It is no longer enough for large medtech companies just to sell devices: Philips’ latest deal, under which it will have a big role in running two hospitals in Canada, shows the increasing importance of providing services too.
Philips follows in the footsteps of Medtronic, which in 2013 agreed to take over cardiology services at two hospitals in the UK, while its imaging rival GE Healthcare also provides hospital consulting services and has partnerships in place with Sweden’s Karolinska Hospital. It seems that, with hospitals increasingly reluctant to spend money on hardware, device companies must look for new ways to bring in the dollars.
To this end, Philips has signed an 18-year, C$300m ($227m) agreement with Mackenzie Health that will see it provide medical technology procurement and maintenance – as well as other services such as room design and cloud-based analytics – for the existing Mackenzie Richmond Hill Hospital and the future Mackenzie Vaughan Hospital, both in Ontario.
The latter will be a so-called smart hospital, using connected health technologies, and is set to be completed in 2019. The Dutch group noted that the equipment in both hospitals would come from other vendors as well as Philips.
The company says the deal is the largest managed equipment services agreement in Canada, covering over half a million patients.
However, it is not the only hospital tie-up for Philips, which is also working with others including the King's Daughters Medical Center in Kentucky, involving imaging and biomedical services, and the Dutch Catharina Hospital on its new cardiovascular centre, slated to open in 2016.
Non-traditional deals seem to be becoming widespread in medtech, one example being Philips’ collaboration with Amazon Web Services in personalised digital health. The former’s HealthSuite digital platform runs on Amazon Web Services’ internet of things system and collects data from various sources including apps, medical devices and electronic medical records, and stores them on a secure device cloud.
The medtech market leader, Medtronic, has also been moving increasingly towards a service-based model, first signalled with its August 2013 acquisition of the telehealth and patient services company Cardiocom. More recently the company partnered with Samsung in diabetes management, not long after a slew of diabetes deals earlier in the year, including one with IBM (IBM collaboration is Medtronic's fifth diabetes deal in a month, April 14, 2015).
Diabetes is providing a particularly rich hunting ground for these types of partnerships as conventional device makers combine with tech companies increasingly keen to get in on the action.
Pharma companies are getting involved as well, with Sanofi recently signing up Google to develop new diabetes management tools – Google itself is also working with Novartis to develop a smart contact lens to track blood glucose, and with Dexcom on a bandage-sized continuous glucose monitor.
It seems likely that the future will see even greater convergence between medtech, traditional tech, pharma and hospital providers. Philips and other imaging players will need to keep up with the changing healthcare landscape if they want to stay relevant.