By Mike Magee, MD
There's a lot of money flowing into Health right now – raising two big questions: First, are you investing in the past, present or future? Second, will your investment pay off?
For those who want to buy in a traditional way, take a look at Grand Rapids Michigan.1 Prominent local donors have committed $1 billion there. For that, they're getting a new medical school (which will house Michigan State programs), a children's hospital, a cancer treatment center, two medical office buildings, and a seven-level parking garage. One billion dollars for "bricks and mortar" in the hope, in their words, of "sustaining the economy and culture of a rebounding city of more than 193,000 residents".1
For a different type of health bet, look at Royal Philips Electronics NV -- or Philips for short -- a "household name" whose consumer electronics business, overtaken by Asian clones, lost $2.2 billion in 2001. 2 They paid $750 million last year for Massachusetts’ based "Lifeline", a service system and network to help seniors age in place.3 They plan to take it global. Like other big technology vendors with a history in health (think of GE), Philips has been hospital-centric, selling X-ray and CAT Scan equipment with some success. But CEO Gerard Kleisterlee thinks times are changing. "Patients are behaving more and more like consumers. They go on the Internet and get second opinions. Care is being pushed out of the hospitals, which are expensive, and into homes ...." In the past, he says, "It was all about technology." But times have changed, causing him to ask, "What is the hand of cards that I have and how do I play them?" 2
Kleisterlee formed an internal work group to explore new value propositions and point Philips in a new direction. And what did they find? Health - but not the same old health! They started, said Senior VP Paul Smit of their Medical Systems Division, with "an existing, new complex product and redesigned it completely for lay people." What was the product? The "Heart Start Home Defibrillator." 4 Available at $1,200 without a prescription, homes -- and banks, and hotels, and shopping centers, and airplanes -- have eaten the product alive.
That triggered the Philips CEO, in September of 2004, to launch a new Consumer Health Care Division.5 The simple command? "Look for opportunities outside the hospital." Mr. Kleisterlee and peers such as Craig Barrett from Intel, are now true believers.6 They have traveled the globe, attending medical meetings, visiting health thought leaders, learned everything they can about aging, and helped form and support the Center for Aging Services Technologies (CAST) in Washington, an arm of the American Association of Home Services for the Aging (AAHSA).7, 8 What are the "sweet spots"? Self-reliance, connectivity, and prevention of functional decline. How's it looking for 2007? Philips Consumer Health Unit is projecting sales of $1.5 billion. 2
Talk inside of Philips is that its CEO has "fundamentally changed the identity of what a lot of people at Philips stand for and believe in." 2 He's done it, they say, by playing the cards he was dealt. And here they are:
1. Take the technology developed for professional use, and redesign it for lay use.
2. Embrace the demographic megatrends of Aging, Consumerism, and the Internet.
3. Move health from the hospital to the home.
4. Leverage connectivity, self-reliance and prevention (That's why Philips originally bought "Lifeline.")
So there you are. You have the Grand Rapids vision and the Philips vision for our health care future. Both are needed, but to what extent? Who takes the lead, and where is the center? One vision is "bricks and mortar,” the other service. One vision is professional-centric, the other consumer-centric. One is hospital-based, the other home-based. One is driven by historic health sector leaders, the other by new health sector players. Where to put your money for the future? I'd invest in a vision that is led by those with financial assets, IT expertise, and an existing position (with products and services) in the home -- especially if they wisely build future planning around connecting the people to the people who are caring for the people.
References:
1. Schneider,K. Grand Rapids lays foundation for health care mecca. July 11, 2007. New York Times. http://nytimes.com/2007/07/11/realestate/commercial/11hill.html
2. Abboud, L. Electronic giant seeks a cure in health care. Wall Street Journal Online. July 11, 2007. http://online.wsj.com/article/SB118411599262762803.html?mod=hpp_us
3. Philips Lifeline Systems. http://lifelinesys.com
4. Philips Heart Start FR2 + Defibrillators. http://www.healthchecksystems.com/philips_heart_start_fr2_defibrillator
5. Lawrence, S. Intel's Barrett: Health IT is a necessity. Feb. 17, 2006 eWeek. http://www.eweek.com/articleZ/0,1895,1928117,00.asp
6. Lohr, S. New name and strategy for chip division at Philips. New York Times. Sept 1, 2006 http://nytimes/2006/09/01/technology/01chip.html?ex=13147
7.CAST. http://www.agingtech.org/index.aspx
8. AAHSA. http://www.aahsa.org/
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