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Philips Takes on GE, Intel for $8 Billion Remote Health Sales

Philips Takes on GE, Intel for $8 Billion Remote Health Sale
An employee walks past the photo mural displayed on one of the main buildings at the Philips Healthcare production facility campus in Best, Netherlands. Photographer: Jock Fistick/Bloomberg

Royal Philips Electronics NV aims to prove remote health-monitoring can be efficient and save cash as it competes against companies including General Electric Co. and Intel Corp. in a market that may exceed $8 billion by 2012.

“We’re trying to generate clinical and economic evidence of telehealth’s benefits such as saving money and managing patients more effectively,” Christoph Westerteicher, Philips TeleHealth business director for the European Union, said in an interview. Remote monitoring of patients with chronic problems, such as heart failure and diabetes, is growing “and it’s set to become more relevant for the medical community.”

Philips, the world’s largest maker of patient-monitoring systems, has spent more than $10 billion buying health-care assets since 2001. General Electric, the world’s biggest maker of health-care imaging systems, and Intel formed a venture in August to create products for patients with chronic diseases and elderly people at home or in assisted-living accommodation.

“In Europe, currently millions of users still use first-generation community alarms and heat sensors as health-monitoring devices at home,” said Eramangalath Sujith, program manager for health care at research firm Frost & Sullivan. More advanced monitoring devices have now appeared and the global telehealth market will expand to more than $8 billion by 2012 from about $6.5 billion last year, Sujith said.

Aging Population

Philips, based in Amsterdam, predicted in May that the global health-care market in which it operates will grow by 4 percent to 5 percent annually from 2011 as aging populations and lifestyle changes in emerging economies lead to more chronic, cardiovascular and respiratory diseases.

“There is an absolute need to come up with new technologies to be able to address the demographic changes,” Westerteicher said. “Telehealth is a new way of supporting the aging population. I see a definite opportunity there.”

Philips has been engaged in telehealth for more than 10 years and developed the Motiva platform, an interactive device that connects patients and health-care providers through a home television and broadband Internet.

Telehealth systems can provide medical staff with timely information about patients’ health, allowing intervention before a condition gets critical. This may save money for governments through reduced hospital admissions and fewer emergency-room trips, and it may help patients in rural areas.

Demonstration Projects

Countries including the U.K. are evaluating such services by funding large demonstration projects. Philips’ Motiva is being used by heart failure and diabetes patients in the London Borough of Newham as part of the Whole System Demonstrator project -- a two-year controlled trial conducted by the U.K. Department of Health, said Steve Klink, a Philips spokesman.

“The need for new solutions in health care is incontestable,” Elizabeth Boehm, an analyst at Forrester Research in Cambridge, Massachussets, said. “People are living longer and health expenditures are growing in most nations.”

Challenges to getting telehealth solutions out in the market include privacy and data management, she said.

Philips said in September that its health-care unit aims for earnings before interest, taxes and amortization as a percentage of sales of between 16 percent and 18 percent by 2015, more than its consumer lifestyle and lighting units.

Rising Costs

Within the health-care division, Philips plans to expand the home-care business from about 15 percent of sales to about 20 percent as care increasingly takes place at home, Steve Rusckowski, the unit’s head, said in August. Beside telehealth, home care includes baby feeding products and defibrillators.

Philips expects 2 billion people to be aged 60 or more by 2050, according to a July report by the company. As much as 80 percent of health-care costs are related to chronic diseases -- a figure that will rise -- moving the focus to continuous care, it said.

The main obstacles in Europe to the development of telehealth are the absence of payment systems for the services; the need to develop models that integrate existing care providers; and a general lack of awareness, Westerteicher said.

“In most countries there aren’t reimbursement structures” involving insurance companies or national health-care services, he said. “That’s why there are so many pilots.”

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