewed Kaiser-Permanente CEO Bernard Tyson on the A16Z podcast. Sadly, these two have nothing more than a surface-level conversation about KP’s unique business model - if you’re looking for a meaty conversation on health, tech, and payment models, keep looking.
And if you have any good healthcare podcast recommendations, please send them my way. I’m getting desperate.
In case you weren’t convinced, here’s an article in JAMA talking about how and why personal health records are coming of age in the era of smartphones.
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