GE expands service capabilitieswith acquisition of National MD

February 28, 1996

Firms plan to exploit each other's strengthsGE Medical Systems raised the ante in the increasingly high-stakesmultivendor service market last week by acquiring National MedicalDiagnostics, a leading supplier of asset management services

Firms plan to exploit each other's strengths

GE Medical Systems raised the ante in the increasingly high-stakesmultivendor service market last week by acquiring National MedicalDiagnostics, a leading supplier of asset management services forclinical medical equipment.

GE bought National MD and its portfolio of more than 200 healthcarefacilities in 23 states. The hospitals contracted with the Cleveland-basedfirm for asset management of their biomedical and clinical equipment.Seventy-five percent of National MD was owned by five venturecapital partners, including Canaan Venture Partners in New Canaan,CT, and Morganthaler Venture Partners in Cleveland, while managementowned the other 25%. The deal was signed Feb. 17, and terms werenot disclosed.

Officials at the two companies are enthused about the potentialfor combining National MD's capabilities with those of GE HealthCareServices, which was formed in 1994 to carry GE's asset managementstandard. The Brentwood, TN, subsidiary secured multivendor servicecontracts for more than 500 facilities before the National MDacquisition, according to Tom Dunham, vice president of serviceat GE.

"From our perspective, this acquisition solidifies anoffering for customers who are looking for one-stop shopping fortheir service needs," Dunham said.

For Ray Dalton, CEO of National MD, the buyout gives his firmready access to a broader customer base.

"There is a big advantage in the synergies between theorganizations," he said.

Those synergies arise by allying similar asset management servicesthat have been targeted at different parts of the hospital. NationalMD's multivendor service offerings for clinical and biomedicalequipment apply to anything that doesn't produce x-rays, Daltonsaid. National MD maintains more than 2200 types of equipmentincluding patient monitors, beds, life support systems, sterilizers,and laboratory and surgical equipment. It was founded in 1987and launched its asset management program in 1991.

National MD counts among its customers Tenet Healthcare, thenation's second largest for-profit hospital chain. In October1995, National MD formed an exclusive relationship to manage biomedicaland clinical equipment assets at Tenet hospitals. The relationshipdoes not cover facilities in California and Florida, and in ElPaso and Dallas in Texas, where biomedical, clinical, and diagnosticequipment are maintained exclusively by Serviscope. National MDis maintaining equipment at 36 Tenet facilities.

"And we're still ramping up the program," Daltonsaid.

GE's asset management efforts have generally focused on multivendorcontracts for medical imaging equipment, although contracts withthe Sentara Group, a five-facility, multi-hospital group basedin Norfolk, VA, and with Good Samaritan Medical Center in Zanesville,OH, cover both imaging and clinical equipment, according to SteveKellett, general manager of GE Healthcare Services.

Dalton will stay on as National MD's chief executive afterthe sale. The company will retain an independent corporate identityand will be operated as a wholly owned subsidiary of GE, he said.Administrative offices will remain in Cleveland, and no changesare expected for its 200-employee work force.