Philips Acquires Emergin

Emergin-lab

Philips announced this week that they have acquired private health care IT vendor Emergin for an undisclosed sum. From the Philips press release:

Emergin is the leading US provider of software utilized to rapidly
transmit medical alarm signals throughout hospitals. The transaction is
expected to close in the fourth quarter of 2007, upon which Emergin will
become part of the Patient Monitoring business unit within Philips
Healthcare sector. Through this acquisition, Philips will expand the use
of information technology in healthcare - and
specifically in its patient monitoring business -
to improve patient outcomes and help hospitals work more efficiently.

Philips Healthcare CEO, Steve Ruschowski, brags on Philips' number one position in the patient monitoring market, and notes that the addition of Emergin will provide the means to address a long standing unmet market need – alarm notification. Sure, Ruschowski's not that direct, he refers to, “solutions that help them access the critical
patient data that our monitors provide, quickly and flexibly throughout
the hospital.” Same thing.

It seems that Philips is thinking that the Emergin acquisition fills a very specific gap:

Emergin's powerful alarm management and event
notification software helps ensure that critical information is sent
rapidly to the right caregiver on the personal communication device of
their choice - be it a pager, wireless
telephone, PDA or LED sign. Emergin
software has wide acceptance among hospital chief information officers
(CIOs), who increasingly play a central role in the purchasing decisions
at hospitals. The acquisition of Emergin will enable Philips to
integrate the functionality offered by Emergin
software directly into Philips' current and
future patient monitoring products. Philips also expects to capitalize
on Emergin's strong relations with hospital
CIOs. Philips has a leading position in the global patient monitoring
market, which in 2006 was estimated to be approximately EUR 2 billion or
approximately USD 3 billion.

I guess that the first thing Philips will do is get premarket approval for Emergin's software for alarm notification. It's one thing for a small entrepreneurial software company to claim their product only provides “secondary” alarm notification, it's another when you're a big medical device company. Philips also realizes that alarm notification without a sample of the waveform that generated the alarm is of limited value. Displaying waveforms with the alarm appears to be the line drawn in the sand by the FDA; “secondary” alarm notification without waveforms will not be noticed, alarm notification with a waveform get you a lot of notice (just ask Cisco). Besides, Philips doesn't want any more of these.

The quote above also hints are a mid to long term vulnerability for Philips. Patient monitoring is a sorely undifferentiated market, and numerous big and small competitors will be entering the field over the next few years. Philips has the broadest, most up to date patient monitoring product line. But Philips will need more than their shiny new patient monitors to beat this competition. Future continuation of hospitals standardizing on one patient monitoring vendor will be dependent on delivering some real enterprise value. They are way behind with the solutions required to provide an enterprise solution that the market needs, and the Emergin acquisition will go a long way to fill that gap.

Post acquisition, Philips would be crazy not to continue an independent
Emergin distribution strategy. Only by actively selling Emergin's
solution, independent of patient monitoring sales, will other device
vendors be compelled to maintain integration with Emergin. Think back
to DataCritical. Their alarm management solution, StatView, got a lot of market traction – and a 510(k)
- and was resold by GE, Philips and others. After DataCritical was
acquired by GE Healthcare, vendors reselling StatView slowly evaporated.

Philips (then Hewlett-Packard) has apparently learned a lot from their Heartstream debacle. The brain drain that resulted from moving the company from McMinnville, Oregon (in the heart of the Willamette valley wine country) to the Boston suburb of Andover wrung a lot of the value out of the deal. The ATL Ultrasound acquisition was handled much better. Plans are to leave Emergin in their Florida digs. Senior management has probably signed the obligatory “we'll stay around a few years” contracts to help ease the transition.

More important questions will revolve around distribution strategy and product strategy. You'll note that the press release mentions Emergin's relationship with hospital CIOs, but says nothing about the many relationships it has with other medical device vendors. Emergin acts like the Switzerland of the point of care, integrating with everyone on an equal basis. Yet cooperation between direct competitors is not done among medical device vendors. While the Philips and GEs of the world dream of hospitals dominated by single vendors, we still live in a heterogeneous market. How Philips balances the de facto proprietary end-to-end product strategy with a product like Emergin's will determine how much value they can get from this transaction (and for how long).

For Emergin competitors this is good news. Until now, the big medical device vendors have withheld cooperation from other medical device middleware vendors like Globestar and Ascom because Emergin had the critical mass of vendor interoperability and they wanted to conserve R&D resources. Now vendors will be scrambling to secure compatible alternatives to their biggest competitor's offering. This news should be a real plus for a more clinically oriented competitor like Cardiopulmonary whose value proposition has been reinforced by Philips' move. Others, including Global Care Quest, LiveData, Nuvon and even Sensitron can claim a certain validation for cross vendor/cross device connectivity.

For hospitals, this is a mixed blessing. How Philiips balances the Dr. Stranglove compulsion towards proprietary systems and the open interoperability Emergin offers will tell the tale. (It's almost too bad that a health care IT vendor like Cerner or McKesson didn't buy Emergin.) Workflow automation at the point of care is difficult just because so many things are interrelated. Initiatives like wireless communications, meds administration, charting, alarm notification – all of these impact multiple systems, and there are no single vendor solutions. Heck, you can't even buy vents, pumps and patient monitors from one vendor. Hospitals should walk slowly, buy when there is a clear ROI matched with a released product, and take vendor roadmaps with a grain of salt.

Pictured right is a view from Emergin's integration lab.

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