It's the next wave from the two giants of medical technology, Siemens Medical Solutions and GE Medical Systems. Secure with their longstanding stakes in the medical technology industry, the two big competitors now appear to be focusing like laser beams on linking up the clinical and clerical departments of hospitals.
Siemens recently announced its new strategic initiative one year after the German company acquired Shared Medical Services and renamed it Siemens Medical Solutions Health Services Corp. Combining Siemens' medical technology with SMS' information technology systems, Siemens now says it is ready, willing and able to help manage the workflow in the hospital from admitting to discharge.
Meanwhile, as it nears its first anniversary, the $1 billion information technologies company created by GE Medical Systems is reporting better-than-expected results as it gobbles up new acquisitions in its quest to be No. 1 in managing the flow of information through hospitals.
It was clear in recent interviews with the presidents and chief executive officers of both companies that in the future, considerable salesmanship is going to be expended on convincing hospital executives that there is a financially sound basis for wiring information systems in all parts of the hospital. They say their solutions are directly relevant to the most distressing hospital issues capturing attention these days: medical errors, quality of care and cost reduction. And both contend hospital executives are listening and jumping on board.
Erich Reinhardt, president and CEO of Siemens, boasts that bringing information technology into clinical areas will boost efficiency and reduce medical errors, a persistent problem that has come under the scrutiny of industry monitors such as the Institute of Medicine, he says.
"(Siemens' top priority) is to improve quality of care and reduce the expenses to deliver the care and for that we need to boost technologies for diagnosis and therapy as well as IT solutions," Reinhardt says.
Convinced that ultrasound will play a key role in the future of diagnosis, Reinhardt also points to Siemens' acquisition of ultrasound-maker Acuson in 2000 as another foundation for the new strategy.
Although Siemens' parent reported mixed results with a $446 million loss excluding special items for its third quarter ended June 30, the medical solutions unit improved earnings. Fueled by the acquisitions of SMS and Acuson, the division reported approximately $1.6 billion in sales, a 56% increase, and $1.8 billion in new orders, a 64% increase, over the year-ago period.
GE Medical Systems Information Technologies is on track to bring in $1.3 billion in sales this year-$100 million of that in new business to 75 new customers, says Gregory Lucier, president and CEO of the young company. Another $200 million in unexpected windfall comes from the "synergies" of the businesses that were combined to form the IT unit, which aims to marry the clinical areas of a hospital with the front and back ends-registration and billing.
When GE announced the formation of GE Medical Systems Information Technologies in late August 2000, the Milwaukee-based company said it would combine seven existing businesses that GE had developed or acquired in the preceding three years. Since then, the division acquired three other companies.
The idea, then as now, was to manage the flow of information at all points but concentrating on clinical areas, which is a familiar playground for GE but a new frontier for many hospitals. Lucier says hospital clinical costs dwarf other costs 10-to-1, yet until recently IT investments were concentrated on nonclinical areas.
"That's where the big investment should be, we think, and the payback will be to drive productivity in healthcare," Lucier says.
Lucier says GE Information Technologies seems to now have all clinical areas covered: cardiology, emergency, surgery and radiology. In radiology, GE has long offered filmless picture, archiving and communications systems, marrying information and medical technology. In the last year, the company has installed more than 150 PAC systems worldwide, which range in price from $50,000 to millions, he says. Lucier declines to disclose market-share data but says GE has "emerged as the No. 1 patient monitoring network company."
Although money may be tight for hospitals, Lucier says GE is not experiencing any backlash.
"We see a robust demand," he says. "We feel really great about the business and where the business is going."