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Signify Premium Insight: GE Healthcare looks to Keep Patients out of Hospital with Medtronic Partnership

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GE Healthcare and Medtronic recently announced a partnership which will see the two health tech vendors increasingly target the US’s growing outpatient segment.

The deal will see the firms collaborate on the specific requirements and needs of Ambulatory Surgery Centres (ASC) and Office Based Labs (OBL), allowing customers to benefit from their combined product sets, and financial solutions.

The partners will also offer these outpatient customers services, to, as the vendors note, navigate the costs and complexity associated with expanding an existing site or establishing a new one. These services include planning construction, medical hardware and digital solutions.

The Signify View

In a growing number of cases, it is clear that patients no longer need to visit an acute hospital to receive interventional treatment. In a shift that is quickly accelerating, ambulatory centres are becoming a much more attractive location for simpler, lower risk procedures. It is, after all, a cheaper option for some operations, a factor that has become ever more important in the wake of the global coronavirus pandemic which has hit the budgets of many acute centres. Further increasing the attractiveness of such sites are changes to reimbursement, which can, in some instances, render procedures carried out at outpatient sites more profitable than those carried out within a hospital’s walls.

However, this rising demand for outpatient surgical centres presents something of a challenge for leading medical imaging vendors such as GE Healthcare. On the one hand, such vendors will be keen to capitalise on the growth of the segment, looking to take advantage of any additional investment in medical imaging equipment that is forthcoming. On the other, however, selling into such settings represents a departure from these vendors’ established practices, and offers a new set of problems that they must overcome. Large vendors are used to forging huge, comprehensive, multi-year deals with entire provider networks, but this will not directly translate to the growing outpatient segment. Instead, these smaller, more specialist ambulatory centres need a different mixture of products, services and support. Furthermore, purchasing decision makers will be different, with surgeons themselves having more influence over a decision, enabling features such as clinical precision to come to the forefront, compared to larger networks where decisions are increasingly being made at a C-suite, rather than departmental, level.

Making Customers Bigger Customers

These considerations will have guided GE in making such a partnership, with the arrangement, and the possibilities it offers customers, helping GE Healthcare and Medtronic to capitalise on the growth of that sector. What’s more, it will be doing this while helping to facilitate the growth of the market itself. This will be achieved by helping these smaller sites to develop their capability and procure the necessary equipment. Through the agreement GE Healthcare and Medtronic will help by offering guidance on the setting up of these sites and their construction. The vendors will also provide necessary equipment, along with the digital solutions to go alongside it, as well as remote support and expertise in matters such as reimbursement. OBLs and ASCs lack the same level of peer support which healthcare professionals have access to in larger hospital facilities, making it more imperative that OEMs form a long-standing partnership, including ongoing training and support, as opposed to delivering a transactional sale.

This latter point could be particularly important given that, at present, reimbursement rates are being used as a tool to incentivise the creation of outpatient surgical centres. For surgeons used to working in large acute centres, having to file for reimbursement themselves could prove challenging and potentially disruptive to a fledgling business. By providing support to these surgeons, the GE Healthcare and Medtronic partnership will help them overcome one of the key challenges they face in establishing their own centres.

This is a sound plan. Beyond helping the outpatient surgical market grow, the inclusion of services will help the vendors retain customers, offer new opportunities for upselling and allow for better margins. OBLs and ASCs are more likely than large providers to purchase single pieces of equipment at a time and be more open to utilising pieces from different vendors. However, the inclusion of a service element will better entrench GE Healthcare at an outpatient provider, fostering brand loyalty and giving it a reason to stick with GE Healthcare even if a competitor offers incentives for it to change suppliers, offering a rival piece of imaging equipment at a lower price for example.

This will be particularly important as GE Healthcare, along with Medtronic, seek to compete with other vendors. Philips is the strongest vendor in the acute interventional space, a market which it stubbornly retains. The growing outpatient setting offers new potential customers and a chance to establish a strong position in a burgeoning market. Philips, as well as other large imaging vendors, are also trying to target these customers, so for the likes of GE Healthcare, ensuring that customers’ eyes don’t wander after they have made their purchase is critically important. For instance, Philips tweaked its traditional inpatient products to address the workflow and infrastructure limitations of outpatient settings, as well as evolving its strategy to provide a more holistic full-service OBL offering.

Pulling the Right Lever

There are also other tools that GE Healthcare and other vendors looking to capitalise on the increase in outpatient interventional procedures can leverage. One of these is business models. Most large providers purchase their medical imaging equipment on a capital expenditure model. This is suitable for these large providers which have large budgets and are used to capex purchasing. However, smaller surgery centres could benefit from other types of purchasing options such as ongoing operational costs or financing packages. By offering such packages that allow customers to purchase equipment over a period of months or years, GE Healthcare can make its equipment more accessible to more outpatient sites.

Another tool GE Healthcare can use is to adapt its product range. The challenges of tackling a more disparate outpatient market, as well as the generally lower budgets of those customers mean that it could be hard to maintain margins. One of the solutions to this is developing a range of products designed specifically for outpatient sites. As well as meeting the financial constraints of such customers while remaining profitable, product adaptations could help create systems that are more aligned with the needs of these outpatient surgical sites and eschewing features unnecessary in ASCs, or bespoke packages of imaging hardware and software that cuts costs for GE Healthcare, a portion of which can be passed on, rendering them attractive to a potential customer.

The Organisation of Opportunity

GE Healthcare is not alone in targeting this blossoming section of the market, but the depth of portfolio offered by the combination of GE Healthcare and Medtronic, makes it a formidable entrant. It will not be an easy segment to exploit, particularly as GE Healthcare and Medtronic are not organisationally optimised to sell to such a diffuse and decentralised customer base effectively and profitably. Sales networks, support teams and supply lines, not to mention business models, have all been refined over decades to better meet the needs of acute hospitals. Unpicking and rebuilding these channels to serve the needs of a different customer group is not the work of a minute and will require investment and dedication over an extended period to be fully completed.

But work toward this goal has to start somewhere. A partnership with Medtronic, which addresses some of the pragmatic needs of surgeons in budding ambulatory sites, while allowing GE Healthcare to promote other products within its portfolio and build a loyal customer base represent solid first steps. Whether it is enough to head off rivals in the space or withstand an external shock such as changes to reimbursement is unclear, but at present, GE Healthcare is making progress in tilling a very fertile field.

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This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify ResearchTo view other recent Premium Insights that are part of the service please click here