Science

Georgia Regents Medical Center, Philips, Enter “First of its Kind” Agreement

July 7th, 2013

The nation’s health care industry is changing at a pace never before seen.

Part of that’s due to the Affordable Care Act, which holds providers accountable for patient outcomes while rewarding efficiencies.

Although not a direct result of the new health care law, those are the same goals behind a massive, first of its kind partnership in the US. To hear an audio version of this story, click the 'Listen' icon above.

Georgia Regents Medical Center and Philips recently inked a 15-year, $300-million alliance that will address “current and future clinical, operational and equipment needs of GRMC’s multiple sites,” including Georgia Regents University, the state’s medical school.

Georgia Regents Medical Center CEO David Hefner says the deal was predicated by one question:

“How do we deliver care in a new way that is better, faster, and less expensive?”

Philips’ answer: Create a comprehensive system unique to GRMC.

Under the agreement, Philips will provide Georgia Regents Medical Center, its affiliated hospitals and clinics, and the state medical school with everything from medical machinery, patient management systems, and electronic medical record systems to maintenance, training, and even lighting and electronics.

Philips says creating the system allows room to design efficiencies currently lacking in the health care system.

Although the agreement is new, the relationship between GRHC and Philips is not. But it does represent a radical paradigm change.

In the past, Hefner says, the two have operated under a traditional “supply and demand” model, where the selling of medical equipment was a “high margin, low volume” equation.

Every few years, Philips would sell the hospital the newest, fastest, and snazziest machine.

When the hospital used the machine, it billed you, the patient.

If your health improved, great. But whether you got better wasn’t part of the business equation.

But what if it was? What if part of Philips profits came from helping the hospital improve patient outcomes?

That’s one component of the extensive, long-term agreement.

“There’s risk and reward for both parties,” says Steve Laczynski, head of Philips health care division in America. “So if we say the benchmark today is 20%, if we can get to 30% -which is better- and reduce costs, then both Georgia Regents and Philips will share in that savings.”

David Hefner, the CEO of Georgia Regents, estimates the value of the agreement will save the system $100-million over its 15-year span.

To ensure the deal does not violate any federal regulations, including anti-trust provisions, GRMC and Philips have asked the Office of the Inspector General for an advisory opinion on the deal. The OAG’s response, Hefner believes, could take 18-months or more.

(This story is part of a partnership between WABE, NPR and Kaiser Health News.)