By Andrew Colbert

Philips Healthcare already has a massive presence in the medical imaging market, providing advanced equipment to hospitals across the world. With its acquisition of numerous healthcare technology platforms, including the majority of Carestream’s cloud-based Healthcare Information Systems in August 2019, Philips has made significant inroads into the imaging informatics and enterprise imaging market as well.

The company’s recent deal with Direct Radiology, a teleradiology platform that connects subspecialty-trained radiologists to rural hospitals and imaging centers, constitutes the next step in Philips’s strategic evolution. This transaction enables Philips to include clinical interpretations in the suite of imaging capabilities they provide to hospitals. 

Today’s Barriers

The Philips/Direct Radiology partnership is a harbinger of innovative arrangements to come. Major industry players like Philips are increasingly seeking to partner with physician groups in order to amplify the physicians’ medical expertise and reach, first via technological platforms like Direct Radiology’s and next by enhancing those medical interventions through data analysis and process improvements. These partnerships use technology to extend much-needed diagnostic services, answering some of the most pressing problems in healthcare: low access to care, especially in rural areas; the increasing medical needs of an aging population; and an insufficient supply of physicians to meet those challenges.

In the case of Philips and Direct Radiology, the partnership also maximizes what Philips brings to the table—advanced imaging equipment, a full-service archiving and communications system, and the resources to analyze, visualize, and compare patient exams across visits as well as across the country.

With the Direct Radiology deal, Philips is taking steps to become a more holistic partner for hospitals, and especially for hospitals that lack access to subspecialty-trained radiologists. One reason to start with diagnostic radiology is the outsized impact the specialty has on patient outcomes and healthcare costs. Consider two of the U.S.’s costliest diseases, cardiovascular disease and cancer: both have better prognoses, wider treatment options, and fewer downstream complications the earlier an accurate diagnosis is made. Better outcomes and fewer complications have massive financial implications in addition to their impact on individual lives.

By acquiring Direct Radiology’s platform, Philips is not signaling an intent to replace in-house general radiologists. Instead, the platform means it can better address whatever the hospital’s particular gaps are. Philips can now go to a hospital not only offering imaging equipment and associated healthcare tech platforms—but also enabling access to much-needed subspecialists who can capitalize on that hardware/software integration. Giving historically underserved populations access to highly trained pediatric radiologists and neuroradiologists is one of the best-case outcomes of this type of partnership.

This positive impact isn’t necessarily limited to rural areas. Only a small percentage of hospitals and radiology groups can afford to have subspecialty radiologists on staff 24/7; a teleradiology service gives the rest the opportunity to pay for that expertise when it’s needed—but only when it’s needed. (The platform also helps hospitals fill gaps in overnight or weekend coverage.)

Tomorrow’s Healthcare

While the deal means immediate improvements in terms of coverage and expert diagnoses, its potential is much greater: this new end-to-end solution suite means that Philips can focus holistically on being a value-added clinical partner for its hospital and physician group clients. Taking the data from its hardware and insights from its software, it can improve workflow and decision-support systems to best support the clinicians who use these tools. This broader focus can ultimately improve patient outcomes and maximize the work of those who care for them.

Philip’s transaction with Direct Radiology is an important sign of where healthcare is headed. The future of innovation in healthcare, as in Philips’ combining clinical care and technology into a world-class telemedicine platform, is to leverage virtual care models to drive higher-level consumer engagement and access.

Andrew Colbert is a senior managing director and founding member of Ziegler’s Healthcare Investment Banking practice. Questions and comments can be directed to chief editor Keri Forsythe-Stephens at [email protected].