Healthcare organizations have been investing heavily in the latest diagnosis and treatment technology in order to show that they are state-of-the-art facilities. They tout the technology in advertisements and annual reports to boost their reputation among patients and referring physicians. They buy machines to keep up with competitors and to recruit the best specialists, who want to practice in a facility that has the equipment they trained on. And patient demand drives purchases too—even if patients don't actually need high-tech care, hospitals that have it still bring them in the door.
But as the healthcare landscape changes, and a greater emphasis is placed on efficiency and cost reduction, that may no longer be the case.
Specialization is a strategy that will likely become more common in the reform-era world, says Stephen Wunker, managing director of New Markets Advisors, a consulting firm in Washington, DC. Hospitals must find their competitive advantage by examining what makes them indispensible and what services are dispensable.
One results of such specialization may be a cooling of the so-called technology arms race. Now, many hospitals feel pressure to invest in clinical technology even if they won't often use it because of the reasons cited above. But specialization as well as increasing transparency about quality and outcomes data may mean hospitals do not need the technology to prove their worth, Wunker says.
How organizations choose to specialize depends on several factors, chief among them market dynamics. On the East Coast, for example, Massachusetts-based Partners Health System is well poised to dominate with advanced IT systems and a large stable of physicians.
Cancer technologies are one area where hospitals may start to look at the cost of technology and weigh it against its ability to impact outcomes and whether or not market demand justifies purchasing the latest piece of equipment, such as stereotactic radio surgery systems, which cost hundreds of thousands of dollars.
Hospitals that invest in high-cost cancer technologies do not do so lightly. It is, they argue, not only critical to their mission of offering patients the best possible care, but it is also a business imperative.
Andrew Pecora, MD, chairman and executive administrative director of the John Theurer Cancer Center at Hackensack (NJ) University Medical Center, says it should not be taboo to question a treatment that is no better or only marginally better than others but costs much more. The trick, he says, is defining what is marginally better.
Pecora cites four steps to making a decision about investing in new technology. "First and foremost, we have to believe that it's materially better than the existing technologies for the patients," he says. "Then we do a financial analysis to determine whether or not the cost of capital will be offset by an appropriate return on investment, like any other business makes a capital investment business decision." Access is another consideration—are there geographic or regulatory barriers? Finally, the technology should be one that the clinicians who would use it want and are excited about, he says.
Any organization with the money and resources to do so can buy cancer diagnosis and treatment technologies, says Anurag Agarwal, MD, chief of radiation oncology at Broward Health, a seven-hospital integrated system in Fort Lauderdale, FL. "But to utilize the technologies properly is very important."
To read more about changing business models in the healthcare industry, read this month's HealthLeaders magazine cover story, Your Move: Hospitals are Predicting, Adapting to Change.
To read more about weighing the costs and benefits of investing in technologies to diagnose and treat cancer, read The Complex Calculations of Cancer Care, one in a three-part series on the cost of healthcare technologies.