Medtronic debuts health services arm

Medtronic CEO Omar Ishrak

Medtronic ($MDT) is officially launching a formal health services arm, with an initial focus on helping European hospitals modernize and better manage their cardiac catheterization labs.

Omar Ishrak, the Minnesota device giant's chairman and CEO, has offered hints about Medtronic's plans for weeks. And now Medtronic Hospital Solutions is off and running. The company announced it already has contracts with two U.K. hospitals--University Hospital of South Manchester NHS Trust and Imperial College Healthcare NHS Trust in London, to manage their cath lab facilities.

"The creation of this new business within Medtronic underscores our commitment to develop innovative services and solutions that create efficiencies, address costs, and improve patient access and outcomes for a broader set of hospital customers," Ishrak said in a statement.

Medtronic Hospital Solutions' long-range business plan is to partner with hospitals to help them boost operational efficiency in a number of areas. But cardiac cath labs are an initial priority. To support the new division, Medtronic snatched up a 30% equity stake in NGC Medical SpA, a company that manages outsourced cath labs in Italy. Plans call for expanding NGC's business outside of Italy, and the company will team with Medtronic in a "strategic collaboration" deal as it rolls out its cardiac cath lab management services.

Ishrak said the new division builds on Medtronic's $200 million August buyout of Cardiocom, a maker of disease-management monitoring technology. At the time, Ishrak said that Medtronic would use its acquisition to help heart failure patients manage their disease, whether or not they have Medtronic device implants. In the U.S., Medtronic wants to help U.S. hospitals move from "fee-for-service" to "pay-for-value" and disease management financial models. And the company has already been working with hospitals in Europe and elsewhere to help them boost efficiency in areas like financing and equipment purchasing.

The official launch of Medtronic Hospital Solutions helps tie those threads together in a more focused business plan. Medtronic, in its announcement of the division launch, said it completed a successful pilot program at Maastrict University Medical Center in The Netherlands, where it helped the hospital boost its efficiency in a number of areas, saving about $6 million over the course of a year. The company assisted with hospital staff training and on-site management. And as Medtronic ramps up its broader effort, rivals will likely be watching very closely.

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