Business
GE, the worlds largest maker of medical-imaging equipment, and Santa Clara, California-based Intel Corp. said yesterday they will jointly spend $250 million over five years to develop home health-care products. Researcher Datamonitor Group predicts the market will more than double to $7.7 billion by 2012.
“GE is very strong in health care and has a lot of knowledge and technology in-house that they can leverage,” said Peter Olofsen, an analyst at Kepler Capital Markets in Amsterdam who has a “reduce” rating on Philips shares. “Philips will be facing the established names here as well.”
The home health-care market is forecast to outpace growth in the hospital business, making it a priority for Philips and GE. Aging populations will boost medical costs and force governments to move more care into homes. Sales to hospitals have been hurt since 2007 by the U.S. Budget Deficit Reduction Act, which has reduced reimbursement for imaging procedures and demand for such systems.
GE Healthcare, also the worlds biggest provider of digital health-record systems, will sell and market the Intel Health Guide, which the U.S. Food and Drug Administration approved last year. The machine collects vital signs and information, sends data to doctors and acts as a videoconferencing and e-mail link.
Big Business
“This is going to be a big business for us,” GE Chief Executive Officer Jeffrey Immelt said in an interview yesterday. “What GE and Intel recognize, is that more of the care is going to take place in the home.”
A comparison between Amsterdam-based Philips and the GE- Intel partnership isnt an “apples-to-apples” comparison, Immelt said. “The fact is this is a widely fragmented industry. Theres hundreds of companies in this space.”
The partnership between Fairfield, Connecticut-based GE and Intel also plans to expand into fall prevention, medical compliance, sleep apnea, cardiovascular disease and personal wellness monitoring. Immelt declined to predict the alliances market share and said home health care will “over time” become a “multibillion dollar business.”
The GE health-care unit, based outside London, provided $17.4 billion of the parent companys $182.5 billion in sales last year. Philipss Home Healthcare Solutions had about 1 billion euros in revenue in 2008, or 13 percent of the medical divisions total sales of 7.65 billion euros ($10.3 billion).
Philips Acquisition
GEs partnership with Intel comes after Philips bought Respironics Inc. for 3.6 billion euros ($4.8 billion) last year, making it the worlds largest provider of home health-care products. Respironics sells masks and ventilators for treating respiratory and sleep disorders.
Joon Knapen, a Philips spokesman, declined to comment on GEs move into home health care.
Philips aims to expand its Home Healthcare Solutions division, whose products include the Lifeline emergency response system, by at least 10 percent annually in the next five years, unit head Don Spence said in an interview March 17.
Wind in its Back
“Home health care is a segment in which Philips still has the wind in its back,” Keplers Olofsen said. “The combination of high growth and above-average profitability makes it one of the pearls of health care.”
Philips said on March 4 that the financial crisis was affecting its medical business, which mostly sells systems to hospitals and competes with GE and Siemens AG. Philips said it saw “ongoing evidence” of financing constraints in its imaging business in North America. In the fourth quarter, medical equipment bookings fell 2 percent as North American imaging systems demand weakened.
The medical-equipment industry may suffer more from U.S. President Barack Obamas plan to cut spending on medical scans. Medicare imaging costs more than doubled to $14.1 billion from 2000 to 2006, according to a June 13 congressional report.
GE and Siemens are lobbying Congress to fight further cuts proposed by the Obama administration, they said March 6.