GE CEO Immelt: Misdirected on Healthcare

The New York Times’ “G.E. Chief Sees India Helping Cut Costs of U.S. Health Care” reports that Jeffrey Immelt predicted that India’s role in reducing US healthcare costs will be significant. The comments were made by General Electric’s (GE) CEO during a news conference related to GE’s healthcare business restructuring in India. He predicted that India’s healthcare industry will grow to $75B by 2012.

Given that GE’s healthcare business is still way too dependent on the medical imaging “big-iron”, it is not surprising that Immelt’s comments focused on outsourcing the interpretation of these images. Creating a cheaper operating infrastructure to support the big-iron is favorable to selling more machines. Obviously, GE wants to do whatever possible to sell more machines and lowering someone else’s revenue will not affect GE’s profits.

GE continues to be shortsighted and selfish in its view of healthcare. I am disappointed as a shareholder that GE is not exiting or substantially shrinking their imaging business. GE’s imaging business is as over reliant on government subsidizes for senior care as Humana (HUM). It is just that Humana’s subsidy is direct Medicare Advantage revenue and GE’s subsidy is revenue to their doctor and hospital customers. These companies should heed what happed to the banks, for they might get feathered without even being TARPed.

Trouble with healthcare is not that the US is undersupplied with medical technology, doctors, hospitals and drugs; we are too far oversupplied. And seniors are no different than street drug addicts, they can never get enough doctoring – whether it’s beneficial or not. What Americans need more of is unbiased advice. Is a cancer patient better off suffering for 2 to 5 years under chemotherapy or living his remaining life peacefully with just pain therapy?

America’s addiction to healthcare is often justified in rhetoric about rationing, waiting lines and technology. As long as the arguments continue; companies, doctors and hospitals will continue to avoid preparing for a reduction in demand. Pfizer (PFE), Merck (MRK) and others will seek mergers, GE will do nothing and demand will start shrinking. The bill for healthcare reform will force us to break our addiction and rational use of healthcare will emerge.

Breaking any addiction is difficult and going cold turkey can be devastating. The Genentech-Roche model is going to be just as obsolete as GE’s. In addition to a newfound emergence of cost-benefit will be patient centric suffering-benefit. Are multiple years of suffering under the breast cancer drug Herceptin worth a short life extension?

Government’s role is to fill in the gaps left by the absence of profit motive. The suffering-benefit equation has not been well balanced by either the private sector or the FDA, and doctors are biased toward extending life at any dollar or suffering cost. Doctors’ role as scientists often conflicts with the patient’s desire for wellbeing. Government needs to fill this void. While choice would definitely encourage substantial cost savings, unbiased advice by government should not be interpreted as “death panels.”

GE must understand the shrinking healthcare demand will not be based on the economic cycles alone. The next generation of seniors might not take every treatment just because it’s free and the government will encourage this new refreshing attitude.

Disclosures: Author is long GE and PFE

Comments

[kotika98:]

Wow, thats pretty strong language. I see a gap in logic here. One is that imaging is not the same as the supposedly useless if you believe the author cancer medicines. GE does not make cancer medicines.
The other mistake the author makes is that what GE is trying to do should be done and will be done in any case. It does not benefit and is not harmed by the passage of the bill in congress or any other imaginable events. So whats the logic of this article?

Oct 04 04:58 AM

[mfg:]

obviously, the author has no backgorund in medicine....as a medical oncologist, I can tell you that herceptin is "virtually: side effect free...other chemo drugs added to it have some side effects...many chemotherapy drugs have a mild side effect profile on which cancer patients live years of quality....we should not be the judges as to what a patient should and should not get...
medicine definitely adds quality life, including to the majority of cancer patients....what price is society willing to pay, that is a different debate...but let us not make it look like we are doing cancer patients a favor by not treating them....

Oct 04 06:37 AM

[apppro:]

The real issue is that EVERYONE wants those very expensive procedures and no one wants to wait for them or to be told they’re not covered. At into that all the insane waste of money of ‘octomoms’ and other ridiculous procedures and well, you get the point.
What we need is not a National Health Plan, but rather a National Health FORM. One form that very doctor and insurance company has to take. One form that covers the main essentials – determined by whomever – that allows cross State insurance and primary care. Have the Feds pick up the cost of tort reform and if a doctor screws up just take away his license.

In any case – just like housing and subprime – there is NO WAY everyone can afford every health care procedure and plan. Sooner or later that Ponzi scheme will collapse too.

Oct 04 08:27 AM

[casey00001:]

Immelt is so in bed with the Obama administration its disgusting. He is an insult to even the shadow of Jack Welch.

Oct 04 09:05 AM

[Chaser12:]

Heathcare need will never diminish until the population does.

Oct 04 11:31 AM

[biodummy:]

Casey: Immelt is the first serious figure who had called for reindustrialization of America. I am ready to take everything he says seriously. Arrogant and self-righteous Jack Welch was (and still is if you read his comments on the last page of BW) ready to ship all the U.S. jobs except the ones at Walmart to China or wherever for an extra penny in cost reduction - I think he should be tarred and feathered together with the bankers who promoted this.

Oct 04 02:06 PM

[bat:]

I think "casey00001" is confusing Mr Immelt of GE with Michael Steinberg the author of the article. Mr. Steinberg is the one who seems in bed with the Obama administration. (Read his other articles re health care). Steinberg seems to share the opinion of many who support the Obama health care plan, that it isn't worth spending money to extend lives by comparing sick seniors to "street drug addicts". He apparently has never been close to anyone as I have who's' life has been extended for many happy, even if sometimes uncomfortable, years and thereby lived to see their children married and grandchildren born. The two folks I have in mind would not have had it any other way. Shame on Steinberg and any others who want to play god in making such decisions.

Oct 04 02:37 PM

[rennert:]

Biodummy you hit the nail on the head. You spoke out of my heart.
And what is the writer of this article trying to say with the words :"free healthcare". Seniors are paying through nose with all this extra cost that Bush and his team have constructed. Of course any one that complains much is called a communist or socialist, yes we must shame him so he will not raise his head again.

Oct 04 03:18 PM

[Mrudula Shah:]

Yes, the author reminds me of the story of four blind persons trying to describe an elephant!! Imperfect and limted knowledge. Our health-care costs are up primarily due to collective greed of all - drug makers; doctors, dentists, and other health professionals (especially therapists, rehab facilitators and so forth); hospital managers; hospital equipment suppliers/lessors; testing labs; insurance-company mangers; and so fortrh - all trying to rip off the system (especially medicare) to keep their jobs and make money. Since the U.S. economy has become primarily service-oriented and less manufacturing or agriculturally oriented, it's no surprise that in the name of creating more employment these dogs have a field day! It suits the politicians very well too. Thus, the whole debate on health-care cost reduction by the law-major politicians (including Obama) and the plans that are being considered now are like a mis-fired rocket. Basically, Americans need to be looking to themselves first before blaming this and that. In a money-hungry society, this will be a tough nut to crack!! Tell me in a few or more years if I am wrong!!


On Oct 04 04:58 AM kotika98 wrote:

> Wow, thats pretty strong language. I see a gap in logic here. One
> is that imaging is not the same as the supposedly useless if you
> believe the author cancer medicines. GE does not make cancer medicines.
>
> The other mistake the author makes is that what GE is trying to do
> should be done and will be done in any case. It does not benefit
> and is not harmed by the passage of the bill in congress or any other
> imaginable events. So whats the logic of this article?

Oct 04 07:33 PM

[desicon:]

This is just ranting and useless drivel.

Oct 05 01:13 PM