When low bids win, radiologists lose out

August 1, 2007

What do Vladimir Ilyich Lenin, the MurderAuction.com website, and your retired partners have to do with your future income? No idea? Then read on.

What do Vladimir Ilyich Lenin, the MurderAuction.com website, and your retired partners have to do with your future income? No idea? Then read on.

Lenin said, "The capitalists will sell us the rope with which we will hang them." He was right. Unfortunately, the communists, China especially, eventually figured out that they could do the same thing cheaper and make an even larger profit, and soon they were selling the rope that would eventually hang communism.

There are no longer communist countries, just capitalist ones with totalitarian governments. The drive for profits can have unintended consequences.

MurderAuction.com is just one of a number of "murderabilia" sites offering for sale everything from gruesome mementos to warped artwork by serial killers and mass murderers. Want to buy a lock of Charlie Manson's hair? You can find it online-though it may not be from his scalp. (And what is it with all of those women out there who want to marry serial killers? What is that all about?)

Who would have thought the profit motive would spawn such an industry? Murderabilia highlights how the power of the Internet, combined with bidding mania and the individual drive for profit, can create a new industry overnight. Think e-Bay. The only problem is that you are next.

The Internet has changed the face of many industries. It is driving small bookstores out of business (Amazon), sucking the life out of small travel companies (Expedia, Travelocity, Orbitz), and beginning to slash realtor's commissions (Redfin).

Even Bill Gates is feeling the pinch. He founded a firm called Corbis in 1989 as a digital media company. Corbis owns more than 11 million stock photographs and represents the rights to close to 100 million more. It has sales of over $250 million a year but has yet to be profitable-which is anathema to Wall Street. In 1995, another billionaire entered the market, Mark Getty with Getty Images. In 1998, he realized the power of the Internet and reengineered his company to take advantage of it.

Getty Images is now part of an emerging trend called microstock. Stock photos, taken by professional photographers, are used by magazines, publishers, and advertisers, who purchase the right to print the images. Corbis charges, on average, about $250 each for the use of its pictures. Getty Images, through its iStock subsidiary, can charge only $1 to $2. Getty Images has 40% of this market and is rapidly growing; Corbis has 11%. But far more important, Getty Images is profitable. How? Are you sitting down?

Outsourcing work to the developing world was the frontal assault, but now comes the rear attack: "crowdsourcing." From Wikipedia: "Crowdsourcing is a neologism for a business model in which a company or institution takes a job traditionally performed by a designated agent (usually an employee) and outsources it to an undefined, generally large group of people in the form of an open call over the Internet. The work is compensated with little or no pay in most cases . . . In almost every case crowdsourcing relies on amateurs . . . or volunteers working in their spare time to create content, solve problems, or even do corporate R&D. Crowdsourcing models are being applied across a broad range of industries, including entertainment, law enforcement, journalism, foreign intelligence, scientific research, and photography.

Getty Images, and just recently Corbis, have realized that amateurs with a good digital camera and Photoshop can provide the same services as professional photographers for less money and, therefore, a larger profit margin. This is what is now called the microstock market.

What could this possibly have to do with you? I suggest you get a stiff drink and sit down again.

BidShift is one of a growing number of companies that provide hospitals with sophisticated software that allows nurses and staff to bid online for work shifts. This has saved hospitals millions of dollars (i.e., increased their profit), which is why the programs are rapidly being adopted by many healthcare systems. The kicker is that these are reverse auctions.

Again from Wikipedia: "A reverse auction is a tool used in industrial business-to-business procurement. It is a type of auction in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction (also known as a forward auction), buyers compete to obtain goods or service. In a reverse auction, sellers compete to obtain business." Nurses compete for more attractive shifts, for example, by offering to do it for less money.

That can't apply to you, right? You shouldn't mix pills with alcohol, but you might consider a valium right about now.

Radiology is poised for a great migration of radiologists out of the workforce as baby boomers prepare to retire. The AMA has already addressed the issue of current physician retirees trying to get back to work part-time due to either boredom or unexpected financial pressures. Now picture this: All those bored radiologists who might find themselves with a lower standard of living, due to either poor planning or underperforming retirement portfolios, are going to be sitting at home with a computer and a high-speed Internet connection wondering how to keep themselves busy and/or make some money.

An antidepressant might go nicely with that valium.

As a teleradiology provider, I get calls all the time from people who are retired or wanting to pick up some cash by doing teleradiology part-time after work or on the weekends. They tell me that other teleradiology providers already do this, but here is the new twist.

At the RSNA meeting this past year, I was approached by a teleradiology provider who wanted it kept quiet but was preparing to adopt a reverse auction model. I didn't think much of it until I got a call recently from someone else looking for part-time work who told me that another group he spoke to was testing the waters with its own proposal for a reverse auction. This was right after the big brouhaha over Massachusetts General Hospital poaching high-profit studies via teleradiology from that hospital in Rhode Island, so it was a sensitive issue that they didn't want generally known. This is just another skirmish in the teleradiology wars.

At this point you may be in need of a priest or proctologist.

The power of auctions is that they are driven more by emotions than by accurate value judgments. Bidders become competitive and want to win no matter what. This is what drives a large auction house like Sotheby's and Christie's. Some people actually get so caught up in the manic bidding on eBay they end up paying more for a used item than they would have for a new one.

Martin Shubik, a professor of economics at Yale, did a study about what is now called the "dollar auction" where he would auction off a $1. There was no minimum bid, but both the winner and second highest bidder had to pay. Professor Shubik typically collected $3 to $5 for his $1 investment! Bidders would continue bidding rather than lose.

Now imagine that a bunch of retired ex-partners, currently practicing radiologists looking to buy a boat or a sports car, or a boatload of residents just out of training who want to buy a new home are bidding against you for the all the head CTs, knee MRIs, abdominal ultrasounds, etc., from the hospital's outpatient imaging center.

They don't have anything to lose out of pocket. And it gets worse if the hospital gets to keep the difference. Impossible? Tell that to the lobbyists who get paid to make the impossible happen.

It may not happen this year or next, but it is coming. The question is, how are radiologists going to address the threat? What can you do to protect your future? What is the American College of Radiology going to do?

The fact that Lenin thought he had the answer and failed does not bode well for us. Happily, however, you will have the chance to make money online via MurderAuction.com: You can sell your hair after you go postal down at the mall.

Dr. Trefelner is a radiologist and cofounder of NightShift Radiology. He invites comments by e-mail at ericxray@pacbell.net or fax at 650/728-5099.