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Market Insight

MRI suppliers focus on maximizing return on investment as competition intensifies

August 28, 2019

Holley Orth Holley Orth Senior Analyst, Healthcare Technology, IHS Markit

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The global market for MRI equipment reached nearly $4.3 billion in 2018, a growth of 3.0% year-over-year. Market performance in the two largest sub-regions was split. The US market struggled while the mainland Chinese market boomed. Intense competition drove down prices, and the rising incidence of bulk buying forced MRI manufacturers to reassess their sales strategies. Unsurprisingly, most product launches focused on increasing return on investment (ROI) for healthcare providers by improving efficiency. Siemens Healthineers and GE Healthcare maintained their positions as the top two global suppliers of MRI equipment, but the pressure to compete with growing Chinese companies was felt by all major players in the market.

Global MRI revenues were pulled down by the United States and up by mainland China

US market revenues declined 1.4% year-over-year. MRI manufacturers continued to battle with reimbursement policies for MRI scans, and bulk deals from major hospital chains caused revenues to be deferred. Despite these challenges, the US market is growing in 2019. Orders for MRI equipment outpaced revenues in 2018, and part of the deferred revenues from bulk deals will be recognized this year. There is high demand for 1.5T and 3.0T equipment to replace or upgrade existing systems. Cost-containment efforts will be insufficient to offset the growth momentum of this demand.

The mainland Chinese MRI market grew by double-digits in 2018. Healthcare reform policies have facilitated a major boom for the Chinese medical imaging market. Demand for 1.5T equipment was particularly high, driven by the continued development of hospital infrastructure. Opportunities for investment in and collaboration with Chinese hospitals have expanded rapidly beyond a cluster on China's affluent east coast to densely populated cities in the interior. The private Chinese market is also providing major opportunities for MRI manufacturers. There are now more private than public hospitals in China, but there is a major disparity between public and private service volumes and revenues. Private hospital volumes and revenues will grow substantially during the next five years, partially eliminating this disparity while driving demand for MRI equipment in the private Chinese sector.

Competition intensified, and manufacturers focused on ROI

To cut costs, multiple healthcare facilities are merging to form large hospital chains. Healthcare chains purchase medical equipment in bulk, increasing competition among vendors and driving down prices. Healthcare chains also have increased access to capital and have generated economies of scale through streamlined operations and workflow. The improved clinical standardization of hospital chains can benefit patients, but patients can also face an increase in the cost of care, as the number of competing hospitals decreases and reduces options available. In this new environment, purchasing power is shifting away from radiologists toward hospital executives, who prioritize value over features. Hospital administrators often value the return-on-investment above brand loyalty and advanced clinical capabilities.

Hospital consolidation and the increased purchasing power of healthcare administrators have created a cost-sensitive environment. MRI equipment manufacturers must compete to win business as the number of available contracts shrinks. This challenge has forced manufacturers to reassess their sales strategies. To address the challenges posed by intense competition and the increased emphasis on overall cost, MRI manufacturers are focusing on improving ROI for their customers. Although every company has taken a slightly different approach, two main strategies have emerged:

1) Moving away from transactional relationships with hospitals toward true partnerships. MRI manufacturers are providing value to hospitals beyond their imaging equipment.

2) Introducing products and features that reduce operating costs and increase revenues.

Workflow optimization dominated headlines

The biggest trend for MRI equipment in 2018 was the launch of several solutions to increase efficiency, patient throughput, and utilize automated protocols. Examples of these features include compressed sensing, patient comfort innovations, and artificial intelligence solutions. Compressed sensing accelerates MRI acquisition time by reconstructing data, thus decreasing scan time and improving patient throughput. Patient comfort innovations, like in-bore entertainment systems, improve the scanning experience and decrease the need for rescans. MRI artificial intelligence solutions, though still in their infancy, can contribute to lower scan times and more accurate diagnoses. All three of these technologies help manufacturers increase the ROI of their MRI equipment. Even scanning just one additional patient per day can have substantial positive effects on a hospital’s balance sheet.

Top suppliers stayed on top, but the threat from a new entrant looms

In 2018, Siemens Healthineers maintained its position as the top supplier of MRI equipment. Siemens launched several new products in 2018 and was the clear global market leader for 3.0T equipment. The company grew in both mature and emerging markets during 2018. GE Healthcare was the second-largest manufacturer, capturing the top market position for 1.5T equipment.

United Imaging Healthcare made waves in the MRI market when it entered the US market last year. The launch of the Chinese company’s business in the United States caused concern for some MRI suppliers, but others remained confident. Some top companies think their strong relationships with hospitals will be difficult for a Chinese company to break. They believe their strong service organizations and direct networks will keep them protected. On the other hand, manufacturers are impressed with the quality of United Imaging’s MRI products and know they can win on price. Strategies to improve ROI have become even more important as companies work to prevent United Imaging from gaining a stronghold in the US market.

Research by Market
Healthcare Technology
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