Internal earnings growth through new deal structures — not straight acquisitions — appears to be the new mantra at GE Healthcare.

At least that's the latest word from its CEO John Flannery, who totaled $26 billion in acquisition deals as the rainmaking head of business development at General Electric, according to a recent Bloomberg News interview.

"When we look at the basic position of the company, we like the portfolio," Flannery told the news agency in Beijing. "So my mandate right now is to get the earnings growth going again, and there’s a lot to just better managing the portfolio we have, align it more with customers and outcomes, for a better margin rate."
The health care giant has pledged to boost profit margins 50 basis points in the next year, with a target of 18 percent in 2018.

No easy task. "Margins were hurt by all of the above and cost pressures that GE was slow to respond to," Bloomberg analyst Karen Ubelhart told the news agency.

In the face of price drops for key components of its business, such as X-ray and MR, as reported in GE Healthcare's annual report, the company is pushing ahead in digital and other areas, including "data analysis services and life sciences," noted the news agency. "We are really trying to move from being just a technology provider to being a partner with our customers," Flannery explained during the interview in Beijing.

The profits from software are much higher. The GE chief believes the company will see as much as a 50 percent growth from its Health Cloud product alone, for example.

The company is also looking to grow its market in pre-made biopharmaceutical factories. One of which was put together in just eight days after arriving in 62 containers from Germany, where GE manufactured it, according to the the report.

GE has high hopes for its expanding Asian presence. "There’s a lot of potential for this in China," according to Flannery. “We have a very strong pipeline of interest.”

Instead of acquisitions, the new GE Healthcare strategy is focusing on partnerships, such as its latest deal, last week, with $480 million integrated delivery network Heritage Valley Health System, which will be a 14-year strategic relationship.

“By working with GE Healthcare as a strategic partner and initiating this long-term agreement, we are also able to mitigate the risk of technology obsolescence through routinely scheduled upgrades,” Heritage's chief operating-quality officer Dr. John Luellen said in a statement.

This novel alliance is GE's first managed equipment service (MES) agreement in the U.S. – an approach it is now looking to expand across the country. The company anticipates that, with this announcement, it launches the first of many MES solutions across the country.

“Through strategic models, such as MES structures, health systems like Heritage Valley prepare for the future with advanced imaging technologies and services,” said Lee Cooper, president and CEO for GE Healthcare, U.S. and Canada. “As part of its agreement with GE Healthcare, Heritage Valley will move from a model of fluctuating capital expenditures to one that is more predictable and consistent over the 14-year commitment.”

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