World - Medical Imaging Equipment Makers Catch a Bug; How Bad Is It, Doc?

Medical equipment makers have enjoyed an enviable growth market in medical imaging. Two years ago, a study said imaging services and costs had grown twice as fast as healthcare technologies.

That was good for equipment makers including General Electric (GE), Siemens (SI) and Royal Philips Electronics (PHG), as well as Toshiba, Hitachi and Hologic.

But radiology procedures became a symbol of excessive costs in the U.S. health system -- featured in report after report. And in the past few years, insurers and employers have been applying pressure and bringing down those costs. According to a recent Wall Street Journal story, per-capita spending on imaging services by Medicare beneficiaries shrank 17%, and spending on advanced imaging fell 28%. And a study published in the American Journal of Radiology says imaging costs peaked in 2006.

What's it mean for the equipment makers? At GE, healthcare represents 12.3% of revenues. It’s turning to emerging markets for growth and is building out its ultrasound business.

At Siemens, its healthcare business was 17% of its total revenues as last fiscal year and last quarter. Healthcare brought in 12.5 billion of 73.5 billion total euros last year, and 35% of the healthcare business came from the U.S. But as it said in its filing, “double-digit order growth in the Asia, Australia region more than offset declines” in Europe, here and elsewhere.

At Royal Phillips, its healthcare group sales were 8.85 billion euros, out of 22.58 billion euros, in 2011. It saw pressure in 2010, when sales in mature market were higher across the board except in imaging systems. It’s out to become “one of the CT and MR market leaders in China.”

General Electric Company is rated Neutral. Royal Philips Electronics is not yet rated. Siemens AG is rated Attractive.

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