July 2012

The Irresistible Force?
By Jim Knaub
Radiology Today
Vol. 13 No. 7 P. 3

To paraphrase an idea I first heard in a talk by imaging informatics expert Paul Chang, MD, you like commoditization when it makes your flat-screen TV cheap but hate it when it’s applied to your profession. It’s tough to see the work product of your years and years of intense training treated like a commodity. And imaging services are increasingly viewed as a commodity.

Radiologists may argue whether the specialty’s traditional practice boat is inexorably headed for a plunge over commodity falls or whether it can come about and power its way back upriver, but few are denying the strong current. Imaging consultant and administrator David Myrice, CPA, MBA, offers his thoughts on how radiologists can combat commoditization on page 12.

But just what is causing the commoditization current? These thoughts come to mind:

• Teleradiology technology has effectively increased supply and, thus, competition.

• Hospitals and/or insurers see imaging services as essentially the same, regardless of the provider.

• Declining reimbursement is fueling a drive toward larger organizations that can succeed on reduced margins.

•  Hospitals, insurers, and/or radiology groups feel such pressure to control costs that cost becomes the primary driver of imaging decisions.

I purposefully omitted the option that all imaging services are essentially the same because if that is the case, imaging truly is a commodity.  While I don’t believe that, there seem to be a growing number of cases where economics alone drives the split between the hospital and the radiology group that once read its exams. Sometimes hospitals are fed up with competing for outpatient imaging dollars with the group that they contract with for hospital services. Perhaps they just want the control of employing radiologists and, perhaps, squeezing some additional profit from professional fees. You read about more cases of hospital administrators accepting a corporate imaging organization group’s pitch promising imaging savings. Sometimes the new arrangement works; sometimes it doesn’t. Publicly traded or venture capital-funded healthcare organizations may see the balance between service and profit differently than not-for-profits. It’s also fair to say that not-for-profits often act in ways increasingly similar to for-profit organizations. All those situations reinforce the commoditization of radiology.

Radiology groups face the challenge of showing hospitals why their group’s services are not a commodity. They need to differentiate their practice from their competitors by proving quality, expertise, service, and value. Myrice discusses ways to approach that challenge. It may or may not prove a winning hand, but it probably is the one groups have to play.