Thursday, July 12, 2007

Home Care - Multinational Electronics Giant Philips Seeks Innovative Health Care Solutions for Aging International Populations

Philips See Market Opportunities in Home and Independent Living Care

“Patients are behaving more and more like consumers. They go to the Internet and get second opinions. Care is being pushed out of hospitals, which are expensive, and into homes and clinics”

Gerard Klesterlee, CEO of Royal Philips Electronics NV, as quoted in “Electronics Giant Seeks A Cure in Health Care: Fleeing Chips and TVs, Philips Makes Big Bet on Aging Consumers,” Wall Street Journal, July 11, 2007

“The economic borderlines of our world will be drawn between countries, but around Economic Domains. Along the twin paths of globalization and decentralization, the economic pieces of the future will be assembled in a new way. Not what is produced by a country or in a country will be important, but the production within global Economic Domains, measured by Gross Domain products. The global market demands a global sharing of talent. The consequence is Mass Customization of Talent and education as the number one economic priority of all countries.”

John Naisbitt, chapter “Economics: From Nation-States to Economic Domains,” in Mind Set, Collins, 2006

When we think about health care, we focus on how each nation-state organizes its health system. We compare national costs and outcomes, but we ignore international business opportunities posed by aging populations worldwide. The health care paradigm may be shifting from care by nation-states to care assisted by international businesses.

Royal Philips Electronics NV, the Netherlands based electronic giant with $37 billion in 2006 revenues has shifted its attention from electronics and TV sets to business opportunities posed by aging populations across the globe. Since 2001, Philips’ annual revenues have shrunk from $44 billion to $37 billion, a drop of 16%, but its medical systems division has increased revenues from $7.0 billion to $9.2 billion, a jump of 31%.

In a 2006 move, Philips paid $750 million to buy Massachusetts-based Lifeline, a medical alert system company. The company makes devices allowing home-bound patients to push a button on a bracelet and connect to a call center. Operators, armed with health profiles, are on hand to help. Lifeline, founded in 1974, has 670,000 customers and strong relationships with 2500 hospitals, community organizations, and home health agencies.

Philips CEO, Gerard Klesterlee, noticed Philips professional medical division had grown 40% from 2003 to 2004. One of its products was HeartStart Home Defibrillator, which it sold to drugstores, on, and to hotels and shopping malls. The defibrillator success became a “trigger point,” and the company began to look for gaps in consumer health care not being addressed by competitors.

Philips created a new consumer health care division with one simple mission: look for opportunities outside of hospitals. Focus groups were organized in Madrid, Frankfurt, San Francisco, and Boston to find out what the elderly and their children wanted most in health care outside of hospitals. Philips sought a “A Senior Solutions Hot Spot.” They found people cherished self-reliance, staying connected to family and friends, and technologies and human help to address failing vision and trouble walking.

I believe Philips is on the right track. Companies like American Telecare in Eden Prairie, Minnesota, have remarkable results reducing hospitalizations and ER visits by placing audio-visual devices next to home-bound patients bedsides. Re-admission rates for patients with congestive heart failure dropped to near zero. Patients control the devices over ordinary telephone lines, communicate openly with doctors and nurses, and have proved to be highly educable and knowledgeable about complications.

Another company, Enhanced Care Initiatives, or ICI, located in rural Connecticut, has similar success with “hands-on” care of the elderly by nurses bearing laptops. Through contracts with managed care organizations, such as Tufts Health Plan and HealthSpring, Inc., a small managed care firm in Nashville, ICI provides and organizes care for frail and elderly patients, mostly over 80 and mostly with multiple chronic diseases. ICI has succeeded in reducing hospitalizations by 33% and ER visits by 25%.

More than anything else, aging patients seek self-reliance, independence, dignity, and technological and human support at home – away from hospitals. It may take a while for nation-states to recognize these desires are powerful drivers for better health for the elderly and for multinational corporations seeking new markets.


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