Author(s): Raghu Gopal
In the US, most large companies provide or contribute to healthcare insurance for their employees and their families. But thanks to escalating healthcare expenses that are pushing up insurance rates, there's a trend among large organisations of bringing some medical services in-house to take control of costs.
The motivation for this is substantial. In describing healthcare as the "the tapeworm of American economic competitiveness", Warren Buffet recently claimed that healthcare spending has risen from about 5 percent of GDP in the US in the 1960s to about 17 percent today. This compares with figures in the low double digits worldwide. Very few businesses have the size and means to launch their own private medical systems, so it's not surprising to see Apple go down this path.
Last week, the company's latest subsidiary came to light. The unit, called AC Wellness, is a private medical clinic exclusively for Apple employees. Apple's plan comes on the heels of Amazon's announcement earlier in 2018 that it's partnering with Mr Buffet's Berkshire Hathaway and JPMorgan Chase to create an independent healthcare company for their employees.
AC Wellness will begin by catering to Apple workers in Santa Clara County, California, through two new clinics that will open in spring 2018. More centres will follow. Apple currently has more than 120,000 employees with about 47,000 of them based in the US. There are certainly bigger organisations in the country, but given the need to attract and retain talent, US tech companies spend more on healthcare per employee than those in other industries, so the cost savings for Apple could be significant.
Companies like Apple realise that an ounce of prevention is worth a pound of cure. By keeping medical services closer at hand and making them more welcoming for employees, businesses can ensure their workers are healthy. According to the US Centers for Disease Control and Prevention, roughly 69 million workers in the US take sick days each year, costing the economy $260 billion.
It's worth remembering Apple's longer-term ambitions. CEO Tim Cook said at a shareholder meeting earlier this month that the company wants to make a "significant contribution" in healthcare beyond building fitness-tracking apps and devices. AC Wellness could be a testing ground for its growing range of products in this area. When Apple launched the original Apple Watch, it focused on two main health-tracking features: a heart-rate monitor and an activity-tracking pedometer. It also worked with developers to release numerous health apps. The company has since expanded each feature through software improvements. Apple is inching forward in the well-being market.
Healthcare is the largest industry in the US, worth about $3.4 trillion per year. It's a highly complex ecosystem, but one that's ripe for disruption. It could be a reason to take AppleCare to a new level and control yet another part of the Apple supply chain.
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