Medtronic aims to help countries build healthcare systems

Tue Aug 20, 2013 3:54pm EDT

(Reuters) - Medtronic Inc (MDT.N) wants to sell more than medical devices in emerging markets.

The company is looking to help countries such as China and India develop their healthcare systems and has targeted two areas where it can provide its expertise, disease management and hospital efficiency, Chief Executive Omar Ishrak said in an interview.

Expansion in developing countries is a top priority for the device maker, which is coping with slow U.S. sales of everything from pacemakers to insulin pumps as intensifying pressures to rein in healthcare spending take a toll on the once high-flying industry.

Medtronic has aggressive goals for sales in emerging markets, aiming to increase revenue growth in those regions to 20 percent from the current 15 percent. To do that, it is establishing itself as a healthcare adviser.

"To realize economic value, we have to go beyond the procedure itself," Ishrak said.

The company is already working with administrators in Europe to help hospitals find ways to operate more efficiently, by developing new financing models and purchasing strategies and outsourcing certain functions, he said.

"We have contracts with hospitals now and a pipeline of many more that are interested in those efforts," Ishrak said.

How to organize patients before surgery, shorten stays in an intensive care unit and perform procedures better are among the areas in which Medtronic has expertise, he said.

Medtronic will initially focus on countries in central Europe and the Middle East, where hospitals are being built at a fairly rapid pace, Ishrak said. "The administrators there are looking for help in setting up those hospitals as soon as possible," he said. He expects eventually to work with systems in Southeast Asia and India as well.

U.S. IN TRANSITION

Ishrak said he supports effort by U.S. hospitals to develop new business models that provide financial incentives for improving care and lowering costs. He said he believes the U.S. healthcare system is transitioning from the traditional "fee-for-service" method of paying doctors for every test, procedure and office visit.

"The quicker we move to pay-for-value and disease management, the more quickly we can realize high-quality, low-cost healthcare in the United States," the CEO said.

As a medical device maker, Medtronic adds value when its technologies help reduce hospital readmissions and visits to the emergency room, Ishrak said.

(Reporting by Susan Kelly in Chicago; Editing by Steve Orlofsky)