healthOS

Author: Nathan Baschez (in Divinations) URL: https://divinations.substack.com/p/healthos One-line: Apple isn’t trying to make health hardware — it’s building the operating system for health, the chokepoint every player must integrate with to reach distribution. #Healthcare

Highlights

• It was January 2019, and Apple ($AAPL) was in free fall. The main concern was the iPhone. Growth seemed to be slowing, and investors were panicked.
• Jim Cramer got straight down to business: “You know I always say, ‘Own it, don’t trade it.’ But right now, people are saying, ‘Jim, give me the investment case for buying the stock.’”
• When people think about Apple and health, the first thing that comes to mind is the Watch.
• Specifically, they’re building a system to aggregate data from modern connected devices (like watches, scales, fitness equipment, mattresses, etc) and integrate it with traditional health records (lab results, conditions, medications, procedures) in order to unlock a new, comprehensive view of your body’s health.
• Imagine the healthcare system was able to operate 10x more efficiently, because continuous background data collection and analysis eliminated unnecessary visits, reduced misdiagnoses, and caught most issues early enough to be solved with simple procedures.
• Apple doesn’t want to go down the path of making health-related hardware devices. These have high fixed R&D and manufacturing costs to make them, and each device tends to only fill a small niche — so it’s a tough business to be in. Apple considers these devices accessories/subcomponents.
• Behind the scenes, Apple has done a ton of blocking and tackling with key healthcare players to make it happen, including vendors, hospitals, and government agencies. Anyone who knows about HIPAA knows this stuff is complicated.
• Put simply, it’s the combination of scale and privacy. Apple’s focus on privacy got them in the door with healthcare companies, and their scale allows healthcare providers to tap into their customer base for large scale research studies that make the relationship mutually beneficial.
• Just look at the Apple Watch. Rather than hyper-focus on a particular pillar of health, Apple has decided to go after the broadest swath of the population possible.
• Because the Apple Health app acts as a repository for all health data, Apple hasn’t developed many apps of their own, opting to allow third-party developers to build on their Healthkit API. They’ve taken a similar route with sensors. While companies like WHOOP, Oura, and Eight Sleep have pushed sensor technology to their limits, Apple has accepted the trade-off of being “good enough”, while they deepen their data moat.
• Instead of making all the hardware, Apple wants to create the OS for health, and own the critical chokepoint that all players must integrate with in order to get distribution. This feels like a distinctly Tim Cook contribution, a definite break from the past.
• Public company CEOs have a lot of limits on what they can say. There are huge disincentives to divulge details about specific plans, and plus, Apple is already well known to be an especially secretive company. So the only thing we have to go by is broad statements.
• Some forward-thinking providers like One Medical, Forward, and Q.bio will make better use of the data from Apple’s ecosystem to offer differentiated primary care. Patients will come to expect it and value it. Perhaps Barry’s or Equinox will integrate with Apple Health to create a better customer experience.

How it connects

• Nathan Baschez / Divinations — author and publication.
• Apple ($AAPL) — the subject; the “OS for health” platform thesis.
• Tim Cook — the platform-over-hardware move framed as his distinct contribution.
• HIPAA — the regulatory complexity Apple had to navigate to aggregate health data.
• WHOOP / Oura / Eight Sleep — sensor specialists Apple is content to be “good enough” against while deepening its data moat.