Medical equipment manufacturers operate largely on a “supply and demand” model: Hospitals buy their multi-million dollar machines, use them for a few years, and then the process starts again.
But Philips Healthcare and a hospital system in Georgia are betting on a new business model, one that has risks and rewards for both the hospital and the manufacturer.
Philips is now going to provide the Georgia Regents Health System with everything from equipment and training to maintenance — potentially even light bulbs and tooth brushes. But as part of the 15-year, $300 million agreement, Philips also gets something it hasn’t had before: complete access.
“We believe there’s true value in understanding more of the workflow of the institution,” says Steve Laczynski, president for Philips Healthcare Americas.
The partnership is on view in a radiology lab at Georgia Regents Medical Center in Augusta where doctors have just finished performing a heart procedure on a child. Radiology tech Scott Stevens is among a half-dozen folks prepping the room for the next patient, someone who needs followup care after treatment for an aneurism.
“We’re going to make sure things have gotten better,” Stevens says.
All of this is happening in a huge, new suite with all kinds of diagnostic machinery, a monitor as big as a refrigerator and even mood lighting. And they’re all Philips products.
Under the partnership, about a dozen Philips employees will work in-house at Georgia Regents. They’ll sit in on meetings, offer ideas and develop systems based on one goal: improving patient outcomes.
Philips sees opportunity in the new federal health care law. The law ties some hospital payments to keeping patients healthier. So if more patients get better, in less time and at lower cost, the hospital pays Philips a bonus.
That’s what’s in it for Philips.
What’s in it for Georgia Regents is one answer to a complex puzzle, says hospital CEO David Hefner.
“Our problem is we have to deliver health care better, faster, and less expensive. What I wanted was a vendor or manufacturer that actually was that kind of partner that would stand in our shoes and think from our point of view, not just sell me more equipment,” Hefner says.
If Philips is successful, it hopes to make this deal with other hospitals.
“I know you’ll see more of these alliances form, because it’s where health care needs to go,” says Laczynski of Philips.
Because the concept behind the partnership is so new, both parties have asked regulators to weigh in on the deal. That should happen within the next 18 months.