In February 2015, a seemingly dormant Philips erupted into action. The Dutch conglomerate snapped up American medical device maker Volcano for $1.2 billion. Philips chief executive Frans van Houten then hinted where it was headed. “In an ageing world with more chronic disease, health and healthcare are enormous opportunities that we want to focus on,” he reportedly said after the acquisition of Volcano, which makes equipment that allows doctors treating heart diseases to see inside patients’ veins and measure blood flow.
Back in India, Philips silently rolled out Project Vijay in October of the same year, a pilot project for the delivery of home healthcare. A year later, it formed Philips Home Care Services (PHCS), a wholly owned arm of Philips India.
Project Vijay, recalls Asik Das, general manager (marketing), Philips Home Care Services, emboldened the company to go full throttle. The pilot, till August 2016, for operating the home healthcare business by using technology as a means for providing remote care for patients, came up with interesting findings: a 27% reduction in the cost of care, 32% decline in acute and long-term costs, and 45% drop in hospitalisation.
“Philips aspires to take high-quality home care to over 1 lakh people in India by 2020,” says Das, adding that PHCS has grown 10 times over the last 10 months and spread to six cities. “We have tied up with more than 100 physicians, and plan to become a leader in the respiratory home healthcare space,” he says, adding that Philips maintains a team of nurses, paramedics, respiratory therapists and other trained personnel, who are monitored remotely by doctors.
Veena Sharma in Delhi is one of the 2,000 patients that the Philips healthcare arm has reached out to in a year since its launch. Sharma met with a road accident last month and sustained serious head injury. After being operated upon at one of the private hospitals in Delhi, doctors advised her for a longer stay in an ICU.
The patient’s family, after consultation with the doctor, opted for PHCS that put together an ICU-like set up at her home. “Home care is better as recovery happens in the home environment and the risk of contracting ICU-borne infections is minimal,” says Sharma.
While patients like Sharma might validate Philips’ move to enter the home care segment, it’s the gloomy chronic disease map of India that makes the segment so attractive for private healthcare players. Chronic obstructive pulmonary disease is one of the top three non-communicable diseases in India, with approximately 3 million patients. According to a WHO report, lung disease accounts for 11% of total deaths in India. While healthcare in India is expected to become an over $200 billion opportunity by 2020, demand for quality non-hospital healthcare delivery in India is set to grow from $6.6 billion in 2015 to $21 billion in 2020.
Health is Wealth
No wonder Van Houten was pleased to announce the transformation of Philips “into a focused leader in health technology, delivering innovation to help people manage their health” in its 2016 annual report. Philips’ transformation from being a trusted electronics brand into a healthcare services company is not an aberration, reckon branding experts. Some of the biggest global brands have changed course.
Take Nokia, which was once a Finnish paper mill, rubber, and cable works firm, and transformed itself into a mobile phone company. IBM too transformed from selling only hardware into a software giant providing consulting services, says Miniya Chatterji, CEO of Sustain Labs Paris, a sustainability incubator.
Philips was the world’s biggest supplier of radios in 1930s, invented the audio cassette in 1963, rolled out the first VCR in 1972, launched the CD in 1983 and was one of the biggest manufacturers of television sets in the last decade. The consumer electronics saga ended in January 2013 when Philips sold its audio and video business to Japan’s Funai Electric. “This completes the repositioning away from consumer electronics,” Van Houten said then.
Three years later, the global CEO pronounced a new beginning. “We have transformed Philips into a focused leader in health technology, delivering innovation to help people manage their health,” Van Houten said in the annual report of the company last year, alluding to the lighting business being hived off. In May last year, the company offered 25% of the lighting division in an IPO, and reportedly said that it would trim down its remaining holding to focus more on its healthcare business.
The transformation in India, says Chatterji, mirrors the wider global strategy to move out of the less profitable consumer electronics and into the fast-growing healthcare markets. What gives Philips an edge in India, apart from being a technology leader, is the trust the brand enjoys in India, familiarity of the company with the domestic market and the dominant position in the medical equipment category.
“People can entrust the lives of their dear ones with a trusted brand,” says Chatterji. While the opportunity is massive in India, the challenges are daunting too. Philips will need to invest in building a digital infrastructure, which is the biggest obstacle towards providing healthcare for all, she adds.
The threat to Philips might also come from a thriving bunch of healthcare startups in the country. Healthcare startups raised $113.45 million across 73 funding deals in 2016, says a report by News Corp VCCEdge in September last year. The leading segments to attract funding in the healthcare sector were healthcare facilities ($110.9 million), biotech ($98.67 million) and healthcare services ($73.51 million), the report added.
The real challenge might come from deeply funded ones like Portea and Practo, the services of which significantly overlap with Philips Home Care. For instance, Portea, founded in 2013, has raised $46.5 million so far, claims to deliver over 1.2 lakh home visits a month across 16 cities and a customer base of over 1 million. Portea has taken the inorganic route to expand its services by buying out medical equipment maker Health Mantra, speciality pharma Medybiz and surgery discovery platform PSTakeCare.
Meena Ganesh, MD of Portea, doesn’t see Philips as a threat. The availability of devices and service offerings developed specifically for home healthcare is a welcome sign, and shows the market is evolving and attracting the right investment and attention, she says, adding that being an early entrant gives the startup an edge. “We have leveraged the learnings to serve patients better by offering a 360-degree, comprehensive care,” she says, listing a wide range of services offered by Portea for post-operative care such as doctors, nurses, nursing attendants, diagnostics, pharma and medical equipment support.
While conceding that the market size is huge, Ganesh points out the biggest challenge for all players: high-quality manpower. Ensuring an adequate supply of skilled manpower, their training and ability to provide service on a consistent basis is a big challenge.
The stakes for Philips India, say experts, are particularly high as it has seen a lacklustre performance from its other verticals over the last few years. The personal health business, the company disclosed in its annual report of 2016-17, declined by 20.3% over the previous fiscal.
Though sales of mixers and irons too dipped, leading to an overall decline of 14.3% in domestic appliances, the air purifier category grew by over 63%. But personal care products reported sluggish growth. Continued festival discounting, the report added, lowered the confidence of traditional and modern retailers. The entry of low-cost players too dented the performance, resulting in a 34.7% decline.
( VeenaSharma, 48 : Sharma met with a road accident last month and sustained serious head injury. After being operated upon at one of the private hospitals in Delhi, doctors advised her for a longer stay at ICU. The patient’s family, after consultation with the doctor, opted for Philips Home Care Services. )
Home care might turn out to be a bright spot. “With 1 in 5 people set to be over 50 by 2050 in India, the opportunity is massive,” says Das, who is aware of challenges as well. Lack of awareness, he lets on, largely restricts the service to metros and tier-1 cities. This makes people equate a specialised home healthcare company with services provided by agencies. Other challenges, he says, are equally formidable. Take, for instance, hospitalisations. Unattended problems can lead to hospitalisations and re-admissions, both of which are highly prevalent in the home health care patient community, signifying the failure of monitoring practices.
“Finding and building a pool of skilled workforce is also a hindrance,” says Das, adding that there are few training institutions for skilled healthcare workforce, and companies have to hire and then train people.
Das, however, is optimistic about the future. The company, he says, is open to acquire startups that will strengthen its healthcare business.
Healthcare is changing at an unprecedented level with the transition to value-based healthcare, healthcare institutions needing to integrate solutions, and individuals taking charge of their personal health journey. “Philips is uniquely positioned to help transform care delivery,” he claims.