Radiology could face disruption under 'spot market' for image reads

September 1, 2007

We've been exposed to a lot of disruptive technology in radiology. PACS, computer-aided detection, and 64-slice CT scanners have all had substantial impacts on practice.

We've been exposed to a lot of disruptive technology in radiology. PACS, computer-aided detection, and 64-slice CT scanners have all had substantial impacts on practice.

We may be on the cusp of another technology/marketplace change that could potentially be the most disruptive yet. At a summer healthcare conference in San Francisco, former White House health IT czar Dr. David J. Brailer raised the possibility of an eBay-style spot market for radiology interpretations. Brailer, who now heads up a healthcare venture capital firm, said he had reviewed such proposals for capital groups. (See Enterprise Imaging & IT supplement, page 21.)

That Brailer raised such a possibility should surprise no one. As the national coordinator for health information technology, Brailer pushed health IT as a solution to healthcare woes. The theory was that innovation could spur systematic improvements and permit a more efficient marketplace to develop.

In fact, similar thinking has been behind the interest of venture capitalists in financing teleradiology companies. They see a market for image interpretations that is highly fragmented and the opportunity, by consolidating image interpretations via teleradiology, to make the process more efficient and profitable.

Now venture capitalists see another opportunity for profits in remaking the pricing mechanism for image interpretations. They envision a system in which radiologists, instead of contracting to provide image interpretations via teleradiology, would bid to provide image interpretations over some sort of Internet-based system.

Dr. Eric Trefelner, our Perturbations columnist and himself a teleradiologist, discussed this concept in the August issue ("When low bids win, radiologists lose out," page 56). The key to these systems is what's known as a reverse auction. In a reverse auction, the roles of the buyer and seller are reversed, and the primary objective is to drive purchase prices down. In an ordinary auction, buyers compete to obtain goods or services. In a reverse auction, sellers compete to obtain business.

In an interview with Diagnostic Imaging, Brailer acknowledged that this "spot market" system would shift power from radiology sellers to hospital and health plan purchasers. Further, he noted that some radiologists who have priced their services high could lose business under these systems. But he argued that, overall, radiologists would not be hurt by the added competitive pressure because they remain in short supply and the volume of imaging is going up.

I'm not so sure.

Trefelner wrote that radiology is poised for a great migration of radiologists out of the workforce as baby boomers prepare to retire. He also noted that he hears all the time from retired radiologists wanting to supplement their retirement income by working part time. Throw in residents just out of training and employed radiologists looking to pick up some spare cash, and you have a potentially very large group of people who could move into a reverse auction marketplace for remote radiology reads. If that happens, you can bet that payments for image interpretations will head down.

How dire a threat this is remains to be seen. Regulatory barriers will inhibit attempts to set up reverse auctions for radiology reads. Payers will need to insist on credentialing and quality measures. And, as Brailer notes, limits on the supply of radiologists will also limit how far down prices can go.

One thing, however, is certain. The advent of reverse auctions for image interpretations moves radiology and medicine several steps closer to the practices and ethics of business. As that happens, medicine may get cheaper, but it won't necessarily get better.

-By John C. Hayes

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