GE's Big Investment

PACSman: Before anyone accuses me of being anti-humanitarian I think GE investing $6B to help “lower the cost of health care and improve the quality of medical care in underserved regions of the United States and abroad,” is commendable, especially if it gets into the hands of the rural regions of the U.S. who really need financial help.

On the surface this investment looks great. Of the stated $6B donation, $3B is slated for “spending on new, lower cost medical technology,” $2B in financing and $1 billion for partnerships, patient education and other services. Now here is where it gets interesting.

The $500 million per year earmarked for Healthymagination® technologies will account for half of the $1 billion GE plans to spend on R&D in each of the next six years. Launching these 100 innovations will “lower cost, increase access and improve quality by 15 percent.” But even GE acknowledges that, “These actions will strengthen GE Healthcare’s business model.” (http://www.genewscenter.com/content/Detail.asp?ReleaseID=6760&NewsAreaID=2)

This then leads to the question: “What makes this investment so newsworthy that it generates over 35 pages of hits when you Google ‘GE $6B’?” Now $6B over six years sounds like a lot of money, and it is, but it’s all relative. GE Healthcare generated $17B in sales last year alone, so this comes out to an investment of just under 6% of the company’s total gross revenue.

Increasing R&D spending to make better products is commendable, but again what’s the big deal? Admittedly most companies spend between 12-15% of their sales on R&D and GE is now upping the ante in this area considerably in the hope that they will be able to reduce the cost of modalities by 15%. But isn’t this just making the company more competitive? And isn’t reducing health care costs the aim of the DRA and other programs that CMS has so wonderfully graced us with? It’s great to say the company will “reduce by 15 percent the cost of procedures and processes with GE technologies and services, increase by 15 percent people’s access to services and technologies essential for health, reaching 100 million more people every year, and improve quality and efficiency by 15 percent for customers through simplifying and refining health care procedures and standards of care,” but how does this really benefit the end user? If the costs of modalities are reduced 15%, will these savings also be passed on to the end users, especially when most single modality outpatient diagnostic imaging centers are struggling just to stay alive in the face of DRA cuts? “Mr. Customer, GE allowed us to save 15% therefore we are passing the savings on to you…” Um….I’m not holding my breath on that one…

I also fail to see how “expand(ing) its employee health efforts by creating new wellness and healthy worksite programs while keeping cost increases below the rate of inflation” and “increasing the “value gap” between its health spend and GE Healthcare’s earnings to drive new value for GE shareholders” affects anyone other than the GE employees. Isn’t this better served in the company newsletter than a press release?

I’d love to understand why GE plans to “expand clinics in Cambodia and provide additional funding for maternal health care programs in Bangladesh.” Now Bangladesh and Cambodia are pretty low on the totem pole in life expectancy at numbers 167 and 174, respectively out of 221 countries, yet they are still just a few years below the average life expectancy of 66 years for all countries combined at 63 and 61 years respectively. Of course ALL of Africa is much lower than these two recipients in life expectancy as are Haiti and Laos, but a Poppa Doc CT scanner probably wouldn’t be well received in most countries….. I’m figuring Bangladesh will no doubt give India a run for its money in call center technology in the ever near future and GE is just hedging its bets there. “Hello. Thank for calling GE, this is Bob in Bangladesh.” We also should not forget that GE gave a whopping $20M to Ghana, Ethiopia, Nigeria, Kenya, Rwanda, Senegal, Mali, Malawi, Tanzania and Uganda back in 2006 to “transform hospitals,” including providing health care and power generation equipment to water filtration systems, appliances and lighting. That comes out to $2M per country or less than the cost of two GE CT scanners.

As an aside, there are 44 countries that have a higher life expectancy than the U.S., which averages 78 years, including several U.S. commonwealths and the like. Maybe it’s time to move…

“GE Capital will provide $2 billion in financing to help health providers in rural and underserved areas get access to more innovation that improves health and reduces the cost of care.” Now $2 billion in financing is nice and is certainly a helluva lot more than I have in the bank, but last time I looked into it financing costs money - and the people lending the money typically make money from that as well. President Obama’s healthcare stimulus program will no doubt help. GE stated that making this money available “will focus financing to assist in the adoption of EMRs and health information exchanges (HIEs)…. GE’s financing will help healthcare systems adopt EMR and HIE before 2011 in time to qualify for federal financial incentives.” I wonder how much interest accrues on $2B in loans though – and how easy it will be to get this money as well with financial institutions all over clamping down. I wonder if GE Capital follow suit?

One billion dollars is slated for partnerships, patient education and other services, yet part of that includes GE using its NBC television networks, including NBC Universal, NBC News and MSNBC as a way to increase consumer knowledge about health, including launching a daily program devoted to health in June on MSNBC. Forgive the cynicism again, but isn’t that just taking money out of one pocket and putting it in another?

GE chairman Jeff Immelt summed it up well: “We don't run a charity at GE – we make money,” he said. “We are in business to earn profits for our investors. We think this is a growth program for the company.” And so it is…