GE Plans a Big Health-Care Push

To spark growth, the conglomerate will spend $6 billion on lower-cost equipment for underserved markets

By Jena McGregor

General Electric (GE) is launching a $6 billion health-care initiative that, in size and scope, rivals its "ecoimagination" marketing campaign and product development push into green technologies.

Called "healthymagination," the initiative announced May 7 is aimed at resetting GE's health-care business, which currently gets most of its revenue from selling diagnostic and imaging equipment to hospital systems, toward rural and emerging markets, as well as toward the priorities set by the Obama Administration. The $17 billion unit plans to develop far more low-cost equipment, such as the portable ultrasounds already being used in developing regions. At the same time, it will focus on services that help hospitals become more efficient and on health-care information technology, which is currently just a small part of GE's business.

In the same way that GE's environmental efforts seep into many of the conglomerate's divisions, the latest initiative isn't limited to GE Healthcare. The company's finance arm, GE Capital, is committing $2 billion in financing to external partners, mostly for health-care IT projects. And the company plans to spend $1 billion creating new health-related content at NBC Universal and funding partnerships with outside companies, such as the alliance GE announced in April with Intel (INTC) to develop home health-care tech for the elderly or chronically ill. In addition, GE plans to improve the efficiency of the health and wellness programs for its 323,000 employees.

Rural and Emerging Markets

The bulk of new spending, however, will be a $3 billion research and development investment over the next six years into affordable health-care equipment designed for underserved populations. The targets will range from emerging markets to rural or even urban areas where technology is lacking. At least half of the unit's spending, GE says, will be on launching products or services that meet internal goals of expanding health care to more people or reducing costs by 15%.

GE plans to launch at least 50 basic products tailored to rural or emerging markets, such as the lightweight portable electrocardiograph machines the company has developed for India. While it's unlikely that such low-cost products will boost the company's lackluster earnings in the near term, GE executives believe the strategy will position them to benefit from health-care-related stimulus spending and global population trends over the long haul. "You can deal with change, or you can get out in front of it," says GE Healthcare CEO John Dineen.

With its massive finance arm struggling, the Fairfield (Conn.) company is now reliant on its industrial businesses—which include health care, infrastructure, energy, transportation, and media—to keep profits humming. The health-care unit, which has been run by Dineen since July, has hardly been one of GE's growth engines in recent months. Hospitals are slashing costs and budgeting fewer purchases of GE's core products, such as MRI machines and CT scanners. In the first quarter, revenues for the health-care unit were down 9% from the year before, with profits down 22%. In the company's first-quarter earnings call, CEO Jeffrey Immelt told analysts: "We had real headwind in health care, as that market is proving to be very difficult, particularly in the U.S."

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