The movement from volume to value is a global phenomenon, according to Dr. Jan Kimpen, chief medical officer of Royal Philips in the Netherlands. The former chairman of University Medical Center Utrecht joined the company shortly after it shed its lighting division to become a pure healthcare technology provider. During the recent Radiological Society of North America trade show in Chicago, he spoke with Modern Healthcare reporter Adam Rubenfire about the changes underway in healthcare and at his new employer. The following is an edited transcript.
Modern Healthcare: What's it like a year into the job?
Dr. Jan Kimpen: I have been working in healthcare for all my life, being a pediatrician for 25 years and an executive of a large university medical center. I have seen healthcare changing from within and now, looking at it from the corporate world. I am very much aware that industry has to transform in order to meet the challenges of this changing landscape. My joining Philips was not an accident. I saw they were splitting the company in two to become a pure play health technology company, which creates enormous pressure to be responsive to what doctors, patients and customers want. I wanted to be part of that, to be the voice of the customer, to bring the outside-in perspective, and to add credibility to the company as a health technology company.
MH: What does it mean for Philips to be a pure healthcare company?
Kimpen: It means that we have to be much closer to our customers, who are healthcare providers, hospitals, institutions, doctors. But we also have to be much closer to patients. We have to understand their needs. The world is changing. If we keep doing healthcare as we have been doing for decades, basically on a volume basis, it will not be sustainable. So we will have to transform the company. We can't just remain the box-selling company that we have always been. We will have to partner with providers and customers, and patients and doctors, to understand real well their unmet needs and to come up with more integrated solutions. That's what they want. They don't want to buy that CT scanner in a box with a service contract and hear, “See you after seven years.” They want to talk with us about what they need, and they want a solution consisting of smart devices, software and services all connected. That's the new relationship that we will have to build with our customers, and that's the main transformation that Philips is going through now.
MH: Philips has bolstered its healthcare consulting offerings in the past couple years with the launch of Radiology Solutions and the acquisition of the emergency department consulting firm. You're not the only device maker involved in consulting.
MH: What role do you see that business having in the future for Philips and in the broader device-maker industry?
Kimpen: I believe that it will be the same story for all the device companies. But for Philips it means that in order to understand the customer better, you need to have people at our side of the table that can speak the same language. If you don't understand what the other party is saying, it is much more difficult to come to solutions that the customer needs. Sometimes I meet with C-suite customers where doctors are leading the organization. If you come in as a doctor, it is immediately as if the ice is thawing. You use the same language, you're on the same page. You can much better understand the other side of the table. We also have people in design, specialists in workflow, in building architecture, in emergency care. It helps us to make this connection with the customer in order to come to these integrated solutions. Consultancy will be part of the game.
MH: As a consultant, though, you're looking at providers' costs; yet you're not necessarily bringing down the cost of your product. Is there any attempt to look at Philips' own cost to create its products and to make its products cheaper?
Kimpen: The customer is increasingly being reimbursed on value. Value-based healthcare is basically better care at lower costs. And if we want to be partnering with our customers, we will have to keep that in mind. We will be looking at the request, the needs of the customer. We will have to come up with a solution that serves him best in price and is a long-term solution. For the provider, cheaper isn't necessarily all these capital developments year after year, nor is that a solution to delivering better care to his patients. It's not a product we are selling anymore. We are taking a long-term view of their problem and having also a long-term, installment-based reimbursement for that.
MH: You've formed partnerships with providers and other manufacturers on marketing and development. How have these deals influenced the company and the science behind your products?
Kimpen: The easiest part is the science behind the products. If you are building a solution for radiation oncology, for example, what you want and what the customer wants is an end-to-end solution. They don't want to figure out for themselves which components they need to buy from you. So we are offering a range of technologies, some we provide and some we obtain from partners. We cannot do this by ourselves, so we need other vendors, other partners, to collaborate. And then, of course, there's the business issue. How are you going to divide the revenue? That's something we have to negotiate. Another example is if we are doing a long-term, multi-year, managed equipment service for a hospital. It is our goal to deliver the whole solution. Now, we don't have everything in that whole solution, so once in a while—sometimes it's 10% or 20% of the whole solution—there are products, or services or software from other companies. We fit them into our end-to-end solution, and we make the deal together with these companies or together with the provider, who pays part of it to us and to them. So it's absolutely necessary not only to partner with the provider but also to partner with all the vendors simply because we cannot deliver everything.
MH: What does the changing political environment in the U.S. mean for your company and your patients?
Kimpen: We don't voice an opinion on democratic elections. We work with the government that is in place. On the other hand, we believe that the paradigm shift from volume to value is not going to be dependent on elections. It's there and it's there to stay. The value-based healthcare that is part of Obamacare will remain. Some things will change, of course. But it's not going to disappear completely.
MH: Where is Philips headed in terms of innovations?
Kimpen: We will try to enhance diagnostics and to connect radiology to improved patient experience. For instance, we have developed a system to automatically do TB screening of the lungs. With data analytics, we can screen large numbers of people who come for TB checks. We can make it much easier for doctors. It's like an artist's impression that we're using now. Every doctor looks at an X-ray and says, “Oh, I think it's TB” or not, based on their own past knowledge. Now we can make this much sharper, data-driven and much more secure. That's still a research project. Probably you will see that in a commercial form somewhere in the near future.