With more than 20 years in the healthcare industry behind him, Oran Muduroglu, CEO of Philips Medical Systems' Healthcare Informatics Group, has plenty to talk about. But the most interesting item of all actually concerns his own start-up, Stentor Inc., which he sold to Philips Medical's parent Royal Philips Electronics (NYSE:PHG, AEX: PHI) two years ago for $280 million. The acquisition gave Philips a foothold in the Picture Archiving and Communications Systems (PACS) market, an activity which was later to form the basis of the company's medical information management business.
Following the acquisition of his start-up by Philips, Muduroglu became CEO of Healthcare Informatics, a field which for some years now has contained the foundations for a potential quantum leap, at least in the Western World. Muduroglu says his latest visit to Israel is his third in two years, something that underscores the importance Philips attaches to the medical market in Israel. While in Israel last week, Muduroglu met existing and potential customers, employees, and a number of start-ups that Philips has expressed an interest in. But the central reason for his visit was most likely the upcoming Clalit Health Services tender for the supply of a new PACS system. The system carries out a form of digitization of medical imaging (called digital imaging) produced by X-ray machines, CT and MRI systems, and transmits it over a communications network, so that attending physicians can view it on their desktops. A system like this costs tens of millions of dollars, and the upcoming tender is considered one of the more valuable ones in the medical device sector.
Globes: We've been hearing a lot of people (of whom the most recent was Larry Ellison) talk for some time now about the potential that IT could have in the healthcare industry. Why hasn't there been progress here?
Muduroglu: "I think that people simply fail to appreciate the complexity of solutions for healthcare. They think you can just take solutions from corresponding fields such as finance, industry, or human resource management and simply adapt them for use in healthcare, and this isn't true,. We've seen a lot of software companies enter the field, such as SAP, or Microsoft, which even acquired a designated software system called Azyxxi (which brings together all types of patient data and makes it available at the point of care).
"Essentially, not enough is being invested in this market. Investment in IT is usually around 7-12% of enterprise expenditure; in the medical market the rate of investment is around 3-4%, which is relatively low. Standards in the healthcare sector are known to be highly complex. I think that the world is now geared for the building of nationwide infrastructures. The UK, for example, has spent a fortune on the setting up of such an infrastructure, and Israel is now ready for the next stage. A total of seven million radiological readings (imaging produced by various systems - S.S.) are carried out in Israel, so we have a substantial interest in the development of infrastructure for medical data collation and management. In global terms, Israel is a highly developed market, and succeeding here will definitely give us an advantage when entering other markets."
Philips Medical and Clalit Health Services have business ties stretching back several years, long before the current tender. Considered the world's second largest healthcare services provider, with four million members, Clalit Health Services has in recent years carried out a significant upgrade of all its IT and technology platforms. Philips Medical has so far installed PACS systems at a number of hospitals such as the Rambam and Sheba medical centers, as well as Maccabi Health Services, so Muduroglu is here with a clear agenda. "I think that our opportunity in Israel lies in the integration of our systems so that medical imaging is available to doctors everywhere. Israel has the infrastructure to support this," he says.
We may enter the CPR market outside the US
But with all due to respect to the Clalit Health Services tender, the project that the interests the Israeli IT market more, despite being less expensive and technically complex, is the Computerized Patient Record (CPR) program. This refers to the ability to provide a full picture of a patient's state of health from any location and at any point in time, including the gathering of data covering a wide range of fields, from a large number of locations (health funds, hospitals, clinics etc.).
Philips Medical decided not to enter this field, because, as Muduroglu explains, of the intensive competition it sees in it. But, he adds surprisingly, change could be in the offing, and it could happen in Israel of all places. "We may enter the electronic medical records market (EMR, also known as CPR, S.S.) outside North America. We have no intention of offering solutions like these in the US. There are plenty of providers offering strong solutions there, and that market has other opportunities. We will, on the other hand, consider launching this activity in Europe and in Israel, although we believe that our specialty lies in applications for treatment itself, rather than the data obtained from it."
Do you have a suitable technology, should you decide to enter this market?
"I think we have the basis for a technology. We deal with many databases during the course of our work with cardiovascular data and imaging systems. However, if we decide to penetrate the CPR market, we'll probably make an acquisition. This is not a short-term goal."
What do you feel will be the healthcare system's IT needs in the immediate future?
"There are a lot of problems with the quality of treatment. When someone goes into hospital, 20% of what they do to him is wrong, and nearly 50% of the treatment he should have had he doesn't get. In practice, the quality of treatment you get at the various institutions varies according the manpower and the technology they have at each place. So I think that the opportunity for us will lie in the development of applications that will come with built-in components to guarantee better-quality treatment. It's become so complicated that doctors no longer know exactly what to do on their own. We need applications that will help them analyze data, make a diagnosis, and recommend the suitable treatment on the basis of this."
Do you already have any solutions based on artificial intelligence?
"Yes, we have solutions such as that for the treatment of sepsis, (a blood infection, and one of the primary causes of deaths among patients in intensive care units, S.S.). It can happen that a sepsis patient whose condition is worsening can be overlooked. It is extremely difficult to monitor this and one of our applications can alert staff to symptoms that show there's a problem."
Do you believe these systems will eventually carry out some of the jobs now performed by doctors?
"No, I see them supporting doctors."
As mentioned earlier, Muduroglu also visited a number of medical device start-ups during his recent visit. He is well acquainted with the Israeli technology market through his company Stentor, whose chairman was Davidi Gilo. Gilo held 6% of the company through his venture capital fund Gilo Ventures. Philips Medical Healthcare Informatics has not made any direct investments in Israeli companies so far, but Muduroglu claims the company is now considering them. The most notable of Philips Medical's investments in Israel to date was its acquisition of the CT activity originally owned by Elscint, which first sold it to Marconi.
Muduroglu is particularly interested in companies that have solutions focusing on visualization for medical diagnosis. "We're interested in companies that have clinical technologies that offer visual solutions for the support of surgical procedures. We acquired Elscint's CT activity from Marconi, and we did a lot of work with it in cardiology-related procedures. We are now seeking to expand this activity to MRI cardiology (diagnosis) with MRI and other similar applications."
Published by Globes [online], Israel business news - www.globes.co.il - on September 16, 2007
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