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Philips Acquires Forcare – The Signify View

  • Philips Healthcare has acquired interoperability solutions vendor Forcare, for an undisclosed sum.
  • This is the latest acquisition by Philips Healthcare in 2017, with more than $2B+ invested to date.
  • The Forcare acquisition is intended to support the clinical informatics business line and increase Philips Healthcare’s competitiveness in large tenders, both in the US and internationally.
  • Philips Healthcare has no intention to change Forcare’s agnostic product supply to third parties (including Philips’ main competitors in clinical informatics).
  • The acquisition further highlights the growing focus on interoperability between clinical informatics solutions and the pressure on competing market vendors to “play nicely”.

As discussed in our previous insight (link here) Philips has been highly active in the M&A market in 2017. So, what does this latest deal say about Philips’ strategy and its impact on the wider market? Here’s our take:

A Statement of Intent

Grand ambition was very much at the heart of this latest acquisition. Philips executives were at pains to mention that health provider consolidation was dramatically changing the clinical informatics market and that Forcare, with its expertise in interoperability, would better position them to address this market shift.

It is certainly true that consolidation is rife, with two US health provider “mega-mergers” announced in recent weeks, as well as a regional and national initiatives for clinical IT gaining momentum in Europe. It is also true that interoperability is rapidly becoming the biggest issue in the minds of providers, especially with the slow-dawning realisation that EMR is not the “one-stop” solution to all their clinical IT needs. If anything, EMR adoption has focused attention on the vast amount of clinical data and systems outside the EMR that still need digitalisation and connecting into providers’ networks.

Since its “pivot” towards healthtech, Philips has not hidden its strategy to develop an end-to-end offering, bringing hardware, software and services across the care continuum, including acute, ambulatory, homecare and health and wellness.

However, of late, there is a gaping hole in the market for clinical informatics platforms. These Agnostic Clinical Enterprise (ACE) platforms offer the foundation for all diagnostic and clinical informatics not well addressed by the EMR. The function of these central platforms is multi-faceted, but two key roles will be to act as a contractor for third party solutions, as well as handling the ongoing interfacing of systems and applications as the provider network evolves.
Philips has identified that these platforms offer many benefits too. Firstly, by becoming embedded in the clinical workflow of their customers, it will be harder to be replaced by competitors and it increases the likelihood of the provider taking hardware and services from Philips. Secondly, by being entrenched in the clinical workflow and operations of their customers, Philips can push risk-sharing contracting based on operational and outcome-based targets. This taps into a far larger revenue opportunity than single clinical departmental budgets. Thirdly, with growing interest in managed service deals based on operational financing models, Philips can look to deliver more robust, stable returns for their investors, avoiding the “boom or bust” exposure often associated with large capital healthcare deals.

Coming to terms with shortcomings

However, reading between the lines, Philips has also subconsciously admitted that to date, like many of their peers with a product legacy in radiology informatics, they have not well addressed interoperability or the challenges faced today.

This is a problem that has long plagued the clinical informatics market. Going back a few years, the sudden surge of interest in vendor neutral archives (VNA) signalled that clinical interoperability was an issue for many providers, even in the relatively small focus of radiology. Yet few of the “vendor neutral” solutions that came to market were able to really deliver on their promises of non-proprietary, content-agnostic, ingestion and management.

The same can also be said of many marketing claims from “enterprise imaging” solutions. While the marketing boldly promotes content-agnosticism, most do little more that integrate siloed own-brand software into a universal viewer and clinical archive (and some struggle even to do that). Some now go further, either expanding the clinical breadth of content ingestion, or adding operational workflow, analytics and business intelligence into their solutions. Few though can handle all types of clinical and diagnostic content, from multiple vendors, in native format. For this, most turn to third-party interoperability experts such as Forcare.

In acquiring Forcare, Philips has recognised it has shortcomings in terms of clinical informatics interoperability and has made steps towards pushing interoperability higher up its agenda, a commendable move if it wants to progress in the race to become leader in ACE platforms for large enterprise and regional deals.

The bigger question perhaps though, is how will the competition react to this move? There is far greater expectation from health providers today that vendors should “play nice” when it comes to multi-vendor implementations. But with one of the leading interoperability solutions firms now in the nest of one of their biggest competitors, will vendors such as Siemens Healthineers and GE Healthcare also make moves for interoperability specialists?

Given what is at stake, they might be foolish not to.