Market Insight

ECR 2019: Selling solutions not just scanners

March 15, 2019

Adam Davidson Adam Davidson Research Analyst II – Healthcare Technology, IHS Markit

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A new sales pitch

On the floor of the European Congress of Radiology (ECR) manufacturers showcased the latest technological innovations in medical imaging, impressing radiologists and civilians alike. Although these flashy displays of technical prowess have long been used to sell radiologists new equipment, behind-the-scenes, manufacturers were focused on different type of sales pitch. In recent years, hospital administrators have taken control of purchasing decisions. The shift toward value-based reimbursement models have placed major strains on healthcare systems, forcing their leadership team to cut costs. In years past, image quality and equipment features were the key selling points for imaging systems; but at ECR, return on investment and total cost of ownership were major themes.

Diverse portfolios are critical as bulk purchases become the norm

One major result of budget constraints is that hospitals have merged and acquired smaller healthcare centers to produce streamlined economies of scale and minimize redundancies. These giant hospital chains utilize bulk purchasing to drive equipment prices down. Manufacturers must win these large contracts to remain competitive. The medical imaging giants like Siemens Healthineers, GE, and Philips have a major strategic advantage thanks to broad product offerings. To fill in portfolio gaps, companies have acquired other vendors’ technologies to complete their portfolios. For example, Philips recently inked a deal with Hologic to license a popular mammography imaging device. Hologic began offering a Clarius handheld ultrasound system to address their lack of breast ultrasound equipment. Philips acquired Carestream’s Health Information Systems Unit (for more information on this acquisition read Shane Walker’s analysis: Philips to acquire Carestream’s Health Information Systems Unit) to improve their healthcare IT offering.

While manufacturers that offer numerous medical imaging modalities are currently winning most bulk purchases, technological advancements may soon offer reprieve for manufacturers that focus on specific modalities. As imaging technology improves, modalities are beginning to converge. Tasks reserved for certain modalities are starting to be performed by other devices, enabling work-sharing of equipment. For example, CT scanners can acquire extremely high-quality images, quicker, cheaper, and at lower dose than ever imagined. Such developments have allowed CT equipment to perform scans previously only performed by x-ray equipment.

Manufacturers must restructure purchasing models

To address the new corporate-style of purchasing, manufacturers must restructure their sales models to remain viable. This has meant emphasizing service over equipment by lowering the overhead cost of equipment in exchange for higher grossing service contracts. This strategy transfers some of the purchasing risk to the manufacturer, but it provides them with opportunities to demonstrate the value of their equipment. To further remove risk, manufacturers are offering broader warranty coverage. For example, Philips is offering a “Tube for Life” guarantee for the Incisive CT. Other strategies include tailoring portfolios to different end-users, offering software upgrades for installed equipment, and personalizing purchasing plans.

In addition to changing sales models, manufacturers are internally restructuring their diagnostic imaging divisions to increase cohesiveness and collaboration. On the product development side, manufacturers are creating standardized workflows to increase technicians’ efficiency while decreasing training costs, thus increasing return on investment.

Return on investment is the primary selling point

To elevate the value of medical imaging equipment, streamlining imaging workflows to increase both efficiency and accuracy has been the focus of product innovation. Workflows are being designed to be more intuitive, and some manufacturers are leveraging machine learning to automate scanning protocol, system optimization, patient positioning, and post-processing. These enhanced workflows allow for quicker and more accurate scans, saving healthcare providers money by decreasing training requirements, increasing radiologists’ efficiency, and maximizing patient throughput.

Strategy will determine destiny

As populations age and chronic illness rates increase, healthcare systems will become increasingly strained and cost constraints will intensify. To remain relevant in this new environment, medical imaging vendors must change their strategies to remain competitive. In this uncharted territory, manufacturers must choose between the following: provide premium solutions or the lowest prices; acquire or be acquired; and build a complete portfolio or create an all-in-one device. While these decisions may seem daunting, taking a strong stance will prevent manufacturers from falling into the dreaded “middle”.

Research by Market
Healthcare Technology
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