GE-Microsoft Joint Venture Hopes to Revolutionize Health Care

But don’t bet on Caradigm having an easy road ahead

   
GE-Microsoft Joint Venture Hopes to Revolutionize Health Care

On the surface, it sounds like a game changer: Health care technology giant General Electric (NYSE:GE) is partnering with enterprise software king Microsoft (NASDAQ:MSFT) to create a revolutionary new system for accessing health information and patient records.

What’s not to like? Microsoft is a heavyweight in office software and has dabbled in personal health records with its HealthVault interface. General Electric rakes in more than $5 billion in revenue each quarter from its health care division. To boot, President Barack Obama has been pushing for electronic medical records to cut down health care costs and improve patient care.

This new joint venture — a new company named Caradigm — could pay off big-time down the road, right?

Maybe. But this 50/50 scheme could take years to get off the ground and even longer to make any money for its parents. Though on the surface electronic medical records are a no-brainer, saving time and money, the venture is anything but a sure thing — even with these two blue-chip stocks backing the scheme.

Here are the details: Microsoft and GE will launch Caradigm with the aim of real-time “intelligence” that will allow response to evolving health care trends. Primarily, Microsoft’s applications will connect to GE’s hardware and health care IT infrastructure — allowing secure but reliable data access seamlessly. Microsoft has plenty of its own health records software, largely acquired thanks to a 2009 buyout of Sentillion.

The trouble is that other tech companies have been struggling to make headway on this front, and it’s not as simple as just acknowledging the opportunity and instantly tapping in. For instance Google (NASDAQ:GOOG) announced last summer that it would be mothballing its Google Health portal, a key personal health records venture that was only a few years old. If an innovative company like Google can’t get traction in digital medical records, investors certainly should have doubts about stodgy GE and much less agile Microsoft.

Of course, it’s not apples-to-apples because that was a more consumer-focused portal designed for patients themselves. And it was largely a lack of health-data sources — and uniformity in records — that ultimately led to the demise of Google Health. Privacy concerns made it difficult to get enough information in the database to plot meaningful trends or allow for any valuable analysis. Microsoft and GE might have a leg up on that front because this partnership offers seamless integration with MRI machines, sonograms and other devices.

But standardizing electronic health records is not going to be easy for the Caradigm venture, either, across disparate providers and insurers and state regulators. An individual hospital might be able to use the Caradigm database to highlight trends, but cost savings and health care improvements will only come from looking at much larger patient pools. Something as simple as knowing trends in blood pressure readings statewide or nationwide, for instance, could provide big insights — and that ultimately is the end intended result of the GE/Microsoft venture. How long it takes to get there, however, is a different story.

What’s more, it’s worth noting that while the most recent GE earnings report shows health care revenue was up last quarter, profits were actually down. That could hint that health care providers have less money to spend in these tight times and GE is cutting costs. Integrated software and health care IT can’t come cheap, and many hospitals might not be too eager to make the switch.

Both Microsoft and General Electric are mammoth companies with a lot of resources to burn on this enterprise. However, their size also makes it difficult for Caradigm to have any meaningful impact on the bottom line anytime soon.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, http://investorplace.com/2012/02/ge-microsoft-joint-venture-caradigm-health-care/.

©2014 InvestorPlace Media, LLC

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