Georgia Regents Health Care System signed a 15-year, $300 million deal Thursday with technology giant Royal Philips, creating what officials called a “first-of-its-kind” alliance in the health care industry.
The deal is the largest of its kind for Philips, a diversified company with products that cut across health care, consumer electronics and lighting, according to a company news release.
The alliance creates a unique partnership with Philips, which will provide products ranging from advanced X-ray and CT scanners to overhead lights and televisions in patient rooms at Georgia Regents Medical Center and its numerous clinics, medical center CEO David S. Hefner said.
“By collaborating with Philips, we’re bringing all the stakeholders together at the same table to better assess and plan health care for tomorrow,” Hefner said. “It’s no longer a simple supply-and-demand business model.”
Hefner estimated that the deal will save the health system at least $10 million a year over the life of the agreement.
“We have certain technologies and services and devices and monitoring and imaging that we are going to need over the next 15 years from somebody,” he said. “We are going to trade off a form of exclusivity to reduce a lot of our costs. For our $300 million, we figure we are getting more than $400 million in value.”
Hefner said the health system will still be free to purchase technology and services from other companies because Philips cannot supply every device or service that might be needed for patient care. He expects the company will provide about 75 percent of the medical technology in its hospital and clinics.
Steve Laczynski, president of Philips Healthcare Americas, said the partnership changes the relationship between Philips and GRMC from a “transactual” one, in which each device or system is purchased as needed, to a true partnership. The two entities will work together to seek solutions across the entire enterprise -- from clinical research and hospital systems down to individualized patient care.
“It’s about how do you get to the patient and improve care even in their home,” he said. “Most people don’t want to go to the hospital all the time.”
This deal was 18 months in the making, but the idea dates back to conversations he had with Hefner long before he came to Augusta, when he was at other institutions in Chicago and Pennsylvania, Laczynski said. He said evolutions in the healthcare business made the timing right for Philips to venture into this new relationship with GRMC.
He said the two partners have the same goals, improving outcomes of patient care and improving overall patient satisfaction -- two key areas that are being tied to reimbursements for care by the U.S. government and insurance companies. If they achieve those goals, patients will benefit from better care and Philips and GRMC stand to benefit financially.
“We have shared risks and shared rewards,” he said.
Dr. Cargill H. Alleyne Jr., chief of Neurosurgery and director of Cerebrovascular Service at Georgia Regents University, said he is excited about having access to cutting-edge technology that the allaince with Philips will provide. He said sometimes it is a challenge to connect the business side of healthcare to the needs of physicians treating patients.
He said having a broad, long-term agrrement with a technology company can do a lot to bridge that gap.
“Being able to say I really need this device to do this one thing might seem very simple, but to a physician it can be very important, even critical,” he said.
Hefner emphasized that the agreement, although one-of-a-kind in health care, is common in other sectors of business.
“We don’t have a model like that in health care because it is so fragmented, so idiosyncratic,” he said.
Health care, however, is like many other industries that have seen old business models fall apart and new ones emerge, Hefner said.
“In health care, I think we are entering an era where the market wants better, faster, cheaper, and you better deliver it,” he said.