Case | HBS Case Collection | September 2012 (Revised March 2014)

Philips-Visicu

by Regina E. Herzlinger, Natalie Kindred and Sara M. McKinley

Abstract

Would the advent of global payment models and ACOs create sufficient demand for a telemedicine offering covering the care continuum, from hospitals to the home? This was the decision facing Royal Philips Electronics (Philips), the Netherlands-based producer of lighting, consumer electronics, and health care products, in 2012. Philips already offered several remote monitoring systems for hospitals, including the eICU, which it obtained through the 1998 acquisition of Visicu. In the eICU model, patients in hospital ICUs were monitored using bedside devices, which transmitted patient data to a remote station from which clinicians monitored and directed care as needed. The model aimed to improve care quality by enabling early interventions and reducing adverse events, and to cut costs by allowing clinicians to care for a larger number of patients. Building on this and other offerings in its portfolio, including numerous home care devices, Philips could extend this model to create an integrated remote monitoring offering managed through a centralized clinician-staffed station. In doing so, it could gain a deep and early foothold with ACOs and position itself as a leader in telemedicine-enabled care. However, U.S. telemedicine adoption to date was slow, in part due to insufficient cost-effectiveness evidence, and ACOs—the likely target customer—remained underdeveloped. Philips would also contend with a complex selling process and numerous operational challenges. Was it too early to invest? And, if not, who were the ideal ACO beta sites?

Keywords: health care; Philips; Visicu; telemedicine; eICU; accountable care organization; ACO; bundled payment; hospital to home; patient monitoring devices; home health care; Health Care and Treatment; Communication Technology; Quality; Safety; Performance Productivity; Performance Capacity; Performance Efficiency; Consumer Behavior; Emerging Markets; Health Industry; Telecommunications Industry; Netherlands;

Citation:

Herzlinger, Regina E., Natalie Kindred, and Sara M. McKinley. "Philips-Visicu." Harvard Business School Case 313-015, September 2012. (Revised March 2014.) (As companion reading for this case, see Regina E. Herzlinger and Charles Huang, "Note on Bundled Payment in Health Care," HBS No. 312-032 (Boston: Harvard Business Publishing, 2012).)