Commoditization of Imaging: Fighting the Trend
As a macroeconomic phenomenon, commoditization is fairly characteristic of a maturing marketplace—two words that describe radiology in the United States perfectly. As the industry has matured, through increased competition and more deleterious economic pressures, radiology practices have increasingly found themselves competing on price alone, raising the risk that factors such as quality and service will fall by the wayside in consumers’ and referrers’ eyes. “Commoditization represents a difficulty on the part of the consumer in distinguishing quality between different providers,” according to Greg Thomson, CPA, executive vice president of Medical Management Professionals (MMP), Atlanta, Georgia. Thomson explains that as radiology’s reimbursement has declined and the service has become more portable, its market has grown more capitalistic than it was even a decade ago. “In any free market, you go through a period of time where the consumer is trying to figure out what is best,” he says. “It can get ugly—and some nonquality providers can be very successful.” Teleradiology practices, in particular, have had success in using economies of scale to bring lower prices to their clients—and Thomson points out that sometimes, the same radiology practices that compete with these providers at the hospital level are themselves hiring the same teleradiology providers for night and weekend interpretations, with little regard for anything other than price. “There is a tremendous irony there,” he notes. “There is a race to the bottom, pricewise, among teleradiology companies, and even their fellow specialists in radiology do not seem to be as focused on quality as one would hope—which gets back to the difficulty of distinguishing quality in radiology.” Enhancing Communication With this difficulty in mind, Thomson says, it is paramount for the radiology industry to educate consumers better concerning the value that a high-quality provider can offer. “It is very hard, in health care, to educate consumers on what it is they are buying, and consumers cannot afford to shop around,” he notes. “Being better at defining what quality is, and then selling that higher quality to consumers, is critical.” For this definition to occur, practices need more clearly defined measures with which to determine quality. “Accuracy of interpretations, turnaround time, and price are all factors, and those metrics need to be ranked based on the service being provided,” Thomson says. For instance, he adds, it might be that in the case of emergency-department interpretations, turnaround time should be ranked as more important than report quality. “The first steps are defining the metrics and then determining a way to educate our consumers on the metrics that should matter most to them, whether they are referring physicians or patients,” he says. Communication to the referring physician is equally important, as referrers remain the gatekeepers of much of radiology’s business. The key component of this communication is the radiology report, which can leave something to be desired in the eyes of referrers, Thomson says. “When people are unable to understand the quality differential, the medium becomes the message,” he observes. “Getting the data to the referring physician in such a way that those data can be easily used is critical. We see radiologists who feel that once they have done their interpretation, how it gets to the physician is up to someone else.” Leveraging advanced IT can enable radiology practices to deliver more structured, easy-to-understand reports in ways that are more convenient for referrers; electronic delivery makes possible the inclusion of key images, and can even allow radiologists to link back to the full image set, for those who want to access it. “To many radiologists, providing good service means delivering a correct interpretation, and I believe that is only half-right,” Thomson says. “It is about delivering an accurate interpretation in a usable format.” Maturing as an Industry Going forward, Thomson observes, radiology practices will have to respond to the maturation of the marketplace by becoming mature businesses—a transition with far-reaching implications. “You can relate it to the computer industry: the Dells and Apples of the world,” he says. “Dell grew like crazy and now has to focus tremendously on optimizing its internal processes because of competition from HP and other companies. Apple, on the other hand, is a thought leader, but it runs a tight ship internally. That is where radiology groups should be: progressive on the revenue side and disciplined on the expense side.” This transition begins, of course, at the top. “In a fast-growing business, you are more revenue focused than cost focused,” he notes. “The advent of commoditization has forced radiology groups to become more disciplined with their management. They need to set up structures where leadership can review expenses and make sure they are getting the proper value.” In a commoditized marketplace, service to the consumer becomes a key differentiator—and that translates to ease of use, Thomson says. “You buy a lot of things from Amazon because of the simplicity of buying from Amazon,” he observes. “Service-oriented changes can drive consumers to a business, and with health care an increasingly consumer-driven marketplace, that will be a key component, going forward.” Accessibility will be another critical issue for radiologists, who have traditionally seen very few of the patients whose studies they read. While it is not economically feasible for radiologists to spend time with all of their patients, Thomson notes that radiology practices can leverage their websites to help educate patients and prepare them for exams. They can also focus more on the role that the technologist plays. “The technologist is often the link between the patient and the radiologist, and that role needs to be analyzed,” he says. “There are opportunities there to help educate patients and improve service to them.” Thomson concludes with a warning: Radiology practices that fail to mature with the maturing marketplace do so at their peril. “In the past, practices were able to run fairly loosely, with less focus on cost and more on revenue,” he says. “Now, we are in a situation where cost containment is critical for survival. There really will be winners and losers in radiology going forward, and 10 years ago, we could not have said that.” Cat Vasko is editor of ImagingBiz.com and associate editor of Radiology Business Journal.