For General Electric (GE), health care has long been a costly business.
But the manufacturing giant is increasingly signaling that its health care businesses will be key drivers in its industrial transformation, most recently in the announcement that GE and partner Accenture (ACN) plan to transform the way the country processes medical claims. GE cited roughly $2 billion in lost claims sales last year due to today's standard, outmoded technology.
The partnership with Accenture, which launched in 2013, is designed to combine consulting businesses with GE's analytics to help health care providers save 25% to 50% of costs tied to reprocessing denied claims, "one of the largest areas of lost revenue in the U.S. health care system," GE said in a Friday statement. (GE stock is held in Jim Cramer's Action Alerts PLUS charitable trust.)
The two companies will attempt to leverage GE's DenialsIQ algorithm to reduce the amount of claim denials, which currently stand at about 20% of total requests in the $1 billion market, costing about $25 for every claim reprocessed.
"Our alliance with Accenture is an example of how GE Healthcare is developing game-changing partnerships to deliver what our customers want and need in an era of value-based care," Jon Zimmerman, vice president of GE's health care information-technologies department, said in a Thursday statement.
The partnership comes on the heels of the announcement that GE is teaming up with Uppsala BIO -- a nonprofit foundation associated with the eponymous university in Sweden -- to scout for health care technologies and equipment for its Life Sciences division of its health care services.
Meanwhile, Accenture has also been building out its own life sciences businesses in a partnership with Salesforce (CRM), also announced Thursday, which aims to build on Salesforce's "health cloud" to provide patients and hospitals with a live access to medical records and caregiver networks.
In the first quarter, GE's total health care businesses pulled in about $4.2 billion, up 3% year over year; its Life Sciences unit pulled in about a quarter of total sales.
And earlier this year, GE outlined that profit margins tied to its health care businesses have been pressured since the 2010 passage of the Affordable Care Act, but projects operating margins to grow to 18% by 2018, up from about 16% last year.
"The core issue is that we've not grown the operating profit and the operating margin of the business for a number of years," John Flannery, CEO of GE's health care division, said in a March presentation to investors. "There have been macro factors in the industry, at various points of time in the last five years ... the Affordable Care Act knocked the U.S. off its axis for a little bit," he added.