Jeff Immelt keynote at Miami forum

You've been here two days, I'm the last speaker, so I'm going to be brief. It's great to be with you. It's particularly great to be with my friend Donna Shalala. I've known Donna for many years, she's such a great leader. In the late 90s, I was running our healthcare business in Wisconsin. Donna, of course, as you know, was president of the University of Wisconsin. She at that time was Secretary of Health and Human Services, and I invited her out to meet with our employees and do a factory tour and be a part of a community service organization. So we're doing a factory tour, and of course we have all these University of Wisconsin grads, and usually I'm used to people saying, you know, 'Hi Jeff, hi Jeff, how you doing?' It's not that long, 'Hi Donna, hi Donna.' I was a nobody there and I'm a nobody here today, so but it's so good to see you. So it's great to be here.

I thought what I just talked about is maybe what I could talk about in a qualified way, given all the great speakers you've had, is maybe the view on competitiveness. I travel the world, I've probably been to 100 countries, and every president of a country talks about kind of four pillars of competitiveness: education, financial systems to promote entrepreneurship, energy, and healthcare. So healthcare is quite central to the competitiveness of a society or of a country.

And in the United States, they were having those challenges in those discussions. This is in the United States, two and a half trillion dollar healthcare spend that in 2010, which was a tough economy with high unemployment, inflation was 10 percent. And if this room was filled by small business owners and not professionals in the healthcare industry, this would be viewed as the single biggest competitiveness and productivity issue: the cost of healthcare. So somehow, someway, there's going to have to be something done about it. And no matter how old you are, young or old, we're going to be working on healthcare in the United States for the rest of our life.

And the challenge is how do you do it without destroying it. And so I always think about healthcare from the standpoint of we want to preserve the innovative leadership that this country enjoys, and it does, and it has the best healthcare technology in the world. We have to probably cut the inflation in half. You know, in other words, nine percent on it is just unsustainable in any economic context. But if you cut it in half, if you could run this whole thing with four or five percent inflation, you could probably sustain it. It still would be 2x CPI, but you could probably do that and make it better for consumers, have more access for people. If you could do those three things, you could probably add to the competitiveness of the country and not take away from it.

Now, what makes healthcare so hard, and I joined our healthcare business in 1996 and I've always been a student of things, is that it's kind of the world's biggest systems problem. You can't solve it through silos, you can only solve it by thinking about it in the totality of the problem. And one of the things I did 15 years ago that I still do today with our healthcare team is we start every strategic presentation with a map of how every dollar is spent globally in healthcare, four trillion dollars. And we kind of start with a general discussion of where's the money spent, where the cost is incurred, to try to have a real understanding. Because if you know where the money is, you can run a great business, and if you know where the cost is, you can run a competitive business. And just have the broadest possible understanding, and that has really shaped GE's strategies in healthcare for generations, just trying to have the best profit pools and trying to think about it as a systems problem.

Now today in GE, you know, we're a little bit, you know, I've probably got a unique qualification for the people you've had here. We have an 18 billion dollar healthcare business, so we earn money in the industry. We're the world's biggest diagnostics company, and I spend three billion dollars here on employee healthcare costs. And so I have 600,000 plus covered lives between retirees and employees. So I'm schizophrenic about the industry, I see it in 360 degrees, I see it coming and going. I try to make money, I try to cut costs at the same time. And so I would just say from the outset, maybe three or four things, then I'll tell you a few things that I'm thinking about specifically.

One is think horizontal, think systems. Systems problems are what have to be solved. I talk about this a lot in education because I think we don't yet educate people to solve real problems. We educate them maybe to be an engineer or a finance person, but we don't teach them how to solve big problems. So systems thinking is key. Transparency is key. I can't tell you for how many years my chief medical officer would come to me and say, 'Well, we had a billion dollars of cost avoidance.' You know, cost points really doesn't mean anything, it's really what's in financial statements and ledgers and things like that. So there needs to be broad transparency in the industry so people can really understand what they're doing. It's the least transparent industry of any that we deal in.

The third thing I'd say is nervous laughter is a bad strategy. I've learned that many times in my life, which is kind of talking about, you know, kind of giggling and saying, 'Oh my god, someday somebody's really going to be in trouble because of these costs.' You know, nervous laughter is bad in health. You actually do have to address some of these problems. And the fourth comment I'd make is a real bias for action. Today there's probably a dozen sessions just like this going on, and there's just not enough action taking place in healthcare. So those are just some backdrop ideas.

So there's five things that I'm thinking about today and that we're thinking about in GE. Some have to do with cost control and some have to do with innovation. And what I thought I'd do is maybe just travel quickly through these ideas, because whether you're an employer in the room today or maybe run a business in healthcare, they might intersect with you. And they all have to do with kind of this general premise of how do we sustain healthcare over the long term, how do we innovate in ways that are going to be meaningful where there's profit pools, and how do we run the system more productively.

The first one, Troy was just talking about, which is to engage consumers to be healthier, more well-informed, and more accountable. In the end, prevention is going to be the only thing that can help us really bend the cost curve. Transparency is inevitable and more consumerism is inevitable. And I would say the chart that Troy showed that showed consumer benefits, that is going to be 100 percent soon. In other words, we are going to as a system go to high-deductible, consumer-based plans. It's only a question of when this will happen.

We did it two years ago in GE. We basically changed our healthcare plan for the first time in 21 years. We basically went where prevention is paid for—physicals, breast exams, things like that. We basically took catastrophic risk off the table for employees, so we capped how much anybody would pay. But on the first day of the year, if you wanted Lipitor instead of a generic, it came out of your pocket. There was no more co-pays. And all the monies that our employees saved would go into their health savings account, and they became veteran consumers. And basically that experience fundamentally lowers your cost between 10 and 20 percent as people know more, as they become better consumers.

Now, it's not going to win you business leader of the year with your employees on day one. It's not universally popular, it's not something that people like. But I've seen it, and we've thought enough about it to see the results to say this really is the way healthcare is going to go. And I would say that having watched the way government healthcare worked this year, I don't want to go through that again. I don't know, in other words, I think if the government did one thing and put all federal employees on a high-deductible plan and every state did the same thing, we would get more change, more positive change in healthcare than any one single thing we could possibly do from an administrative standpoint. And the sooner we get about that, the better off we'll be.

Now it's not enough as an employer just to do that, because really what you want is you want your employees to be healthier. So at the same time we did that, we have 600 factories in the United States. We basically now treat healthcare like we've treated environmental health and safety for years. We have prevention programs, we have eat-healthy programs, we have awareness programs. We took ideas from Johnson & Johnson, we took ideas from everybody we can. We now have formal plant certifications on the healthiest plants, and we followed that up with our employees to add jobs in the plants and the facilities that had the healthiest population.

So the first point I'd make is, piggybacks on what Troy said, is that there's only one eventual road, and that's towards more consumerism, more transparency, and ultimately more accountability. People have to be accountable for their own healthcare. So that's point number one.

Point number two: the money is spent in chronic disease. Seventy percent of all the healthcare dollars, probably growing, is in chronic disease. Again, something Troy pointed out from an innovation standpoint. A lot of the GE investment—and so we're about a billion and a half dollars a year at R&D, maybe close to two billion dollars in healthcare in R&D—almost all of our R&D money is going towards impacting chronic disease in some way. That is the holy grail, and that is so important.

Some of the more innovative things that I've seen or that we're working on: we just did an acquisition in high-value diagnostics. This whole notion of being able to stratify patients who can then have a better sense of what's the right drug and what's the right therapy, I think is extremely exciting. One of the great things about healthcare is just how good the pipeline of technology is. And we're going to see cancers like maybe lung cancer go chronic in our lifetime. And the trick is to be able to pick the right patient that can get the right therapy ultimately for disease. And I think this is particularly fertile turf and very exciting in terms of where innovation goes.

In the imaging business, we do a lot more molecular imaging. You know, we can now image Alzheimer's in a living patient, and we're trying to work with drug companies who work on therapies that can extend life. If you think about just the dimensions of aging and what the costs are going to be on society, being able to get some of these chronic diseases where people lead a higher quality of life is going to be where billions and tens of billions of dollars are saved. And so all the areas around marrying diagnostics and therapy to make therapy more effective is extremely important.

And we just launched this week a joint venture with Intel to go into the home. Again, piggybacking on something Troy said, is the more therapy and the more treatment we can do in the home, and the more innovation we can bring to track our people taking their drugs the right way, and the amount of miniaturization and wireless technology that exists, I think we're really going to be able to transform the way that chronic disease gets treated. And the last thing I'd say, again putting my payer hat on, is we're going to accountable care organizations or some of our partners to really take, let's say, the population of GE employees that are diabetic and putting them into standard of care groups as ways to drive chronic disease costs down.

So this innovation is fertile, this is where we're investing a lot of money. If I were a startup company today in the healthcare business, this is where I'd be placing a lot of bets because it's ripe and it's a win-win. So that's point number two.

Point number three, and this is something I really learned outside the United States more than inside the United States, is to implement technology at lower price points, at lower cost. Healthcare has always been a trickle-down industry. It's always been about best of breed and then going down and cheapening these costs as they went down and then ultimately getting down. I think that is really changing. So that healthcare today is about being able to innovate products at multiple price points that can impact consumers and doing them simultaneously. Don't do high-end to low-end, flood the market with those at the same time. And basically this is something that I brought from doing business in India and China, where fundamentally that's the way innovation is going to have to take place.

So I think healthcare has to do a better job of encouraging more low-cost innovation. Just some examples: one of our big product lines is a 1.5 Tesla magnet strength MR scanner. And these products in the United States sell for, let's say, one and a half million dollars. But we're making a 1.5 Tesla MR scanner in China that'll be sold for 600,000. It's simpler, it's more automatic, you can't do as many procedures. But ultimately these products are going to find their way back into the United States. And so this notion of cost, quality, and access and driving innovation that can drive these types of technologies, we think is quite important. Both information technology and everywhere across the board, more portable products, lower-cost products, more information, and products at lower price points.

India is going to launch 400 new hospitals in the next two years. These are going to be designed for rural cities, they're going to be designed for extended care. You know, my aspiration in GE is to have incredible content in all of those, not just for the Indian market, because I'm convinced there's going to be reverse innovation of healthcare practice models from countries like this back to the United States, and I think that's inevitable.

So more consumerism, point number two is focus on chronic disease, point number three is there's no crime in this industry to work at lower price points with innovation. In fact, I think that's imperative.

Point number four, that I know you've had a lot of panels on and there's people in the audience that are more expert than I am, and that is to just harness the power of information. This is still, in my belief, early days in information technology in the healthcare industry. Information technology in every other industry that I've competed in or that I've seen has been at the core of driving cost, quality, and access at the same time. About 90 percent of the impact of healthcare information technology so far has been about connectivity. I would argue that connectivity is about 10 percent of the value of what information technology can bring.

So what's out there in the future, I think, in terms of information technology is a lot more productivity, clinical productivity, being able to do more with less with some of the high-quality talent we have in nursing and administration. It's more decision support. You know, there's so much knowledge that can be brought in healthcare that should be digitized and put at doctors' fingertips, and this is a big area that we're working on. Areas like pathology that are fundamentally where the work is done the same today that it was 20, 30, 40 years ago, really digitizing the pathology labs, I think, is critical for the future. And just using information technology to drive more access.

It's unclear to me to see how remote access healthcare is going to get done in the United States. I know for a fact that in other countries it's really going to be driven by nurses, and it's going to be driven by nurses backed up with information technology as ways to drive it. So, you know, I think, you know, having wasted billions on information technology projects as a GE manager over a 28-year career, I empathize with how hard it is. You know, you always hate your IT supplier, you know, at any time you're in this. But the power of information in healthcare is extraordinary. So this is a place that I think is important for productivity as well.

And then the last point I would make is we just have to drive and improve efficiency in healthcare delivery. It's extraordinary to me when I look at, you know, nine percent healthcare inflation equals nine percent unemployment. And you have to recognize unless we do something about healthcare costs, the country's not going to ultimately have the kind of employment picture we want. So it's very much the responsibility of the people in this room.

I think there's no such thing as national healthcare. There's no such thing as a national healthcare system. Healthcare basically is done on a city-by-city basis in the United States. When I look at GE, fundamentally, we're really big in 15 cities in the United States. The difference in, on a common disease, cost per employee in these 15 cities is a difference of about 50 percent. And in 2010, the inflation went from a negative 2 to a positive 15. Unacceptable, inexplicable, and, you know, can't remain. It's just the way you have to think about healthcare.

You know, I still spend a lot of time on the road seeing customers. I always go in to see the hospital CEOs because I love the industry and I always have these original questions like, 'How's business?' You know, stuff like that. So I go see a hospital CEO and I say, 'Hey, how's business?' And they say, 'Great, profits are up this year.' And I say, 'Why?' Most common answer is payer mix. Payer mix. Now, I'm happy for them because I want my customers to be happy. I'm the payer. You know, if you get more GE patients, more Medicare patients, you make more money. That doesn't necessarily make me feel good, right? So we've got to make the system more competitive, we've got to make it more productive, we've got to make it more predictable. I actually think it's going to happen on a city-by-city basis, and businesses are going to kind of forward integrate past the insurance companies unless the insurance companies can make it happen on their own.

For GE, this is critical. You know, for somebody else it may not be, but three billion dollars is a lot of money even for us. And so we are going to either have to see this healthcare cost curve get bent. And so one of the things we've done is in Cincinnati, which has got the highest level of most GE retirees and employees, we've kind of gone out with Procter & Gamble and Kroger's and a bunch of the other employers in town. There's 14 providers, and we've kind of tried to put in a systemic program using a health information exchange, working together, trying to harmonize around the five big standard of care issues to try to say, can we take inflation together from nine to five percent? And thereby drive better activity and better behavior. And ultimately the towns and the cities that have better control over their healthcare costs are going to be the ones that get more jobs.

And so in some way, shape, or form, we're going to have to drive accountability on a city basis that drives productivity, drives better accountability, and gets this inflation under control. And that's going to, you know, whether accountable care organizations can do it or not, I think it's a good step. But, you know, healthcare costs in the US is a blob. Unless you take the whole blob and reduce it, costs are going to get shifted to other pockets. So we've got to work on it as a system in its entirety, and that I think is absolutely critical. And that's going to take public and private partnerships. And one of the things that I've always thought would be a very productive use of HHS or some of the national healthcare initiatives is to really create kind of 50 experiments around the country in big cities to try to see if there would be ways working together to make that happen.

So those are five things that we're thinking about and working on as a company. It's to be systems thinkers about the problem, to really focus on a combination of technology, innovation, public policy to engage consumers. And I would just encourage you all to think about the inevitability of consumer-based high-deductible plans. I don't think it's a question of if, it's a question of when, no matter where you work. Point two: all the innovation, you know, when I came and met with Pascal earlier, you know, all the great innovation is going to take place around chronic disease. How you find it earlier, how you treat it more effectively, what are the therapies associated with it. It's staggering how much great technology exists. Be willing to experiment and implement with lower-cost technology. I actually think it's a place where big institutions should experiment more with multiple price points along the range because I think it's going to make you smarter. Information that reduces variation, it drives productivity, and just drive more of the market forces in productivity and in public policy.

Like I said earlier, a couple points I'd close with: we're going to be working on healthcare for the rest of our life. And so one of the things we've tried to do inside GE is to make everybody a better student of healthcare, whether they work in our healthcare business or not. I would offer that I think big business ultimately has the most to lose if we don't get it right. So I think we're going to be a lot more aggressive and a lot more interactive, I think both in our communities and with other companies. I don't just mean GE, I mean IBM and all the other big payers. And I just think it's exciting to see the number of activities and things we can do together. And my encouragement to all of you is to be a big part of the change process. You know, and just to end where I started, I spend a lot of time thinking about the productivity and competitiveness of GE. I also spend a lot of time thinking about the competitiveness and productivity of the country. I think we're in a particularly interesting time where our competitiveness is being challenged, and finding ways to reform and make healthcare more productive is one of the key ways to do that. So again, those are my comments. I'm happy to take a few questions and take it from there.

So, you know, I think like other companies, you know, we have things that are our core competency and we have things that aren't our core competency. And we've never wanted to kind of get in the healthcare delivery business because we didn't think it was necessarily our core competency, we didn't want to compete with our customers, and you get sued too much when you're a hospital. I've got deeper pockets than any hospital CEO and I worry about that as well. Now, all that being said, the headset I have today is complete resolve to get high-quality, low-cost healthcare for my employees no matter what it takes. Complete resolve. So I'm not anxious to do that, but I don't rule out the fact that we might have to run some of our own clinics. Because, you know, guys, look, we could talk about whatever we want to talk about over these two days, but in a tough economy, in 2010—now the economy is getting a lot better, but in 2009, 2010, two tough years in the history of this country economically, right?—after inflation was unabated. So think about what the good things are going to look like. You know, that's the challenge is that somehow, someway, if you're GE and you compete with the Chinese and companies every place around the world, healthcare costs is just going to have to get under control.

You know, healthcare tort reform is a must, I think. You know, my view is that over the last couple years, particularly led by the Chamber, there's been a lot of good work done on tort reform. If I had gotten to six or seven points instead of five, I would have certainly mentioned tort reform. But it's one of those things, and it's got to happen, and I wish we had done more. If we were really going to talk about healthcare reform, you're going to have to talk about tort reform. But insofar as I can't control it, you know, I want to stay focused on the things that we can do the most about. But I totally agree with your point.

So, you know, when we got started, you know, we of course have been in healthcare for a long time, but when we wanted to put all the dots together about how we think about healthcare, one of the places we went to and spent a day was Cleveland Clinic. And I know Toby was here, and we did it not just to hear from a Cleveland Clinic standpoint but to hear how, you know, some things they've done with their own employees and things like that. So education, smoke-free sites, getting people on different diets, having contests and programs, controlling where, you know, we now have a 20-point, you know, I grew up in our company in our plastics business, and so I was used to OSHA programs like VPP and things like that. It was a voluntary protection program. So basically every plant in the United States, the OSHA gives a grade to in terms of what their safety record is. We've created that same metric on health. So fundamentally we now go to a site and say, okay, you meet these 20 criteria, you're a HealthAhead certified site, you get jobs. If you're not a HealthAhead certified site, you don't get jobs. So it creates peer pressure and things like that for people to join the exercise programs. Now, you know, legally there's boundaries to what we're going to do and we're a compliant company and things like that, but I think people in the healthcare industry, like the people in this room, this will never become better unless people are more accountable for their own healthcare. And so there's going to have to be consequence to that activity. And look, I love the people that work at GE. I don't like them, I love them. It's, I respect them and I want the best for them. But I also want them to be better healthcare consumers, right? And so if you're never willing to say here's consequence for activity, then you're not a good leader in my mind. And I think for too long we just have not told each other the truth on what it's going to take to get healthcare costs back in control.

So look, I think that ultimately having transparency is a good thing. And one of the concerns is that it could lead to people either not understanding the impact of data and not understanding, you know, is one doctor rated differently or one hospital rated differently for a specific reason. So what we've tried to do, I guess, inside the company with our employees is we push them through our own websites where at least we can have as good a quality of data as is possible. But, you know, anytime you have such access to information, there is the danger that it's not perfectly correlated. But again, in the little world that I can oversee, I think we can do a pretty good job of making sure that that takes place.

Look, I mean, I try to steer, not always successfully, away from political commentary, you know, so I leave that to allow everybody to make their own choice on that politically on what it is. Now, I would just make two contextual comments. I can certainly see why people think that everybody having access to healthcare is a good thing. So I don't disagree that that is a good practice. And the other thing I would say is that these people get healthcare anyhow, and they get it in the least efficient way humanly possible. So if we can find ways to get people better healthcare more efficiently, that's probably a good thing.

The only, you know, not directly to your question, but, you know, when I hear that Medicare is going to cut reimbursements for anything, that doesn't cut cost. You know, basically you've got 50 percent, you know, I'm giving you my perspective now, you got 50 paid for by the government on which they pay about 80 percent of their cost, and you got the other 50 paid for by private payers, industry, who pay 20 above their cost. So if reimbursements go down lower on Medicare, my costs grow higher. So unless you go after the blob, ultimately, unless you go after the whole blob, healthcare cost isn't going to be reformed. And that's ultimately what we all have to advocate.

Listen, it's past five on a three-day weekend, so I'll be done. I'll keep answering if you want me to. I know everybody in here has got a better place to go.

You know, the ability to have devices in the home is unprecedented. So whether it's monitoring devices, whether it's as much as, you know, PDA-type activity with ultrasound, things like that. Now, it's got to be clinically directed, it's probably going to have to be orchestrated by the payer, and it's got to be disease-specific. But, you know, again, ultimately getting more care in the home and getting more people that adhere to the drug regimes and things like that, that's going to be good for the system. And the miniaturization of technology and the wireless nature just makes it all possible.

So it's early days, you know, we're two years into it. So again, I think it's made everybody more aware. And like I said, I think our experience would say it probably resets the bar 10 to 20 percent lower from a cost standpoint or from a user standpoint than you went at. Now, that's going to settle out. I don't know if those numbers are right, but my hunch is just by people being able to make better choices on their own, it's going to settle out in that level of savings. That's why, you know, I'm not sure where the smart, you know, because we followed a lot of other people that did it, that's why I think there's an aura of inevitability about consumer-based high-deductible plans. There just is an aura of inevitability about it. Thanks very much, it's great to take questions.