Philips Inks $226M Deal To Help Develop ‘Smart Hospital'
Philips has announced a strategic partnership with Canadian healthcare provider MacKenzie Health that is worth $226 million. The 18-year contract is the latest in a growing trend of risk-sharing alliances between healthcare systems and med techs meant to improve patient access to innovative technology while lowering costs for hospitals.
Because hospitals charge the same amount for medical services or procedures and are subject to the same liability, regardless of the make and model of device they use, it has historically been in their best interest to use the most time-tested and least expensive technology available. To incentivize innovations and drive sales, med tech companies have been brokering partnerships with healthcare systems, who agree to provide state-of-the-art technologies along with long-term service agreements and collaborative projects.
Over the past year, some of the biggest names in healthcare technology — Medtronic, Johnson & Johnson, St. Jude, and GE — have signed deals with hospitals in which they agree to shoulder some of the risk in using their device innovations in return for a chance to prove their products’ value.
According to Reuters, both Siemens and GE were in the running for the contract with MacKenzie, but Altaf Stationwala, president and CEO of Mackenzie Health, remarked in press release that Philips was the best partner help further advance their “smart hospital” vision. This vision covers the existing Mackenzie Richmond Hill Hospital and the future Mackenzie Vaughan Hospital, which will be completed in 2019.
“We chose Philips not only for their products, but also for their expertise and solutions,” said Stationwala.
In addition to early and ongoing access to Philips products, Mackenzie Health will have access to Philips’ expertise and assistance in developing programs that turn patient informatics into actionable data for predictive and preventative care solutions.
Philips CEO Frans van Houten told Reuters the company’s current goal is to develop systems to manage patient care holistically, from preventative measures to follow-up.
“A siloed approach between suppliers doesn’t really help hospitals well enough,” said Van Houten. “You need to follow the patient (throughout an interface with the health system) and you need to integrate the data.”
Reuters reported that Philips has signed deals with three additional health systems over the past two years — two with hospitals in Sweden and a $500 million contract with U.S.-based Westchester Medical Center Health Network.
“Forward-thinking organizations such as MacKenzie Health understand that in order to transform healthcare and deliver the type of care their communities need and deserve, they need public-private partnerships with industry leaders like Philips,” said Iain Burns, CEO of Philips Canada. “And with this type of large-scale partnership, we are an accountable partner, which will ultimately allow MacKenzie Health to focus on doing what they do best.”
“It’s a big shift,” said Susan DeVore, chief executive of Premiere Inc., which represents 3,400 hospitals in contract negotiations, to Reuters. “Device manufacturers that are responding to that discussion are the most progressive ones who see the world is changing.”