Can Apple Watch Carry Apple Into The Healthcare Future?

Healthcare is becoming more important to major players in digital commerce and payments, with companies such as Amazon, Apple and Google trying to build their own ecosystems to capture more of the spending in that massive and global industry. A closer look at Apple’s activities and plans in the wake of the company’s latest earnings release shows the appeal and challenges of the healthcare space.

Apple is seeking more revenue fuel from services — a category that includes App Store, Apple Pay, Apple Music and the Apple Cloud — as the company deals with weakening sales of iPhones. Those services, of course, are key to Apple’s efforts to build a healthcare ecosystem anchored to its hardware and digital offerings. In a post-earnings conference call with investors, Apple CEO Tim Cook said that overall the Apple ecosystem includes  1.4 billion installed devices at the start of 2019, a 100 million device increase from the start of 2018.

That’s not the only factor that could work in Apple’s favor when it comes to healthcare. According to Cook, owners of Apple devices are using them longer — aided by the company’s battery replacement program — pushing further growth for services.

That growth spike applies to the Apple Watch as well. Thanks to its expanding use as a healthcare management tool, Cook said that the Watch  is becoming an “indispensable tool” for users worldwide.

Wearables Growth

Sales of Apple wearables, home and accessories products topped $7.3 billion in the fourth quarter of 2018 — up 33 percent year over year. Services came in at more than $10.8 billion — up 19 percent. Apple Watch sales are less than 10 million units per quarter, according to estimates, with a user base estimated at approximately 43 million. Those numbers serve almost as a foundation for Apple’s ongoing efforts to capture more spend and consumer loyalty via healthcare — but it obviously needs to expand that user base.

And Apple’s healthcare ecosystem is expanding as the company enlists other operations in that push.

Further evidence of that came on Tuesday (Jan. 29), when Aetna, part of the CVS health business, announced the launch of Attain, a new health experience designed by Aetna in collaboration with Apple. Via the Apple Watch, the Attain app will give Aetna members access to personalized goals, the ability to track their daily activity levels, access health action recommendations and earn rewards for taking actions that improve their overall well-being.

The significance of that deal goes beyond expanding the Apple healthcare ecosystem — though that aspect is notable, given that Aetna has an estimated 18 million medical-plan members. The ongoing work with Aetna — the two companies signed their first deal in 2016 — follows findings showing that 90 percent of participants reported receiving a health boost from their Apple Watch. And rewards offered via that device seem to work in encouraging healthier habits. A global study conducted for Vitality Insurance recently revealed that people will exercise more if they are given a reward, such as a great deal on an Apple Watch.

Customers of United Healthcare — which serves an estimated 70 million U.S. consumers — also are taking part in an Apple Watch program that encourages people to walk more.

Wider Ecosystem

And that’s saying nothing of the estimated 86 million U.S. consumers who have iPhones are already part of the larger Apple ecosystem. “In healthcare, iPhones and iOS apps continue to streamline and support clinical workflows, communications and care delivery across leading health systems including Johns Hopkins Medicine, Massachusetts General Hospital, Stanford Health Care and Saint Jude Children’s Research Hospital,” Cook said during that post-earnings conference call.

Beyond devices, Apple also wants to work with the Department of Veterans Affairs by providing portable electronic health records for military veterans as part of a partnership aimed at making hospital visits less complicated. Apple has also touted how its Apple Watch has helped saved lives thanks to the data it offers consumers.

Older Consumers

Further growth of the Apple Watch healthcare ecosystem seems likely to come from older consumers, too. Apple has reportedly been in discussions with private Medicare plans to provide those devices to people 65 years old and older. As it stands, roughly 19 million seniors are a part of private Medicare Advantage plans — and that figure is said to be on the uptick — another chance for ecosystem expansion.

That will take some work — but will also provide the opportunity to sell Apple Watches to groups of consumers that are relatively unfamiliar with Apple products . For consumers between the ages of 65 and 74, about 70 percent do not own any Apple device, a percentage that increases to about 75 percent for consumers older than 75, according to the latest data from CBI Insights.

The expanding Apple healthcare ecosystem has benefited from favorable attention from the U.S. Food and Drug Administration, which, as one recent analysis notes, approved the device’s electrocardiogram and the irregular heart rhythms apps with relatively little hassle. “For a company, a FDA clearance can be worth hundreds of millions or even billions of dollars,” the analysis said. “The Apple announcement is a visible signal in Washington that the FDA is encouraging innovation.”

That innovation is demonstrated, at least in part, by the number of patents filed by Apple that relate to “wearables” and “health informatics. According to the latest CBI data, Apple filed about 40 such patents in 2016, up from about 33 in 2015 and 23 in 2014. A file patent doesn’t guarantee a finished products, of course, but those numbers do help describe Apple’s healthcare ambitions.

“We believe we are just beginning to see the impact we can make to improving health and are deeply inspired by the possibilities,” Cook told analysts Tuesday.

Apple, of course, is not the only business betting that watches and wearables will prove a big hit in the healthcare space — a more than $3.5 trillion space in the U.S. Fitbit, for instance, is banking on smartwatch use in healthcare for future growth. And a backlash seems likely — a recent report from CNBC describes the growing concerns of doctors being flooded with more and more data brought in by patients who use Apple Watches and similar devices. But as Apple demonstrates, the stakes are too lucrative, and the technology too promising, to back down in healthcare.