Last year's health-care alliance is this year's health-care joint venture. General Electric (NYSE: GE) and Intel (Nasdaq: INTC) have apparently decided that since they liked being aligned with each other so much, it's time to tie the knot.
A new 50/50 joint venture announced yesterday will combine GE Healthcare's Home Health unit and Intel's Digital Health Group into a new company focused on telemedicine and independent living. The company is expected to be up and running by the end of the year, but it doesn't have a name yet.
No financial terms were given, so it's hard for investors to know who the suitor is, and who's getting the dowry. Let's assume it's a win-win for now.
The key goal of the new joint venture should be to decrease health-care costs through innovative technologies. The old model of spiraling health-care costs is no longer viable, and health-care "toys" that do little to decrease overall health-care costs probably won't sell very well. General Electric appears to get that, considering its Healthymagination program.
But how much competition will the joint venture have? UnitedHealth Group (NYSE: UNH) and Cisco (Nasdaq: CSCO) have teamed up on a telemedicine project. And independent medical-device makers have also moved into the space. Medtronic (NYSE: MDT) sells a program for importing data from its own pacemakers, as well as those from rivals Boston Scientific (NYSE: BSX) and St. Jude Medical (NYSE: STJ).
There's also an issue of who will pay for the products. A monitoring system that pays for itself after a few years by reducing complications is a good investment, but that doesn't mean that insurers will be willing to pay for it. If the payoff is down the line, when the patient may be insured by another company, it's harder to justify the large initial purchase. A single-payer system would solve that, but I don't think General Electric and Intel should count on it anytime soon.
