Editor’s Note: Alex Green is the Director and Principal Analyst at Signify Research, a UK-based market research firm focusing on health IT, digital health, and medical imaging. Alex is responsible for leading Signify Research’s Digital Health market intelligence portfolio, initially developing its coverage of the patient engagement platforms and portals market
Philips announced on December 8th that it had acquired Dutch population health management (PHM) and eHealth platform provider VitalHealth software. The acquisition marks Philips’ second major PHM acquisition after it purchased the US-based PHM vendor Wellcentive in July 2016.
The acquisition bolsters Philips’ PHM offering, particularly within the execution elements of a PHM platform (e.g. patient engagement, care coordination and patient reported outcomes). It also opens several international markets to Philips – its PHM business to-date being dominated by US customers.
Consolidation has been a key theme within the PHM industry for a number of years, but what does this latest deal say about Philips’ strategy and future challenges? Here’s our take:
The convergence of two geneses
Philips’ original PHM acquisition, Wellcentive, was very much a product of US legislation and US market demands. Tools to support the move to value-based care and to hit CMS targets were key features of the Wellcentive solution. The US focus was also reflective in its customer base, which was dominated by US health providers.
While VitalHealth was not without US influence in terms of its origins (Mayo Clinic being a co-founder and launch customer), its outlook has been more international. Most of its business is driven from Europe and it can boast of clients in, amongst others, India, China, Sweden, Germany, Belgium and the Netherlands (its headquarters) as well as the US. Its success in developing a strong international business relies on its understanding of the different approaches required to address the PHM needs in different countries.
This is not just in terms of a broad understanding of the market differences in the US versus Europe, but also understanding the nuances between the Netherlands and Germany, or the Netherlands and the UK for example. A quick analysis of how the company presents its offerings on its North American website, compared to its Dutch website, is testament to this.
This acquisition is not just one that expands Philips international PHM footprint though. Whilst the Wellcentive solution ticked all the main functional boxes required for a PHM solution (i.e. data aggregation, risk stratification, care management, care coordination and patient engagement), its origins and strengths were historically in the earlier parts of the process, i.e. the data aggregation, analysis and risk stratification.
Conversely VitalHealth has more strength in the execution element of PHM, i.e. provision of care coordination and patient engagement tools. Philips has for some time pushed the “Understand, Navigate and Activate” message in relation to its PHM strategy. This acquisition has significantly bolstered the “Activate” elements of that message.
Challenges still to be addressed
The acquisition certainly allows Philips to position itself well to take advantage of the growing PHM market. In North America alone the market is forecast to grow at a CAGR of 16% from $3.7B in 2016 to $7.9B in 2021 (Source: Signify Research’s 3Q 2017 North American PHM report). However, several challenges remain.
Firstly, it will take a considerable amount of time before the two legacy solutions are brought together under one product that leverages the best-of-breed elements of both companies. This has been a particular challenge for Philips’ peers, such as IBM Watson Health; bringing together the products of Phytel, Explorys and Truven Health Analytics into one coherent solution has been a challenge for IBM and one that’s still in process more than 18 months after its last acquisition.
The likely strategy for Philips will be to bring the VitalHealth Platform under the umbrella of the Philips HealthSuite Digital Platform (HSDP), much in the same way the Wellcentive solution was integrated, which should allow for a smoother integration process. However, the time to completely bring the two solutions together should not be underestimated.
While the acquisition brings Philips good exposure in terms of international PHM markets, it should be noted that these are still relatively embryonic markets. VitalHealth has a proven track record in developing an international PHM business but the US PHM market still dwarves the international PHM market.
Although there is pent up demand within Europe and elsewhere, limitations around funding mean that it will remain a significantly smaller market compared to the US for the foreseeable future. That being said, there are pockets of maturity such as the Netherlands, VitalHealth’s home market, that will provide more short term opportunities. Philips is certainly now better positioned to take advantage of this non-US demand, but it will be a slow burner compared to market performance in North America.
Finally, leading US-EMR vendors such as Cerner, Epic, Allscripts and athenahealth have taken an increasing share of the US PHM market over recent years. EMR vendors are estimated to have accounted for 25% of PHM revenues in the US in 2016.
While these companies didn’t necessarily come to market with best-of-breed PHM solutions, via acquisition and internal product development, they are now starting to leverage their large installed base of EMR customers for PHM within the US market, especially as they transition to value-based care delivery models.
Of course, Philips has a large installed base of health system customers itself in the US which it too can leverage; however, not in terms of EMR. The strong links between EMR solutions and PHM mean that those that have both do hold an advantage.
Outside of the US, Philips has started to push its Tasy EMR product, which was originally developed for the Latin American market, into other markets such as Europe. In addition, the PHM solutions it has from its two acquisitions can be integrated with EMR solutions from a wide variety of vendors. So Philips does recognize this linkage and the importance of the relationship between EMR and PHM.
However, challenges certainly remain in convincing some providers to switch from their EMR vendor when rolling out a PHM solution, particularly in the US. There is the argument that there are many health systems where multiple EMR solutions are in use, and so an open PHM platform, such as Philips’, that allows for interfacing with many legacy EMR solutions may well have success in penetrating these systems.
Despite these challenges, it’s still the Signify View that the combination of Philips, Wellcentive and now VitalHealth is likely to succeed. The addition of VitalHealth has aided enhance the overall PHM offering and can open up new geographic opportunities for Philips, whilst the original Wellcentive acquisition brought a highly regarded US brand into the Philips fold. As we start to see more convergence between PHM and telehealth, also expect Philips to increasingly leverage its leading share in the telehealth market to further enhance its PHM business.
Will this be Philips’ last PHM acquisition? Only time will tell. However, through acquisition we’ve seen the PHM market rapidly transform from a collection of best-of-breed start-ups to one dominated by major health IT and EMR vendors, in just a couple of years. This momentum is unlikely to stop soon.