07.22.14
$18.42 Billion ($102.6 B total)
Key Executives:
Joe Kaeser, President & CEO, Siemens AG
Eric A. Spiegel, President & CEO, Siemens USA
Hermann Requardt, CEO, Siemens Healthcare
Michael Reitermann, CEO, Siemens Healthcare, Diagnostics
Bernd Montag, CEO, Siemens Healthcare, Imaging & Therapy Systems
Gregory Sorensen, M.D., CEO of Siemens Healthcare North America
Jeffrey Bundy, Ph.D., CEO, Siemens Ultrasound
No. of Employees: 52,000 (362,000 total)
Global Headquarters: Munich, Germany
Healthcare systems—not just in the United States, but globally—are facing unprecedented change. While healthcare is primarily organized within national geographies, the issues impacting the industry are global, according to healthcare markets analysts at professional services firm KPMG. Demographics, fiscal restraint, new technologies and consumer expectations, experts continue to note, are creating challenges and opportunities.
Safety and efficacy are, of course, paramount. Close behind, if not on par these days with the first two axioms, is value.
And though mature systems such as those found in the United States and Western Europe are grappling with the value equation as well, emerging economies have the advantage of getting a head start in streamlining costs against outcomes, by “baking in” the concepts of value-based healthcare as a central organizing feature from day one, according to analysts with the healthcare division of the London, United Kingdom-based Economist Intelligence Unit.
“Value-based health is here to stay,” said Vivek Muthu, M.D., managing director of EIU Healthcare. “Those who ignore or fail to implement a value-based strategy do so at their peril. It requires a refocus, a mind-set shift that begins with an acknowledgement that any action in healthcare must improve outcomes for the individual patient and also for the health system as a whole.”
Companies such Siemens Healthcare aggressively are positioning themselves for this new value shift. The multibillion-dollar, multinational division of Germany-based Siemens AG, includes diagnostic imaging and image-guided therapies, as well as a clinical products division that includes ultrasound and X-ray equipment, providing a mix of high-end solutions and cost-efficient, less complex equipment for emerging economies. The company also includes an in-vitro diagnostics division and a unit providing healthcare information technology (HIT) systems.
To illustrate its “global” healthcare viewpoint, in its annual report for fiscal year 2013 (ended Sept. 30), Siemens highlighted the work of Medanta, a multi-specialty hospital in Gurgaon, India.
In the United States, a coronary artery bypass operation costs about $40,000. In Europe, the figure is around $25,000. At Medanta, the same operation costs less than $4,000.
“We can provide the operation at that price because labor costs in India are lower and because we work much more productively than our colleagues in the West. In India, heart surgeons perform an average of more than 600 operations a year—in some cases, up to six times the number performed by their counterparts in other countries,” said Namrata Gaur, M.D., a cardiothoracic and vascular surgeon. “Our advanced medical technology solutions from Siemens and our optimized IT infrastructure are further key factors.”
Gaur is enthusiastic about her work, but is concerned about the growing number of cardiovascular patients under her care.
“The incidence of coronary artery disease is increasing sharply, and our patients are getting younger all the time,” she explained.
“Not long ago, for example, we operated on a girl of only 14. One contributing factor is a genetic predisposition in the Indian population, and another is the changing lifestyle. In the cities, in particular, there’s more stress, people are smoking more, eating less-healthy foods and paying less attention to their health in general.”
As a result, India will have to expand its capacity for treating cardiovascular disease in the years ahead. Despite growing prosperity, relatively few people can afford health insurance. The challenge is to provide access to high-quality healthcare—regardless of their income and status.
To respond to similar conditions in healthcare markets around the world, Siemens Healthcare’s research and development (R&D) activities most recently have focused on two trends: The world’s population continues to grow steadily and to get older. These trends increase the pressure on healthcare providers to treat more people at increasingly lower costs in order to stabilize rising healthcare spending. To meet these needs, R&D efforts have targeted the development of systems that help physicians diagnose large numbers of patients but also are robust, easy to use, and inexpensive to purchase and maintain. (Incidentally, Siemens Healthcare spent roughly $1.58 billion in R&D in 2013.)
One example is technology that the company claims is the world’s first wireless ultrasound device, Acuson Freestyle The system is designed to make it easier to use advanced ultrasound technology in areas that need to be aseptic, or sterile. Examples include interventional radiology, anesthesiology, intensive care, catheter labs, and emergency care. Ultrasound with wireless transducers also is ideally suited for minimally invasive procedures such as nerve blockades, access to blood vessels, and positioning for therapeutic interventions and biopsies.
Acuson is made at Siemens’ a new manufacturing site in Plymouth Meeting, Pa., just outside Philadelphia. It is a 12,000-square-foot facility opened in 2013 following Siemens’ acquisition of ultrasound company Penrith Corp. in 2012—a move made to expand the company’s ultrasound offering.
“With this new facility, we will be able to offer Siemens customers worldwide a cutting-edge ultrasound system that eliminates the impediment of cables during ultrasound-guided procedures,” said Jeffrey Bundy, Ph.D., CEO, Siemens Ultrasound. “The Acuson Freestyle system’s wireless transducer technology offers greater flexibility and ease in obtaining accurate transducer placement, and simplifies sterilization in interventional settings. The system will enable ultrasound technology to be used more readily in a variety of point-of-care applications, including interventional radiology, critical care, anesthesiology, and emergency care.”
The Philadelphia-area facility will be Siemens’ second ultrasound manufacturing facility in the United States. The other is in Buffalo, Grove, Ill.
Corporate Shuffle
Siemens had an important corporate changing of the guard at the top during FY13.
After parent company Siemens AG issued its second profit warning of the year, CEO Peter Loescher was voted out by the company’s supervisory board on July 31. He was replaced by Joe Kaeser, who had served as the company’s chief financial officer (CFO). There had been rumors in the past of Kaeser eyeing the chief executive role, but the two insist there is no bad blood between them. Late last year, when questioned about the rumors, the CFO said the two complemented each other “like light and dark.” Loescher was named CEO in 2007 and was the first person appointed from outside the company to take on the job. He joined the company from U.S. pharmaceutical company Merck & Co. He was, at the time, hailed as a hero who would lead Siemens out of prominent bribery and price-fixing scandals that had blackened both its image and finances.
Loescher did drag the company out of that mire, but lost credibility after repeated misjudgments around demand in Siemens’ main markets. A company with assets totaling $143 billion, Siemens often is viewed as a bellwether of Germany’s economy, and it has been suffering since German exports fell in late 2009. The company also has been affected by a series of one-time charges related to project delays and other issues.
“Peter Loescher restored Siemens’ high reputation and helped it achieve a series of impressive successes,” said Gerhard Cromme, board chairman. “Under his leadership, Siemens experienced two of the most successful years in its history.”
“Our company is certainly not in crisis, nor is it in need of major restructuring,” Kaeser said. He did allow, however, that Siemens has lost some profit momentum compared with competitors and said he wanted to put the company back on an “even keel.”
Financial Ups & Downs
For fiscal year 2013, Siemens Healthcare recorded flat sales of 13.6 billion euros ($18.4 billion). Profit for the year was up 13 percent in euros, from 1.82 billion to just shy of 2.05 billion ($2.8 billion). Sales in the Americas were 5.63 billion euros ($7.61 billion), down 1 percent compared to 2012. The United States made up 35 percent of Siemens Healthcare’s overall sales for FY13. Sales also fell 1 percent in Europe/Africa/Middle East to 4.54 billion euros ($6.14 billion). Sales grew in Asia/Australia by 3 percent to 3.42 billion euros ($4.62 billion).
“Growth was driven by emerging markets, as these countries continue to expand access to healthcare for a broader population and build up their healthcare infrastructure,” Siemens officials noted. “In contrast, markets in industrialized countries grew only modestly compared to the prior fiscal year as demand was held back by healthcare reforms and budgetary constraints, particularly in Europe. Healthcare IT markets grew faster than the healthcare market as a whole, on particular strength in the United States. On a geographic basis, markets in Asia, Australia grew in the high single digits, including double-digit growth rates in China. Markets in the Americas, including the U.S., grew moderately.”
Profit for the company’s diagnostics business (for which the company breaks out specific figures, but not for other healthcare sectors) came in at 350 million euros ($473 million) compared to 314 million euros in 2012 ($404 million at 2012 rates). Revenue declined 1 percent, from 3.97 billion euros ($5.11 million at 2012’s Sept. 29 conversion rate) to 3.94 billion euros ($5.33 billion).
For Siemens as a whole, sales were down 2 percent to 75.9 billion euros ($102.6 billion). Net income was up 3 percent to 4.41 billion euros ($5.96 billion). Earning per share grew 7 percent to 5.08 euros ($6.87).
Going Forward, More Change
In May this year, during fiscal 2014, Siemens is planning a restructuring that will unleash its healthcare unit as a separate business.
At a recent press conference in Berlin, Germany, Kaeser outlined the plan, which will see the company’s four business sectors—industry, energy, healthcare and infrastructure—eliminated in favor of bundling businesses into nine divisions.
Additionally, Siemens’ hearing aid business also will be spun off and publicly listed. There also are rumors that the company is planning to divest its healthcare IT operations.
“Looking at the longer run, the market technologies of healthcare [are] going to see fundamental changes,” said Kaeser. “For example, cost reimbursement systems—these are increasingly value-based and require new business models.”
Company officials pointed to a number of paradigm shifts in medicine that helped drive the decision to restructure healthcare, including disruptive technological changes such as big data analytics, increasing use of molecular diagnostics and the growth of mobile healthcare.
“To be able to adequately respond to these profound changes and to keep a hand at the helm to be able to react properly, healthcare will be set up as a separate unit within Siemens in the future,” said Kaeser.
With healthcare managed separately, regional organization structure can be tailored to the requirements of the healthcare market and don’t have to conform to Siemens’ organizational matrix, according to the company.
Siemens anticipates that the bundling of divisions and elimination of the sector level will cut costs by reducing bureaucracy.
Increases in productivity are expected to be around 1 billion euros annually, fully effective by the end of fiscal 2016.
Morgan Stanley analyst Ben Uglow said the restructuring shows “healthcare will no longer have the same go-to-market strategy as the rest of Siemens,” while Nicholas Heymann of William Blair noted the move “suggests [the unit will] be either IPO’d, spun out, sold or swapped.”
Last year, a report suggested that Kaeser received proposals from investment banks about an initial public offering or spinoff of the healthcare division.
Siemens said the public listing of its audiology unit will “give the business an opportunity to better leverage its potential,” noting the division’s “technology and ... consumer-oriented market access limit synergy potentials with other ... businesses.” Siemens executives said that anticipated technological developments at the unit “differ greatly from those of ... its healthcare activities ... this applies particularly to growth fields like implants and the link to consumer electronics.”
Siemens also announced that second-quarter profit in its healthcare unit jumped 19 percent year-over-year to 531 million euros ($739 million). Meanwhile, revenue fell 1 percent to 3.3 billion euros ($4.6 billion), with orders dropping 4 percent to 3.2 billion euros ($4.5 billion). Siemens said sales and orders came in below prior-year levels due to declines in the Americas region, while orders fell in both Asia and Australia. The company added that sales in its diagnostics unit fell 3 percent to 937 million euros ($1.3 billion), due to lower revenue in the Americas region.
Kaeser said the second quarter showed that the company has “a lot to do” to improve its operating performance. “Nevertheless, we are on course to reach our targets for the fiscal year,” he said.
Key Executives:
Joe Kaeser, President & CEO, Siemens AG
Eric A. Spiegel, President & CEO, Siemens USA
Hermann Requardt, CEO, Siemens Healthcare
Michael Reitermann, CEO, Siemens Healthcare, Diagnostics
Bernd Montag, CEO, Siemens Healthcare, Imaging & Therapy Systems
Gregory Sorensen, M.D., CEO of Siemens Healthcare North America
Jeffrey Bundy, Ph.D., CEO, Siemens Ultrasound
No. of Employees: 52,000 (362,000 total)
Global Headquarters: Munich, Germany
Healthcare systems—not just in the United States, but globally—are facing unprecedented change. While healthcare is primarily organized within national geographies, the issues impacting the industry are global, according to healthcare markets analysts at professional services firm KPMG. Demographics, fiscal restraint, new technologies and consumer expectations, experts continue to note, are creating challenges and opportunities.
Safety and efficacy are, of course, paramount. Close behind, if not on par these days with the first two axioms, is value.
And though mature systems such as those found in the United States and Western Europe are grappling with the value equation as well, emerging economies have the advantage of getting a head start in streamlining costs against outcomes, by “baking in” the concepts of value-based healthcare as a central organizing feature from day one, according to analysts with the healthcare division of the London, United Kingdom-based Economist Intelligence Unit.
“Value-based health is here to stay,” said Vivek Muthu, M.D., managing director of EIU Healthcare. “Those who ignore or fail to implement a value-based strategy do so at their peril. It requires a refocus, a mind-set shift that begins with an acknowledgement that any action in healthcare must improve outcomes for the individual patient and also for the health system as a whole.”
Companies such Siemens Healthcare aggressively are positioning themselves for this new value shift. The multibillion-dollar, multinational division of Germany-based Siemens AG, includes diagnostic imaging and image-guided therapies, as well as a clinical products division that includes ultrasound and X-ray equipment, providing a mix of high-end solutions and cost-efficient, less complex equipment for emerging economies. The company also includes an in-vitro diagnostics division and a unit providing healthcare information technology (HIT) systems.
To illustrate its “global” healthcare viewpoint, in its annual report for fiscal year 2013 (ended Sept. 30), Siemens highlighted the work of Medanta, a multi-specialty hospital in Gurgaon, India.
In the United States, a coronary artery bypass operation costs about $40,000. In Europe, the figure is around $25,000. At Medanta, the same operation costs less than $4,000.
“We can provide the operation at that price because labor costs in India are lower and because we work much more productively than our colleagues in the West. In India, heart surgeons perform an average of more than 600 operations a year—in some cases, up to six times the number performed by their counterparts in other countries,” said Namrata Gaur, M.D., a cardiothoracic and vascular surgeon. “Our advanced medical technology solutions from Siemens and our optimized IT infrastructure are further key factors.”
Gaur is enthusiastic about her work, but is concerned about the growing number of cardiovascular patients under her care.
“The incidence of coronary artery disease is increasing sharply, and our patients are getting younger all the time,” she explained.
“Not long ago, for example, we operated on a girl of only 14. One contributing factor is a genetic predisposition in the Indian population, and another is the changing lifestyle. In the cities, in particular, there’s more stress, people are smoking more, eating less-healthy foods and paying less attention to their health in general.”
As a result, India will have to expand its capacity for treating cardiovascular disease in the years ahead. Despite growing prosperity, relatively few people can afford health insurance. The challenge is to provide access to high-quality healthcare—regardless of their income and status.
To respond to similar conditions in healthcare markets around the world, Siemens Healthcare’s research and development (R&D) activities most recently have focused on two trends: The world’s population continues to grow steadily and to get older. These trends increase the pressure on healthcare providers to treat more people at increasingly lower costs in order to stabilize rising healthcare spending. To meet these needs, R&D efforts have targeted the development of systems that help physicians diagnose large numbers of patients but also are robust, easy to use, and inexpensive to purchase and maintain. (Incidentally, Siemens Healthcare spent roughly $1.58 billion in R&D in 2013.)
One example is technology that the company claims is the world’s first wireless ultrasound device, Acuson Freestyle The system is designed to make it easier to use advanced ultrasound technology in areas that need to be aseptic, or sterile. Examples include interventional radiology, anesthesiology, intensive care, catheter labs, and emergency care. Ultrasound with wireless transducers also is ideally suited for minimally invasive procedures such as nerve blockades, access to blood vessels, and positioning for therapeutic interventions and biopsies.
Acuson is made at Siemens’ a new manufacturing site in Plymouth Meeting, Pa., just outside Philadelphia. It is a 12,000-square-foot facility opened in 2013 following Siemens’ acquisition of ultrasound company Penrith Corp. in 2012—a move made to expand the company’s ultrasound offering.
“With this new facility, we will be able to offer Siemens customers worldwide a cutting-edge ultrasound system that eliminates the impediment of cables during ultrasound-guided procedures,” said Jeffrey Bundy, Ph.D., CEO, Siemens Ultrasound. “The Acuson Freestyle system’s wireless transducer technology offers greater flexibility and ease in obtaining accurate transducer placement, and simplifies sterilization in interventional settings. The system will enable ultrasound technology to be used more readily in a variety of point-of-care applications, including interventional radiology, critical care, anesthesiology, and emergency care.”
The Philadelphia-area facility will be Siemens’ second ultrasound manufacturing facility in the United States. The other is in Buffalo, Grove, Ill.
Corporate Shuffle
Siemens had an important corporate changing of the guard at the top during FY13.
After parent company Siemens AG issued its second profit warning of the year, CEO Peter Loescher was voted out by the company’s supervisory board on July 31. He was replaced by Joe Kaeser, who had served as the company’s chief financial officer (CFO). There had been rumors in the past of Kaeser eyeing the chief executive role, but the two insist there is no bad blood between them. Late last year, when questioned about the rumors, the CFO said the two complemented each other “like light and dark.” Loescher was named CEO in 2007 and was the first person appointed from outside the company to take on the job. He joined the company from U.S. pharmaceutical company Merck & Co. He was, at the time, hailed as a hero who would lead Siemens out of prominent bribery and price-fixing scandals that had blackened both its image and finances.
Loescher did drag the company out of that mire, but lost credibility after repeated misjudgments around demand in Siemens’ main markets. A company with assets totaling $143 billion, Siemens often is viewed as a bellwether of Germany’s economy, and it has been suffering since German exports fell in late 2009. The company also has been affected by a series of one-time charges related to project delays and other issues.
“Peter Loescher restored Siemens’ high reputation and helped it achieve a series of impressive successes,” said Gerhard Cromme, board chairman. “Under his leadership, Siemens experienced two of the most successful years in its history.”
“Our company is certainly not in crisis, nor is it in need of major restructuring,” Kaeser said. He did allow, however, that Siemens has lost some profit momentum compared with competitors and said he wanted to put the company back on an “even keel.”
Financial Ups & Downs
For fiscal year 2013, Siemens Healthcare recorded flat sales of 13.6 billion euros ($18.4 billion). Profit for the year was up 13 percent in euros, from 1.82 billion to just shy of 2.05 billion ($2.8 billion). Sales in the Americas were 5.63 billion euros ($7.61 billion), down 1 percent compared to 2012. The United States made up 35 percent of Siemens Healthcare’s overall sales for FY13. Sales also fell 1 percent in Europe/Africa/Middle East to 4.54 billion euros ($6.14 billion). Sales grew in Asia/Australia by 3 percent to 3.42 billion euros ($4.62 billion).
“Growth was driven by emerging markets, as these countries continue to expand access to healthcare for a broader population and build up their healthcare infrastructure,” Siemens officials noted. “In contrast, markets in industrialized countries grew only modestly compared to the prior fiscal year as demand was held back by healthcare reforms and budgetary constraints, particularly in Europe. Healthcare IT markets grew faster than the healthcare market as a whole, on particular strength in the United States. On a geographic basis, markets in Asia, Australia grew in the high single digits, including double-digit growth rates in China. Markets in the Americas, including the U.S., grew moderately.”
Profit for the company’s diagnostics business (for which the company breaks out specific figures, but not for other healthcare sectors) came in at 350 million euros ($473 million) compared to 314 million euros in 2012 ($404 million at 2012 rates). Revenue declined 1 percent, from 3.97 billion euros ($5.11 million at 2012’s Sept. 29 conversion rate) to 3.94 billion euros ($5.33 billion).
For Siemens as a whole, sales were down 2 percent to 75.9 billion euros ($102.6 billion). Net income was up 3 percent to 4.41 billion euros ($5.96 billion). Earning per share grew 7 percent to 5.08 euros ($6.87).
Going Forward, More Change
In May this year, during fiscal 2014, Siemens is planning a restructuring that will unleash its healthcare unit as a separate business.
At a recent press conference in Berlin, Germany, Kaeser outlined the plan, which will see the company’s four business sectors—industry, energy, healthcare and infrastructure—eliminated in favor of bundling businesses into nine divisions.
Additionally, Siemens’ hearing aid business also will be spun off and publicly listed. There also are rumors that the company is planning to divest its healthcare IT operations.
“Looking at the longer run, the market technologies of healthcare [are] going to see fundamental changes,” said Kaeser. “For example, cost reimbursement systems—these are increasingly value-based and require new business models.”
Company officials pointed to a number of paradigm shifts in medicine that helped drive the decision to restructure healthcare, including disruptive technological changes such as big data analytics, increasing use of molecular diagnostics and the growth of mobile healthcare.
“To be able to adequately respond to these profound changes and to keep a hand at the helm to be able to react properly, healthcare will be set up as a separate unit within Siemens in the future,” said Kaeser.
With healthcare managed separately, regional organization structure can be tailored to the requirements of the healthcare market and don’t have to conform to Siemens’ organizational matrix, according to the company.
Siemens anticipates that the bundling of divisions and elimination of the sector level will cut costs by reducing bureaucracy.
Increases in productivity are expected to be around 1 billion euros annually, fully effective by the end of fiscal 2016.
Morgan Stanley analyst Ben Uglow said the restructuring shows “healthcare will no longer have the same go-to-market strategy as the rest of Siemens,” while Nicholas Heymann of William Blair noted the move “suggests [the unit will] be either IPO’d, spun out, sold or swapped.”
Last year, a report suggested that Kaeser received proposals from investment banks about an initial public offering or spinoff of the healthcare division.
Siemens said the public listing of its audiology unit will “give the business an opportunity to better leverage its potential,” noting the division’s “technology and ... consumer-oriented market access limit synergy potentials with other ... businesses.” Siemens executives said that anticipated technological developments at the unit “differ greatly from those of ... its healthcare activities ... this applies particularly to growth fields like implants and the link to consumer electronics.”
Siemens also announced that second-quarter profit in its healthcare unit jumped 19 percent year-over-year to 531 million euros ($739 million). Meanwhile, revenue fell 1 percent to 3.3 billion euros ($4.6 billion), with orders dropping 4 percent to 3.2 billion euros ($4.5 billion). Siemens said sales and orders came in below prior-year levels due to declines in the Americas region, while orders fell in both Asia and Australia. The company added that sales in its diagnostics unit fell 3 percent to 937 million euros ($1.3 billion), due to lower revenue in the Americas region.
Kaeser said the second quarter showed that the company has “a lot to do” to improve its operating performance. “Nevertheless, we are on course to reach our targets for the fiscal year,” he said.