As anyone can imagine, Siemens has been very reserved with public statements and interviews these past 12+ months. Because of existing relationships within Siemens Medical Solutions I was able to sit down and have an interesting conversation with their Director of Public Affairs and Health Policy, Dr. Karl-Jürgen Schmitt.
The focus of the interview was to explore Siemens’ work in emerging markets and the healthcare products and services that fit this market.
We also incorporated some questions learned from prior interviews in the PHM Emerging Markets Healthcare Monitor. For instance, we wanted to know how Siemens might manage contract and client relations across multiple countries or multiple sectors. And finally, we were keen to learn what Siemens might be able to tell our readers about macro level market demand and what new opportunities Siemens was working.
Interview with Siemens AG, Medical Solutions
Dr. Karl-Jürgen Schmitt
Director, Public Affairs
Siemens AG, Medical Solutions
Interview: 12 November, 2007
Kempinski Hotel, Munich Airport
Hank Kearney (HK): We know Siemens as a global player in the healthcare sector, and it is certainly a presence in nearly all emerging and developed economies. Can you tell us what emerging markets you focus on for new opportunities?
Karl- Jürgen Schmitt (KJ): Our unit covers the territories of all the former Soviet Union states, including what today is known as the CIS or Commonwealth of Independent States. This includes Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan. Turkmenistan is also included in our territory, though not a full member of the CIS.
Also, all of Eastern Europe, South East Europe including the former states that made up Yugoslavia, and Turkey.
HK: That is a very large territory and I presume challenging?
KJ: We are also covering the Middle East and all of Africa.
HK: Are there a few products or services that are of particular interest in these markets? For instance, while selling a MRI in Tajikistan is certainly news, it doesn’t happen very often. What products do particularly well in emerging markets vs. other products and markets?
KJ: The needs are more fundamental in emerging markets. It isn’t so much a situation of what products do better than others, but rather, most of the equipment simply needs to be modernized. Updating the equipment is a major focus.
However, there is a great demand for diagnostics, particularly X-ray based digital diagnostic technology. And this varies by country and region. For instance, in Poland we see a demand for high-end CT technology, specifically for coronary care. Poland is a country that is large enough, and has such a strong healthcare sector that the market understands the advantages of such equipment: in the long run the costs are less, the tests are faster, and of course less invasive.
HK: How is Poland’s healthcare market different from say, Hungary with its similar per person GDP or Russia?
KJ: Poland’s healthcare market is benefiting as well as the Hungarian market from EU Structural Funds, a measure and tool to accelerate cohesion between European Member States. The Polish healthcare system, however, is much more de-centralized than the Hungarian. Therefore Poland is not so dependent on central decisions and has more competition between the regions, which might have a strong impact on implementation of innovation.
Russia is still facing huge inequalities throughout the regions. There are very innovative regions around e.g. Moscow and St. Petersburg and regions where there is a lot room for improvement.
HK: Speaking of big price sales, last year in Malaysia I saw a sign at a hospital, announcing the arrival of a new 64 slice CT Scan. In talking with the executives I learned it was running 16+ hours a day, 5.5 days a week. This certainly points to a high level of demand, at least in that market.
Can you tell our readers what Siemens is doing to help meet general market demand in emerging economies? For instance, how does Siemens work with say, a private hospital, to forecast demand for a particular service?
KJ: Siemens has been in these markets for a long time. We have a very good reputation amongst the doctors, clinicians, and medical technologists, the public at large, private hospitals and clinics, and of course amongst decision-makers in healthcare. Our market share is significant.
To your question of what we do specifically to assist our clients and future clients to meet demand, we have a consulting group that started 9 to 10 years ago. This group works with medical providers on several key areas. For instance, organising work flow, patient flow, process integration, facility planning, are all key issues in large institutions like hospitals. This group helps with forecasting, reimbursement strategies, patient turn over, general and specific ROI planning, and more.
I must point out though; this group is operating independently from the other business units within Siemens Medical Solutions. They are charged by the customer to give them independent advice to support their success in the market.
HK: One could imagine, or expect, a Siemens consulting group to be product orientated or biased towards Siemens technology and services. How does this consulting group deal with these preconceptions?
KJ: Yes, sometimes clients and prospects have such expectations. They think the outcomes of studies will be product drivers, quantity rather than quality assessments, if you will. On the other hand, knowing about how technology is benefiting healthcare delivery is a competence one cannot treasure high enough. But we have to face this balancing act and we work very hard to maintain clarity of purpose.
For instance, the Siemens Medical Solutions consulting group was requested to do an analysis of a project at the Frankfurt airport. The concept was that a diagnostic and high-end radiology center would be built in the airport to service wealthy individuals from the Middle East and other regions of the world, individuals who have the ability to fly in and out in a short period of time. (Editor’s Note: Since September 11, 2001 medical visas to USA have become very difficult to obtain.) Well, our consulting group did the analysis and it indicated this would not generate a positive ROI for the client. The project did not go forward. This is an example of quality over quantity.
HK: And the next step? What is Siemens able to do with sales assistance?
KJ: We are very careful not to position the company as a provider of medical services. Therefore, our model does not foresee ownership or active partnering with provider institutions or medical centers. This would bring us in a position to act more or less as a competitor to our customers. It would be a very inconvenient situation for us.
On the other hand, if our clients demand, we work as partners focusing on our core competencies, technologies and processes in healthcare. In this regard we are entering long term contracts running 15 to 25 plus years with healthcare providers to maintain service and update our products and solutions.
And, we have a long term strategy, namely to develop only products and solutions which serve our customers to accomplish their work more efficiently, which means with increasing quality and cost effectiveness. Quality up, cost down through innovation and process optimization is our strategy. Our customers appreciate this.
HK: A few months ago we interviewed the managing director of AHC, the Western Hemisphere’s largest hospital management company. In our conversation we talked about the challenges faced by a trans-national hospital company. In particular we talked about the challenges of working with multiple distributors in multiple countries, though all from the same supplier. The managing director said it was difficult to streamline the contracting and procurement issues.
Can you tell us how Siemens Medical Solutions works with customers that may function in multiple countries, multiple regions?
KJ: Yes, we see this trend for some years, where Western European hospital chains are considering expanding throughout Europe. We are facing this challenge by establishing key account managers for those customers. Even if those chains are acting in multiple countries, they have one face to consult with and negotiate about Siemens products, solutions and services
HK: I know from past experiences that Siemens Medical Solutions is fairly forward thinking in establishing relationships with key clients. We’ve seen where Siemens will appoint a Siemens manager or executive to be the key client liaison to all facets and divisions within Siemens. This manager would be able to help a client with a Siemens X-ray or a locomotive engine.
Tell us how Siemens sees the upside of such a relation. Is this being used to help grow key clients in emerging markets?
KJ: Key Account Management is a strategic approach, which is very important for us and Siemens has a good reputation with its customers. For years, we have had additional support structures for these account managers with our Sector Development Boards (SDB) for specific markets. One of these SDBs is “Healthcare”. While these SDBs are the center of our key account managers, they can consult with the customer and support him best in line with his needs. The focus is on products and solutions for this market. So, while a “Healthcare” customer will not likely ask for locomotive engines, we can help a customer build a new hospital, including building management, security and safety solutions, clinical equipment, IT-technology and lightning. Here we can really offer the complete Siemens solutions.
HK: We understand for some time now Siemens Medical Solutions has been putting a lot of energy into its services and software efforts. I’d like to take a moment and talk about electronic medical records. Most of our readers understand the difference between a PHR or personal health record, and an actual medical record, maintained by a patient’s physician or hospital. However, it appears Siemens has opted to focus on creating an inter-operable transaction platform, facilitating movement of data across multiple sources, say a polyclinic, a hospital, and the doctor’s office.
Can you talk about how these types of software applications might speed-up deployment of e-health development in emerging markets? For instance, how might a small group of clinics in South East Europe take advantage of these services?
KJ: Perhaps this question can best be answered with an example, a real example and then we’ll examine how it may facilitate data flow in emerging markets.
We have a project in Scotland, for the National Health Service. As you know, Scotland’s NHS is different from England’s NHS. Regardless, the project focused on making sure patients were getting their eyes examined to detect early onset of diabetic retinopathy. In effect, an appointment setting capability. The NHS knows instinctively that preventing vision loss allows for significant savings, both monetary and social. The challenge was the multiple information systems involved in a relatively easy process.
So, our IT systems group developed the ability to facilitate IT information flow from patient invitation, to scheduling, to examination and image compilation, outflow to evaluation or diagnostic, and then follow up.
HK: Does Siemens do the initial data mining to determine which patients are 1, diabetic and 2, which are due for the eye exam?
KJ: No, the data mining is done by Scotland’s NHS.
So now we have the ability to take this complex process, from an IT perspective, and move it into various disease state in different markets. You wanted to know how we might work in emerging markets? Well, let’s take this same example and use it for instance, for TB compliance in say the Ukraine. We would be able to very efficiently expedite the communication, examination, diagnostic, and follow up care of TB patients. This is a strong case for effective healthcare IT in emerging markets. And this can apply to nearly any disease state where you have to collect some information from the patient (e.g. medical images or laboratory data) and to evaluate these data by professionals under quality assured conditions.
In regards to patient medical records, Siemens views the terms not only in technical aspects. That is, patient records or e-health records, or e-medical records are only tools to support information flow and processes in patient care. Therefore, the main issue is how a hospital or clinic or health system will work with existing and new records. This is the determining factor of how to optimize healthcare processes in order to promote patient centric care.
HK: I know some clinicians that would have an issue with self reported data vs. diagnostic data collected by professionals.
KJ: Oh yes. I’m not talking about the clinical efficacy of the data but rather how that data is transmitted, integrated, and ultimately used. In fact, if the markets are only talking about, say electronic patient records, then the issue is content – the validity of the content.
But again, when we talk about challenges of the future, the main issues aren’t IT or data validity. Chronic care and the staggering associated costs are the biggest challenge of the future. We see managing chronic conditions as a main driver of costs for the future. And with chronic care management we believe data flow becomes even more critical, data from all sources, including, perhaps most importantly, the patient. This in turn requires the physician to begin to use data differently. And most importantly, good business models have to be established to reward professionals to work with and to use the data in the most interest of the patient.
In fact, our industry association, COCIR is working with the EU in Brussels to help understand how the new member countries can utilize the advantages of IT in their healthcare systems and how to better use the EU Structural Funds provided. This is, we think, very exciting work for emerging countries. In fact all countries are faced with the same challenges of the future.
HK: New hospital developments in the world’s emerging markets have a distinct advantage in that they’re able to capitalize on the lessons learned over the past 40+ years in developed countries. Today, patient flow is a serious component of any facility plan and design. But equally important is information flow. Again, many emerging countries have the advantage of starting fresh or with little legacy infrastructure.
Speaking specifically to healthcare or hospital system-wide IT flow, what work is Siemens doing in this area and what are the advantages for new companies in emerging markets?
KJ: We believe we have real solutions for hospitals and clinics in emerging countries when it comes to Hospital Information Systems (HIS) and IT-Management. The recent acquisition of the German provider of clinical information systems GSD, and our cooperation with SAP regarding the administrative part of HIS, positions Siemens Medical Solutions as the company which can provide HIS which are hosted by one hospital or data center for a complete hospital chain or region. Today, we are doing this already in several countries. The IT-Division of the hospital then provides services to the other entities or institutions which are connected. Resources and synergies can be used jointly. No longer is there a need for each hospital to have its own HIS-Installation.
These hosted HIS take advantage of economies of scale, ease of system updates, and are readily scalable.
These are very exciting projects from Siemens. Today we can host, and manage HIS for example in Spanish, German, French, English and soon Romanian, as we won 16 hospitals in Romania a few weeks ago. This system can also be adapted to country specific requirements rather easily.
HK: Hosted hospital and clinic IT systems. This is big news and likely a game changer. I can imagine many of the IT companies around the world, in the US, India, Europe and elsewhere are now faced with reviewing their models. Tell me about the scalability of the systems. How small a hospital or clinic would find this financially feasible?
KJ: This is a question that cannot be answered only by giving some numbers. The financial feasibility highly depends on the business model, which is behind and the number of patients planned to be treated or number of beds. Such a hosted HIS can be run economically for a relatively small hospital. The previous described IT-Divisions of hospital chains or regions can go for additional offerings outside there traditional “customer base”. For example they can provide different level of ASP (Application Service Provider)-Services out of shared systems to small, stand alone hospitals. Final remark, this can of course also be done by external data centers
HK: Karl-Jurgen, thank you for re-routing your itinerary to meet me here at the airport. I very much appreciate your time and look forward to talking again.
KJ: Thank you.