General Electric Co
The U.S. conglomerate and the world's largest chip maker will develop devices that they expect to save money by allowing healthcare workers to monitor the sick and the elderly outside of hospitals or medical offices.
They plan to invest $250 million in the field over the next five years.
The digitization of healthcare is in the first inning, said Jeff Immelt, chief executive of GE, the world's largest maker of medical-imaging devices. We think it's going to grow quickly.
It could become a multibillion-dollar business, he said.
By treating patients remotely, the venture aims to reduce the cost of healthcare for the elderly and people with chronic conditions such as diabetes or heart disease, which require prolonged periods of treatment.
Something like 80 percent of the spending today in the healthcare system is on chronic care patients, said Paul Otellini, CEO of Intel. This has the potential to take that down dramatically because a day at home costs a heck of a lot less than a day in the hospital.
The two companies estimate current market demand for home healthcare amounts to $3 billion a year, a figure that they expect to grow to $7.7 billion by 2012.
The venture will likely mean little for GE in the immediate future, but could present an important growth vehicle over the long term, said Matt Collins, capital goods analyst at Edward Jones in St. Louis.
Investors would be disappointed if they weren't thinking about long-term opportunities, Collins said.
GE and Intel already have products on the market aimed at filling this niche. GE's healthcare unit will take over distribution and marketing of Intel's Health Guide product.
That product allows physicians to check vital signs like blood pressure and weight remotely and to provide patients with reminders related to their health, such as when to take medicine.
GE offers QuietCare, a system primarily used in nursing homes that tracks residents' movements and can alert doctors to falls. GE's current home health-monitoring business generates less than $100 million in revenue, Immelt said.
Immelt said GE sees the opportunity to use this technology around the world.
The needs are the same globally, he told reporters. The needs in places like Japan and France, with aging populations are exactly the same as here in the U.S.
Intel chose to join forces with GE because it already has a sizable operation selling healthcare products to institutional buyers like hospitals and insurance companies, which are the primary customers for these devices.
The United States' stimulus package includes $20 billion in funding to modernize the health industry's record-keeping system, replacing billions of sheets of paper with a computerized record systems that could more easily communicate with one another.
GE is working on electronic medical records as well, and Immelt said the stimulus program could tangentially benefit the GE-Intel program by stimulating investment in healthcare technology.
GE's healthcare arm, which Immelt headed before taking on the top job at the Fairfield, Connecticut-based company, also makes medical imaging devices like MRI machines. Profit at the unit last year fell 7 percent to $2.85 billion on revenue that rose 2 percent to $17.39 billion.
GE shares were up 6 percent at $10.08 and Intel's rose 5 percent to $15.72 on a day that U.S. stocks were sharply higher amid investor hopes that efforts by the G20 would boost the world economy.
(Reporting by Scott Malone; Editing by Derek Caney, Dave Zimmerman)