Using the circular economy to improve the lives of 3 billion people

Philips, a global leader in medical devices and diagnostics, has been making the world healthier and more sustainable through innovation for over a century. It aims to improve the lives of 3 billion people by 2025. How? Building on its innovative healthcare products and services, Philips is also innovating new financial solutions by focusing on circular economy ideas and leveraging its strong collaboration with financial partner DLL.

Healthy synergy
Philips and DLL have built a healthy synergy that spans several decades (see sidebar). They share many core values, including a strong commitment to the circular economy – developing sustainable models, like service based models and refurbished equipment that combine profitability with social benefits – and ultimately meet the needs of end customers.

$4 billion in medical equipment
Nestor Coronado Palma, Philips Program Manager Circular Economy says, “Although many hospitals are still focused on owning new equipment, we are seeing a growing interest in leasing equipment, refurbished equipment and in service based models.” DLL and Philips have been very successful in leasing. “In the past 12 years, DLL has funded over $4 billion worth of equipment from Philips in the USA under the Philips Medical Capital brand,” says David McCoubrie, DLL Global Account Manager.

Scaling up to service based contracts
From leasing it’s a logical step to service based models that sell the performance of an asset rather than the asset itself. Coronado says, “Hospitals are accustomed to thinking they must own the asset to save money in the long term. We need to refocus the conversation on the customer’s requirements and shift to an approach where the best solution depends on the performance and outcome at a service level. These new models are gaining traction.”

Complex funding structure
McCoubrie says, “Because service based models involve a new type of funding structure, we have set up a joint working team so we can be consistent across regions and customers. These deals involve expertise across the board, from treasury to funding to accounting. We are working with Philips to help understand how to implement these financial constructions globally.”

Refurbished equipment
Refurbishing equipment is another way to extend the lifetime of valuable medical equipment. Coronado says, “If you are a research-oriented university hospital you might choose leasing because you need to upgrade to the latest technology every five years. If you are a facility with more modest requirements, you may consider buying refurbished equipment because it offers high value for your money. When we bring refurbished equipment to the market it is premium quality with the same guarantee and performance as a new system. This has incredible value to our customers.”