Why Apple Won’t Buy Epic (Sorry, Jim!)

So last week Jim Cramer of CNBC suggested that Apple ought to buy leading electronic health record provider Epic Systems in order to prove to the investor community that Apple’s services revenue could be a serious addition to the possibly-dwindling iPhone revenue stream.

“It’s time for them to make a big, splashy acquisition … in the software space,” Cramer said. “The idea here is that this would make the service revenue stream a larger piece of the pie [and] it would force investors and analysts to reevaluate Apple as more than just a hardware company.”

Further, Cramer argues at CNBC that Apple could use an Epic acquisition to become the universal repository for patient data that the system badly needs: 

“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.”

I’ve been a Cramer fan for years because despite the horns and bugles and sirens on the show the guy seemed to know what he’s talking about — but I’ve been an Apple fan and investor (full disclosure) for even longer and on this one Cramer just isn’t making sense.

So let’s look at the “serious services revenue” and “universal health record” angles Cramer’s preaching.

Apple Watch Revenue is Epic x 2

Apple is a hugely profitable company with millions of loyal customers, and made more than $275 Billion dollars in 2018, more than twice the revenue at Google or Microsoft, and five times revenue at Facebook. The main engine of that revenue is the iPhone and, yes, with the Chinese economy faltering Apple just took a hit on iPhone sales.

Services revenue, however, continues to climb, from $15B and change five years ago to about $30B in 2017, then $40B in 2018.

For context, that’s about how much Delta Airlines or Best Buy make in a year, while Epic Systems makes less than $3B a year— a half of Apple’s estimated revenue from the Apple Watch alone.

Caution: revenues larger than they appear

Caution: revenues larger than they appear

In fact, the top five EHR industry companies combined brought in less than $15B in 2017.


Hard to imagine how adding $3B to the $40B Apple Services is already making (and growing at 25% per year) is going to make analysts think “hey, maybe we should take services revenue seriously!”

Why Buy an EHR Vendor if the Data is Already in iOS?

Cramer’s second argument is that if Apple buys Epic, the market (if not the revenue) leader in EHRs, it could have access to their health records and that would give Apple a boost in becoming a universal repository of health records.

The problem with this argument is that Apple already has deals with more than 160 major US health systems, from Stanford to Yale New Haven to Johns Hopkins to Mount Sinai, to enable their medical records to be displayed in the iOS Health App.

iOS Health App

iOS Health App

As of June 2018, Apple has opened up secure access to all those medical records to developers, “to create an ecosystem of apps that use health record data to better manage medications, nutrition plans, diagnosed diseases and more.”

Apple opens Health Records API to developers

Bottom line: I’m really not sure what additional benefit Apple could accrue by purchasing any of the teeny-tiny EHR vendors. As I asked Jim on Twitter:

Apple doesn’t want or need to build or own an EHR — not for a splashy acquisition and not to please analysts and definitely not to gain access to data. Apple wants to give millions of iOS/watchOS developers secure access to health data — so they can build amazing apps for their nearly one billion active users. 

And that’s exactly what Apple is doing.