‘Value triangle’ offers framework for radiology business models

Radiology must deliver value in the current healthcare environment, and to survive this increasingly competitive market, imaging practices must clearly define the value propositions that form the base of their business model, according to an article in the March issue of the Journal of the American College of Radiology. To benchmark your practice, please complete the one-question survey at the end of the article.

“As healthcare moves to value orientation, radiology's traditional business model faces challenges to adapt,” wrote Dieter R. Enzmann, MD, of the University of California, Los Angeles, and Donald F. Schomer, MD, MBA, of Banner MD Anderson Cancer Center in Gilbert, Ariz.

The authors looked at various models for radiology to follow, providing examples from the general marketplace and distilling the value discipline approach to three market-based categories: low-cost/operational excellence; product and service leader; and customer intimacy.

Low-cost/operational excellence – For companies in this category, value translates into finding the lowest total cost to provide an acceptable quality, explained Enzmann and Schomer. They feature high-capacity utilization, high labor efficiency and standardization. Think Amazon, Walmart or Toyota.

Radiology practices taking this position would seek to economize labor by limiting the number of radiologists while employing non-physician staff such as nurse practitioners and radiology assistants. Investments would be made in communication infrastructure to reduce costs, while teleradiology and computer-aided diagnosis tools would be increasingly leveraged. This model likely adapts well to an accountable care organization (ACO) environment, noted the authors.

The trade-off here is that telepresence dilutes relationships with referring physicians and increases the risk of commoditization, wrote Enzmann and Schomer.

Product and service leader – Value in this position stems from a product or service offering high performance and innovation at a premium price. The authors pointed to Apple, Ritz-Carlton and Tiffany as examples of companies in this category.

“This suits some academic radiology practices or large groups at brand-name institutions,” wrote the authors, though they noted serious cost-cutting efforts in healthcare will make this position harder to maintain. In order to stay “product and service leaders,” radiology will have to become an information business and seek out innovative ways of improving decision making, wrote Enzmann and Schomer. For example, the combination of molecular diagnostics with phenotypic imaging could create a new information product.

Customer intimacy – This position emphasizes the needs of specific customers rather than a general market or market segment. IBM began modeling this position by offering consulting services and business intelligence along with predictive analytics tailored to individual customers.

In radiology, this model is suited for large multispecialty radiology groups that could be academic or private, explained the authors. ACOs that provide “health” and not individual services, and initiatives to track cumulative radiation dose for individual patients are steps toward customer intimacy.

“Successful radiology businesses, either in private practice or academic settings, will likely gravitate to one of these corners of the value triangle, while maintaining a threshold position in the others,” summed Enzmann and Schomer.

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