The future of healthcare, at least for the industry’s sixth largest medical device maker, is digital. That’s how Pete Arduini, CEO of GE HealthCare, sees the future for his newly independent firm, which began trading as an independent company on the Nasdaq Wednesday, after being spun off by General Electric.
This interview was edited for length and clarity.
MedTech Dive: What are your plans for the future now that you're independent and unshackled?
Pete Arduini: This is my one-year anniversary, believe it or not, actually on the bell ringing day. When we started the journey, a big part of that was about the right operating structure, even the size of my staff, bringing in some new folks that we knew, and we would bring in other individuals in the [GE] organization. And because of that, we've been able to have a really nice mix of longevity folks that have been here for a while, and also some new blood. I'm really excited about that start, we've actually seen the benefit of that. The other part is this focus on innovation, we'll announce here shortly a new chief technology officer to have control of our digital resources, and also be kind of the maestro, if you will, for the broader technology spend. [On Thursday, GE Healthcare named former Amazon health tech executive Taha Kass-Hout as CTO]. GE set us up well in the last few years. We've increased our R&D from $700 million back in 2017 to over $1 billion today. So we're in a good spot, and we'll continue to grow but, more at a single-digit pace, but those are going to be some of the focus areas. And then I would say with our commercial teams, really on commercial execution, there's so much pent up demand in the market and actually backlogs of procedures, we have a really interesting opportunity, over the next few years to take advantage of that. And then, we'll continue to build out our platforms with more digital capabilities, which is going to be the next big inflection point for us, how we drive more and more growth across healthcare.
There's pent-up demand, but there's also a huge problem of hospital staffing, of having the people needed to do the surgery. Is that the digital aspect: lower labor costs, lower labor inputs? Will that drive your growth?
Right now, it's one of the big growth drivers. Just to give you an example, in our MRI business, we've been able to come out with upgrades to a 10- or 15-year-old system you may have in your institution, and make it 50% faster, and at the same time, increase your image quality. So your clinicians are super happy that you’ve got state of the art image quality, and your administrators say, ‘Gee, I'm paying all this money for techs and nurses at an all-time high. If I can get 50% more patients through on that shift, that's a real savings.’ We've been doing extremely well with upgrades and new systems around that. And we're going to only see that continue in the near future.
Coming back to digital, there's a lot of tension around digital: you can do a world of good with it, and there's also enormous pressure to protect personal privacy. How will you navigate these waters?
I look at it as a pyramid of data. At the very top are your personal records and data, and at some point, a specific diagnosis for you and using AI to get that is going to be an important part of the healthcare model. I think that’s many years out. Then as you go down the pyramid, there's just so many other layers of ways, without getting into HIPAA-related data, that you can change care. [We take] data across an institution, and it’s less about who the patient is and [more about] [how] you can get more patients in and out effectively. This is our handheld ultrasound system that actually has the power of what we had in the biggest system we made only eight years ago. And the difference is, this guy is designed for a primary care physician. Now, the primary care physician has in their pocket an imaging device that's a whole lot more powerful than a stethoscope that they just haven't had. I think there's gonna be a lot of these types of areas that get away from personal [data] but really benefit from artificial intelligence, machine learning. I think it's about 97% of the data collected in a hospital today really isn't used. We look at that as a stacked up goldmine that's out there. And if we can help unlock that, even if I don't own that data, or even directly access it, but use it to make better decisions, it's a win for patients. It's a win for the institutions, and ultimately, it'll be a win for our value creation for shareholders.
Let’s talk regulation. Does the FDA have what it takes to regulate software additions to healthcare devices?
When you have a large installed base, you want to have a large voice there to influence how people might think about it. Because unlike a consumable that's gone the next day, in many cases, our products are out there for five or 15 years. So we play a pretty active role with the agency [FDA] on your AI and machine learning. We have more apps out there than anybody, they're resident on our devices. To your point, when you get to models that are learning from a network of other devices, by definition, the product gets slightly better every day. The current FDA model is not designed to actually have approvals on something that can change. But ultimately, Jeff Shuren and the FDA team, it's a smart group. They speak with industry, they really think about the data science around it. I think we'll get to a place that ultimately makes sense. And as those regs change over time, we hope to [have] a major seat at the table and help define them.
The M&A power has shifted now to big players like you, with deep pockets and broad sales networks. What’s on your horizon?
We think M&A is going to be a really important part of our capital allocation strategy. We talked about investment in organic R&D. That's job one and an important aspect. The second area is M&A, and some of these aren't big deals. Some of them are partnerships. In my career, I've done over 5,060 deals. It's important that you actually build that into your capabilities as a company and my first week on the job, I said I want to do a weekly business development call. Why? Not because I was anxious to buy, but when you start looking at the market,it helps your organization become more agile because you start thinking about well, that would be interesting for us. [And] If it goes to somebody else, what does that mean? Do we care? How does that look? Are there partners that we can bring in? So I think you'd expect to see us be an active player in both partnerships, collaborations and in M&A over time, in products as well as in digital and in those things that enable us to have a more integrated presence.