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  • John Soloninka

Digital Healthcare Innovation at Philips: transforming healthcare

Updated: Dec 10, 2019

Oct 27, 2019

Recently, I had the pleasure of hearing Jeroen Tas, Chief Innovation and Strategy Officer for Philips, speak at the Rotman School of Management in Toronto. The topic: How Philips is using disruptive digital innovation to fundamentally transform healthcare.

Tas’ talk was inspiring, demonstrating incredible scale and potential for impact. Philips deserves great credit for exploiting digital innovation to dramatically transform its business to deliver better outcomes, improved patient and user satisfaction, and lower health system costs - and it’s just the beginning.

I noted three important lessons for connected medical device vendors, hospitals and payers:

  1. Philips’ transformation from fixed products to digital disruption including machine learning, advanced analytics, and IoT connected devices are trends that affect all medtech innovators. It was made clear that disruptive digital approaches ARE the future - and investors are interested!

  2. Medical device connectivity at the point of care is exploding. Philips’ HealthSuite is one of a new class of cloud-based pervasive “ecosystem” offerings, allowing smaller vendors faster time-to-market for device connectivity. Few if any vendors will need to spend money to “reinvent the wheel”.

  3. New risk-sharing business models that pay for outcomes rather than for procedures were the main drivers in the total transformation at Philips. This cannot be under-emphasized: changes in what payers reimburse caused this major multi-national to completely re-invent itself in ways that will dramatically benefit the health system- while dramatically changing HOW care is delivered.

I will briefly explore each below.

Digital Innovation: From “fixed products” to perpetual change.

Tas gave several compelling examples of how digital innovation is transforming medtech at Philips from fixed products to continuous improvement.

Here’s one:

An MRI used to be a “fixed” product…with hardware and software released concurrently. Improvements came through advances in physics or engineering and were batched and made available with subsequent product releases…usually for more capital dollars.

Philips fundamentally shifted its focus from “product evolution” to “disruptive digital innovation”. Simply by changing the software and connectivity on that same MRI machine, Philips could :

  • non-invasively measure heart rate, blood pressure, respiration;

  • determine optimal imaging sequences for the patient’s clinical condition;

  • gate the imaging via patient’s respiration for better quality images;

  • deliver diagnostic accuracy at rates superior to radiologists in select contexts;

  • recommend follow-on testing or treatment pathways;

  • request a porter for the patient;

Last year alone, Tas claimed MRI scan time and dose were reduced 50% and further reductions of time and dose by 95% are anticipated, through software changes alone!

Now, rather than charging $1M in capital investment per MRI machine, Philips is able to charge on a subscription basis. In addition, by optimizing patient flow, personalizing best practice protocols, remotely controlling machines, and faster scan times, they can now place cath labs in shopping centres--dramatically lowering costs and improving patient access!

From Products to Ecosystems

Philips’ Tas went on to describe how Philips was able to build a “health ecosystem of connectivity” because of its dominant market share in several product categories.

Philips, like many other companies, has been involved in messaging and data sharing standards with acronyms such as HL7, DICOM, IHE, and now the latest enhancement of the HL7 standard, FHIR (Fast Integration Healthcare Resources). These allow products from different vendors to share data and inter-operate. However, getting different systems to communicate through standards has not been easy and remains highly labor-intensive to implement. But, if onerous, at least multi-vendor systems can be made to communicate.

Several years ago, Philips found itself in an enviable position of managing a critical mass of many of healthcare’s data and device assets: images, imaging suites, monitors (e.g. 43% of all radiology monitors are Philips’), IoT devices, etc.

The slide above is from 2017. Not unlike Amazon, or Google, this uniquely large footprint enabled Philips to create services few others could. In this case, an “ecosystem” platform, called HealthSuite, enabling and encouraging multiple vendors to “co-create” inter-operating devices and systems on top of HealthSuite. Now, connected medical device vendors,including direct competitors of Philips, are encouraged to build their connectivity on HealthSuite, rather than from scratch. True, vendors large and small need to look critically at the “cost” of using HealthSuite, handing over control of their interoperability to Philips. But with millions of devices connected across the globe, HealthSuite is extremely interesting. Again, not unlike Amazon and Google, HealthSuite’s network effects have not yet been fully felt, but I suspect will be dramatic in years to come.

New risk-sharing business models that pay for outcomes

However, there remains a major barrier to truly utilizing the Phillips vision and moving to optimized patient satisfaction, care outcomes and cost reductions. While disruptive digital forces have truly revolutionized other industries from travel to media, and continue to change the world, healthcare continues to embrace disconnected, “siloed” systems and providers.

Bottom Line: Health Systems and Payers WILL create change…by changing what they PAY for!

Edward Demmings is believed to have stated: “Every system is perfectly designed to produce the results it gets.” Another adage states: “You will get more of whatever you pay for.” In the 1990s and 2000s, when you had medtech vendors hawking incrementally improved products at ever increasing prices, it was because health systems paid siloed doctors, hospitals, clinics homecare and even medtech vendors for greater volume of procedures, i.e. for “inputs” rather than for successful patient “outcomes”. It was almost impossible to take advantage of moving patients to lower cost settings, or sharing risk across provider settings, as the silos created disincentives to do so.

But exploding volumes of chronic disease, health system costs, procedure volumes, technology advancement and increased patient acuity are forcing health systems and payers to seek alternative approaches. Vendors and health systems are being required to deliver higher quality, at lower cost, through cross-silo integration and vendor-agnostic approaches. As new payment mechanisms and business models appear, companies will have no choice but to evolve and deliver what the market demands.

Health systems are realizing the power of this principle, and vendors like Philips are responding. But it is not politically easy: as vendors start controlling whole ecosystems of devices, it is not without risk of conflict of interest.

Is the market buying into digital transformation? The recent investment of $22M by 14 leading healthcare providers in the US into AVIA Health, the leading partner for digital health insights, strategic guidance, and consulting services, is a strong vote for “yes”.

With the dramatic technological and business model transformations underway, 5-7 years from now the relationships between health payers, providers and vendors will be vastly different from those of today…and that will likely be very good for patients, providers and health system sustainability worldwide.

© John Soloninka, Accelerant Health Innovations, 2019


John Soloninka is the Founder and President of Accelerant Health Innovations Inc. a Medtech consulting company focused on bringing new health technologies to market. He has held multiple roles including medical technology strategist, serial entrepreneur and former investment company CEO.

Tags: #Philips #Healthsuite @HealthAVIA @jeroentas

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