Tech Looks to Raise Bets on Healthcare

By Reuters -  |  Posted 2008-11-21

LONDON (Reuters) - An aging population, spiraling medical costs and increasingly poor service are spurring more computer firms to bet on healthcare and what many of them see as a lucrative -- but relatively untapped -- market.

Expectations for an overhaul of the U.S. health system following the election of Barack Obama as president and a desire of governments worldwide to drive costs of national health systems reinforce the belief that healthcare is an opportunity that tech companies underestimate at their own peril.

"Healthcare is a $2.5 trillion market in the United States alone," said Andrew Rocklin, an analyst at Diamond Management & Technology Consultants, in the United States.

"Anybody who chooses not to participate could be giving up a potentially large amount of revenue."

That message is echoing through Silicon Valley and beyond, reaching companies with seemingly little or no immediate connection to the health field.

One example is chip-maker Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz), which earlier this month introduced a monitoring system that allows doctors to check in on patients with chronic conditions like diabetes from remote locations.

The product is among the first to emerge from its digital health unit formed in 2000 to target new ways to get the company's chips into different products and look for other ways the company might compete in healthcare.

Intel has tried -- and failed -- in the past to offer branded products such as microscopes and music players containing its chips to ride growing trends to new profits.

Netscape founder Jim Clark's next venture after creating the pioneering Web browser company was Healtheon, a company that even after it merged with WebMD has struggled to turn using the Web to streamline paperwork into a big business.

But it sees technology as a more sure-fire way to meet an urgent -- and long-lasting -- need for new tools to help people to do things like manage chronic diseases and manage their own health more easily.

"Intel believes the personal healthcare marketplace is a multibillion dollar greenfield opportunity," Eric Dishman, global director of product research and innovation at Intel's Digital Health Group, told Reuters in an interview.

"Initially we thought we would sell chips into the new market but frankly there was no market to build them for. What we are doing is pretty radical for Intel."

Industrial giants like General Electric (GE.N: Quote, Profile, Research, Stock Buzz), Siemens AG (SIEGn.DE: Quote, Profile, Research, Stock Buzz) and Philips (PHG.AS: Quote, Profile, Research, Stock Buzz) have long competed in the health field and all expect even more growth.

GE's $17 billion healthcare unit recently estimated its information technology business -- computers that help doctors track everything from X-ray images to drugs patients have been prescribed -- could grow to a $5 billion to $7 billion business, up from the about 10 percent of revenue it currently represents.

And newcomers, including start-ups looking for an early jump into a hot area, are eager for a slice of an overall healthcare information technology market worth an estimated $50 billion or more.

Apple (AAPL.O: Quote, Profile, Research, Stock Buzz), for example, offers a range of applications for its iPhone to gets its popular Internet phone device into the hands of doctors and allow them to quickly access drug and other medical information.

A drive to organize health records electronically has also attracted the likes of Google and Microsoft. In May, Google introduced Google Health, a Web service allowing people to share health information with doctors and insurance companies that competes with Microsoft's HealthVault and others.

Reform of the U.S. healthcare system is a big factor but companies and experts say the opportunity is universal, extending to other developed countries and emerging markets too.

In July, the European Union launched two initiatives to study how doctors can access their patients' electronic records across countries and to look at how to link pharmacies across the region.

"As we learn what to do with all that information, it will call on the need to have the right devices to gather and deliver that information," Diamond Management & Technology Consultants analyst Rocklin said.

Google's plan aims to help people organize and gain greater control over their personal health information, said Roni Ziegler, a product manager for Google Health.

The Web search giant at the moment does not plan to use ads on its Google Health site. But winning more traffic there will likely spur visitors to other areas of Google where it does sell ads.

One hurdle is overcoming a reluctance to divulge health information over the Web. But once this happens -- as it eventually has with online banking and shopping -- expect a spate of other technology companies to aggressively challenge for share in that market.

"You could make a case for putting as big as a number you can think of on the healthcare opportunity," Ziegler said. "If people are coming up with tools to truly help people take care of themselves that is something people are willing to pay for."

(Editing by Chris Wickham)