GE and Siemens: Less May Mean More (Profits)

As President Barack Obama and Republican leaders debate how best to contain runaway Medicare and Medicaid costs, medical equipment makers such as General Electric's (GE) GE Healthcare and Siemens (SI) have embarked on their own quest to help hospitals reduce wasteful spending and treatment errors. It's a bid to keep profits growing even as hospitals face austere times.

Hospitals continue to spend millions on the scanners and other high-end medical equipment made by the companies. Increasingly hospital chains and other healthcare organizations are also paying GE and Siemens for software programs, electronic medical record management systems, and consulting services to improve efficiency. As much as $500 billion of the $2.2 trillion spent on health care each year is wasted on duplicate processes, bad coordination, and out-of-date scheduling, according to a GE estimate based on data from the U.S. Centers for Medicare and Medicaid Services. It's a challenge and opportunity all rolled into one, says Jan De Witte, who on Apr. 1 was made chief executive officer of GE's health-care IT business unit. "It's generally accepted that for every $100 spent on health care, $20 or more is waste," says De Witte. "Over the past two years, the industry has come to grips with this being a problem."