Getting out in front of health reform

A year before Barack Obama was elected president, John Rice and other top execs at GE started to tackle the mess we call health care.

The ground already was shifting beneath them as the federal government froze increases on payments for diagnostic imaging equipment and other key products that GE sells to hospitals.

“‘This too will pass’ was our first reaction,” Rice, one of four vice chairmen of GE, recalled during a recent interview. “Then we realized things aren’t going to get back to normal.”

As CEO of the company’s Atlanta-based Technology Infrastructure unit, which includes medical equipment and services, Rice is responsible for an operation totaling $46 billion in revenue. That’s larger than all Georgia-based companies, except for Home Depot and UPS.

While his 117,000-employee unit stretches among other industries, including aviation and transportation, GE’s health care business alone totals 50,000 workers and $17 billion in sales.

To try to get ahead of the political curve they knew would be coming from Washington, Rice and his team noodled over health care issues for 18 months. Then in May, they launched a $6 billion strategy called “Healthymagination.” The long-term goal is to grow GE’s health care business by two or three times the growth rate of the overall economy.

The heart of the program is for GE to invest $3 billion to launch 100 innovations that will lower medical costs, increase consumer access and improve quality — all by 15 percent by 2015.

Are these guys in love with the number 15?

“No,” Rice said. “Our stake in the ground needed to be significant. … But it will take at least five full years to begin to see the fruits of our labor.”

That labor will largely focus on creating new products for underserved areas, such as rural and inner-city parts of this country and much of the developing world.

The idea is to strip out costly bells and whistles from many pieces of diagnostic equipment and other medical technology, as well as to develop a new generation of hand-held devices.

That way, the equipment is cheaper, allowing more communities to purchase it, which would expand GE’s market. A small percentage of patients would still have to travel to big-city hospitals for the more sophisticated models that GE also will produce.

Another $2 billion for the plan is coming from GE Capital. It has committed to helping underserved areas finance the new equipment purchases.

The final $1 billion will come from other GE units, such as NBC Universal, which has pledged to increase its health-related programming on air and online.

Rice, 52, also pointed out that GE has another self-serving reason for trying to cut costs — it pays $3 billion a year for employee and retiree medical benefits.

It’s nice to have a game plan, but Congress is returning from summer break today to tackle health care reform. How’s that going to impact this strategy?

“In the end, if we’re developing new technology and services, we’re going to win in whatever environment,” Rice maintained.

That’s what a top dog is supposed to say. But with all the talk about cost-cutting among the different health care players, GE’s growth plans may be overly ambitious. Still, not waiting on Washington seems prudent, to say the least.

One comment Add your comment

concerned

September 8th, 2009
9:14 am

Seems like those who are against health care reform are fine with the rising costs and the inadequacies that our present system affords us.Insurance is big business.This is why there is so much opposition. The employees of insurance companies are often taught to reject certain cases as a mean of saving the insurance company money, regardless of the patient’s needs. The reaction to universal health care makes me wonder, has america sold out the americans?