The healthcare IT and EHR world is ablaze after Jim Cramer on his show Mad Money on CNBC suggested that the best thing Apple could do to help its stock price is to do a big, splashy acquisition. Here’s who Jim Cramer suggested Apple should acquire:
Apple should acquire Epic Systems. That’s a privately held provider of electronic health records. Not only would this deal be good for the company, I think it’s exactly what Apple’s stock needs to get its mojo back.
That’s right. Jim Cramer suggested that Apple should acquire Epic. Not that Apple has expressed interest or that Epic is willing to sell, but let’s go along with him for a moment.
Ever since Apple launched the iPhone, there has been a group of people that have been yearning and praying for Apple to build an EHR. They somehow think that Apple’s success in the consumer space would translate to the world of EHRs. I’ve never believed this was possible. First, when has Apple ever done well in Enterprise? Second, the regulations and reimbursement requirements are what they are. Could Apple possibly make a better EHR? Sure, but would it be demonstrably better to the point that hospitals and health systems will want to leave Epic, Cerner, and MEDITECH. I don’t see it happening in the current environment, but I digress.
The thing is, Jim Cramer isn’t suggesting that Apple should build their own EHR. He’s suggesting they buy Epic. Many people’s gut reaction is that somehow Apple’s magical fairy dust mojo will rub off on Epic after an acquisition by Apple. Good luck with that. However, Jim Cramer is making a much better point for why this acquisition makes sense for Apple.
The idea here is that this would make the service revenue stream a larger piece of the pie. […] Perhaps more important, it would force investors and analysts to reevaluate Apple as more than just a hardware company.
This is actually a brilliant reason for Apple to acquire someone like an Epic. The stock market could stop looking at just iPhone sales and have to start looking at the service revenue in their analysis of the stock. Epic’s revenue would be strong and consistent since even in a downturn hospitals keep running and Epic still gets paid. It’s not like a hospital can rip out its EHR if the economy is hurting.
Beyond this, Apple acquiring Epic could help them sell more iPhones. I’ve often said that the best reason Apple should create an app to aggregate your health records and other forays into healthcare like the Apple watch is to provide the perception that buying an iPhone or Apple Watch will be good for your health. Even if aggregating your records doesn’t actually accomplish that goal, that perception is a valuable marketing tool when you’re trying to justify buying the more expensive Apple devices. Owning Epic would support that message that your iPhone will get you access to your medical records, hospitals, and doctors which they’ll argue in their marketing will be good for your health. That’s valuable to Apple.
The problem with Jim Cramer’s analysis is that it looks at it completely from an Apple viewpoint. Why would Epic want to sell to Apple?
The obvious answers to those questions are the billions of dollars, the cache of selling to Apple, and what could be done if partnered with Apple. The problem with all of these is that Judy Faulkner, CEO of Epic, doesn’t really care about any of these. For all intents and purposes, she has all the money she wants. From my experiences with her, she doesn’t have any interest in selling to anyone and would actually see selling to Apple as a failure and not a success. I’m also quite confident that she believes that selling to Apple would slow her efforts to improve healthcare rather than enhance them.
All of these might be poor or incorrect choices and ideas on Judy’s part, but that’s beside the point. We’ve seen over and over again that Judy doesn’t cave to what other outside people think about how she’s running the business. When she has a deeply held belief about something, she’s fierce about it and isn’t likely swayed by others opinions for whom she likely doesn’t know or respect. And for those that think there’s more to it than Judy. At least while she’s living, Judy is the key stakeholder you’d need to sway for Epic to even consider being sold.
Needless to say, Apple would have a massive uphill battle to even get a discussion with Judy about an acquisition. “Do not go public.” and “Do not be acquired.” are the top 2 points in Epic’s 13 Principles which are plastered all over campus and ingrained in staff training meetings. I honestly think as it stands today, Judy would rather die than sell to Apple. In fact, she’s taken it one step further with the private charitable foundation she reportedly started to own her shares of Epic and try and keep it private. Basically, Judy would have to have a complete change of mind, which seems very unlikely.
The only way I think Apple could even get Judy to have a conversation about this idea is if they appeal to Judy’s real desire to improve healthcare. Judy won’t care about the money or the prestige, but she does care deeply about her clients. I’ve seen numerous examples of how much and how deeply she cares about her clients. It is part of the secret sauce that I think has made Epic so successful. Apple would have to make the case that together they could accomplish some magical things for their clients that Epic wouldn’t be able to do alone. Then, Judy might listen.
This is an extremely hard challenge when you’re going into the negotiation with Epic already believing that being a public company and being acquired is counter to this goal. Plus, you also have to remember that Epic’s clients are hospital and health system CIOs, not patients. What’s the magic that a combined Apple – Epic company could provide a hospital or health system CIO that Epic can’t already do now?
Jim Cramer seemed to make the case that the magic that Apple could provide Epic is being able to solve the health data interoperability problem. Here’s what he said:
If electronic health records are ever going to achieve their full potential, you need something to act as a universal repository for all this data, and the iPhone and Apple could easily do it.
If Apple wants to become the universal electronic health records provider, to be the handshake between, say, the Watch’s data and the system, they’re going to need to break into this market big, and the best way to do that is by acquiring the best: Epic
We’ll set aside the idea that Judy already probably feels like Epic is the future universal repository of health data for a minute. Let’s just address how far fetched it is to think that Apple and Epic together would have the power to finally get doctors, hospitals, and other healthcare organizations to start sharing their data. This ignores the fundamental reason for why healthcare organizations aren’t sharing data today: it’s not in healthcare organization’s (Epic’s clients) interest to share data. If it was in their interest to share data, Epic, Cerner, MEDITECH and all the other 300+ EHR vendors out there would already be doing it.
As we’ve said 100 times here before, health data sharing isn’t a tech issue, it’s a business model issue. Check out our recent Healthcare IT Today podcast on healthcare interoperability where we dive into this subject even more including the fact that all your health data is spread across thousands of healthcare organizations and hundreds of systems. Having just your Epic health data is like having 10 pieces of a 100 piece puzzle. Doesn’t make for a pretty picture or provide much health value to patients or doctors.
No doubt Jim Cramer strongly disagrees:
These companies are dis-incentivized to talk to allow their data to talk to each other. By buying Epic, Apple can become the universal standard … That's why Epic should do the deal… Disruption is good!
— Jim Cramer (@jimcramer) January 16, 2019
I just don’t see how Apple buying Epic changes this equation for healthcare providers at all. In fact, it seems more likely that the Cerners of the world would be less likely to want to share data with Apple if Apple owned Epic.
However, Jim did suggest one way Epic could cut into their competitors market share if it were part of Apple:
If Apple buys Epic, the new Epic could go to all of Cerner's clients and get them by offering a great deal knowing it will be made up on the service stream…Epic can't do that; Apple can
— Jim Cramer (@jimcramer) January 16, 2019
Can you imagine Judy accepting the idea of Epic being sold as the least expensive product? Basically, the exact opposite of how they approach EHR contract negotiations today. I also think that Jim doesn’t quite understand how difficult it is for a company to switch from Cerner to Epic. Let alone the hundreds of other EHR vendors, labs, device manufacturers, etc that would have to be convinced to work with Apple/Epic in order to really provide a universal health record to patients. Again, the perception and diversification of revenue streams would be enough for Apple to consider the deal, but that’s not compelling for Epic to consider the deal.
Jim Cramer did suggest this reason for Judy to consider selling to Apple:
If she wants to retire with a bang, selling her company to Apple would be a good way to do it, especially because a deal like this one could potentially be revolutionary for the health-care sector
Unfortunately, it misses the point that Judy doesn’t care about retiring with a bang. I’m pretty sure she already feels like Epic is, was, and has been revolutionary for healthcare and the best way for her to retire with a bang will be to keep Epic private. Selling Epic to Apple would be seen as stopping her revolution of the healthcare sector.
That said if Judy was to sell, Apple is an interesting acquirer. Apple has created more trust in how it handles data than most technology companies and that’s something that would be valued by Judy and Epic. Is it enough? Probably not today. I think Judy still trusts herself and Epic to protect their clients’ data 1000 times more than she would trust Apple to do so.
However, as I mentioned to Jim Cramer, I don’t see any Epic acquisition while Judy is alive, but you never know what will happen when trustees of her Foundation take control. They could see acquisition by Apple as a fulfillment of Judy’s bigger mission. I’ll still give that at least a generation or so before that would happen though. Jim Cramer seems to agree.
This is exactly what i was talking about.. EXACTLY https://t.co/5CaGbROUzw
— Jim Cramer (@jimcramer) January 16, 2019