The Natural Progression of Radiology as A Business Practice

The terminal destination of all products and services is commoditization.  So that’s a simple answer, though one that’s not all that simple.  The management journal Harvard Business Review dedicates several classic articles on the process of commoditization, including global competition, process modularization, and, simply, the natural resting place of a mature product.

So where does radiology sit in the natural growth process?  More importantly – as junior residents – what have we gotten ourselves into?

Where is radiology in the natural growth progression?

Credit: http://bigideabiology.wikispaces.com/ED+2.C

Commoditization Is Not Simple

Specifically, (1) commoditization is not always a bad thing… at least not for everyone.  (2) The commodity pathway assumes static, unevolving service/product, not one that changes over time.  Finally, (3) Commoditized goods and services can divert away from such states through a creatively named ability called commodity pathway diversion.

Commoditization is not necessarily a bad word. The commoditization of the personal computer made it possible for the typical family to own one affordably. Additionally, the expiration of a pharmaceutical patent begins its commoditization process. Generic drug companies from India, Japan, and China have the opportunity to create the same formula for far lower costs.

Radiology – The Next Generic Drug?

For radiologists, the commoditization of radiology is a prime concern.  However, entire fields do not commoditize, as the process first requires interchangeability from one product with another.

Much of medicine has become modularized and decoupled, as private clinics collaborate with radiology practices, small multi-specialty clinics, and hospitals in a way that PC component collaborate to create a new Samsung tablet. Modularization is one of the best ways to drive down cost because it allows subcomponents of a previously wholesome system to commoditize.

Radiology is already beginning to modularize, starting form the technological solutions.  Whereas PACS server, software, workstations used to be a bundled product due to the high complexity and interplay, there are now vendor neutral archives (VNA).  Additionally, the advent of web-based PACS touts a new era light-weight clients and superior performance.

Ivory Towers

As long as the paradigm remains the same, the workflow would be given time to mature and modularize, and the evolution of the industry will follow Clayton Christensen’s classic disruptive innovation curve as new low-end innovations such as outsourcing of radiologists, computer-assisted detection progressively take on increasing complex work.

Harvard Business School professor Michael Porter made his career talking about business competition. When volume and RVUs define productivity, the work is undifferentiated, and the only competitive factor is price. It is almost the exact definition of commoditization.

Therefore, those who narrowly define the profession will soon find themselves facing cost pressure.  Therefore, the commoditization of radiology is probably better stated as the commoditization of imaging interpretation.  That is: If your job description is to do no more than image interpretation seeking to produce maximal RVU, then there are plenty of papers and a whole book describing your future.

The momentum for Imaging 3.0 arises from framing the natural progression of radiology as a “fight or be commoditized” scenario, suggesting that there exists such thing as winning or losing the war.

However, the patterns of other industries and management theory suggest that the current course – with or without expressive attempts at curbing its progress – may be more likely to produce a dichotomy of radiologic practices optimized on least two points of the pareto-efficient curve.

The Two Viable Value Propositions

The first is the radiology practices that use an integrative approach to provide higher performance care in an accountable care organization (ACO).  In this model, the radiologist is not a “gatekeeper” denying inappropriate use but rather a facilitator of appropriate imaging.  The practice is able to quickly produce a personalized protocol for an examination, and creates additional value to the ACO has mechanisms to ensures appropriate follow-up based on the afterwards.  The extra cost necessary the practice incurs on the ACO to render these services are easily recouped by the improved patient satisfaction, reduced complications, and reduced malpractice suits (which is related to though not exclusively dependent on patient satisfaction and complication rates).

The second equally viable business model of the future is the high-volume, high-speed radiology practice.  Of note, these practices do not produce a “low quality service” per se.  Rather, it is more practical to think of them as providing bare-bone service for ACOs that either do not need comprehensive diagnostic guidance or rely on clinicians to fulfill the pre- and post-imaging portions of the radiology value chain.   must also be capable of optimzing along the radiology value chain to reduce the cost of providing care.  For example, they would benefit the most from standardized protocols for image acquisition and standardized reporting language, as a successful practice in this domain must provide high-quality service, and standardization allows them to perform the necessary quality assurance.  This business model innovates by economy of scale and is the natural progression of existing teleradiology practices, using principles of distributed computing to connect newly completed studies available radiologists state or country borders.  It would take advantage of the payment gradient, the standards of living, and timezone differences across country borders to offer 24 hour service.

In The End…

We have already seen this in another industry.  Apple Inc. commands an integrated approach to device manufacturing, creating high-cost and high-quality products and showing no sign of commoditization.  Simultaneously, a vibrant market exists for very low-cost – but good-enough quality – computing devices using modularized, somewhat interchangeable components.  The reason that these two markets exist is because they are both viable, with sufficient supply and demand to sustain profit.  One market has not consumed the other partly because they have reached an equilibrium where demands for a high-performance device (perhaps for work) and the demand for low-cost, good-enough devices (perhaps for a child) do not often overlap.

Those radiology practices that manage to survive the initial change in selection pressure may end up following the same patterns.

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Howard Chen
Vice Chair for Artificial Intelligence at Cleveland Clinic Diagnostics Institute
Howard is passionate about making diagnostic tests more accurate, expedient, and affordable through disciplined implementation of advanced technology. He previously served as Chief Informatics Officer for Imaging, where he led teams deploying and unifying radiology applications and AI in a multi-state, multi-hospital environment. Blog opinions are his own and in no way reflect those of the employer.

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