GE plans $250 million in health venture investing

NEW YORK (Reuters) - General Electric Co (GE.N) is rolling out a $250 million venture fund to buy stakes in small companies that are developing new healthcare technologies, the largest U.S. conglomerate's chief executive said on Wednesday.

The move, which mirrors an approach the world's largest maker of jet engines and electricity producing turbines has taken in the energy industry, is intended to help boost GE's presence in the life sciences, information technology and diagnostic device segments of the healthcare industry.

"What we're trying to do is embrace the venture community, try and do a series of early-stage and later-stage type investments," GE CEO Jeff Immelt said in an interview. "We don't do everything inside our four walls."

The Fairfield, Connecticut-based company plans to take small stakes over the next couple of years in an as-yet undetermined number of healthcare start-ups inside and outside of the United States. These start-ups are developing what GE regards as "disruptive technologies" that could displace devices currently on the market, Immelt said.

The conglomerate reasons that taking stakes in smaller companies rather than buying them outright gives it more flexibility, by gaining exposure to a wider array of technologies, any one of which could take off.

Its investments in the energy sector include a stake in A123 Systems Inc (AONE.O), the battery maker that was one of the best-received initial public offerings of the year.

'UNCERTAINTY' HURTS

Immelt -- who ran GE Healthcare prior to becoming CEO -- also warned that the effort in Washington to reform the $2.5 trillion U.S. health insurance system is hurting demand for medical devices, with hospitals holding off ordering equipment until they see what the new system will look like.

Reforming the healthcare system is one of the Obama administration's top domestic priorities and several proposals of how to do so are now making their way through Congress.

"I was in our healthcare business in the mid-90s, when the healthcare reform was very active, let's say, even though nothing passed," Immelt said. "Uncertainty, in the end is bad for markets of all kinds. And right now there's just so much uncertainty. Once people know how to budget and how to plan, they go back about their life, about how do they treat patients. I just think it takes pressure off the market."

GE is in the midst of a $6 billion drive to revamp its healthcare arm, called "Healthymagination," that includes rolling out products intended to help hospitals and other health providers cut costs and making investments to encourage the adoption of electronic medical records.

GE Healthcare was once one of the company's fastest-growing units, but the segment has slowed in the past few years, in part due to U.S. regulatory changes that made its pricey CT-Scan and ultrasound machines less profitable for hospitals.

The conglomerate disclosed its venture plan at a New York event where it announced a series of health-related moves, including a breakthrough with drugmaker Eli Lilly and Co (LLY.N) that it said would make it easier for doctors to diagnose and prescribe treatments for cancer.

The company is also making changes to the healthcare plan it offers its employees, Immelt said.

GE said on Friday that profit at its healthcare arm fell 20 percent to $508 million in the third quarter, on revenue of $3.8 billion, which was down 9 percent.

Its rivals in medical imaging include Philips (PHG.AS), Siemens AG (SIEGn.DE) and Toshiba Corp (6502.T).

(Reporting by Scott Malone; editing by Gerald E. McCormick and Andre Grenon)