Commoditization of Healthcare

Blog post by Colin Hung

This week I will be attending the annual Healthcare IT Marketing and PR Conference (#HITMC) in Las Vegas NV. #HITMC is one of the conferences I look forward to the most – it is one the few opportunities to network with #HealthIT marketing peers without the pressure of having to man a booth. If you are all involved with marketing at an healthcare technology company, I highly encourage you to attend #HITMC.

This year I am part of a panel discussion with Shahid Shah @shahidnshah, John Moore III @ChilmarkHIT  and Greg Caressi @Frost_Sullivan. Together we will be discussing the future of #HealthIT and how marketers can adapt to where the industry is heading. One of the topic areas that we plan to explore is the commoditization of healthcare. I thought it would be interesting to bring the perspective of the #hcldr community to the panel.

According to Investopedia, a commodity is defined as:

A basic good used in commerce that is interchangeable with other commodities of the same type…The quality of a given commodity may differ slightly, but it is essentially uniform across producers…The basic idea is that there is little differentiation between a commodity coming from one producer and the same commodity from another producer. A barrel of oil is basically the same product, regardless of the producer.

As marketers, we have been taught to do everything possible to avoid commoditization. Thus, we constantly seek ways to differentiate the products and services we represent. Yet paradoxically, the central goal of many healthcare technologies is to commoditize the provision of health.

Take, for example, the application of artificial intelligence (AI) to healthcare. Companies like IBM, Microsoft and Google have introduced technologies that mine volumes of historic medical data in order to help diagnose diseases and make treatment recommendations. It is not hard to imagine that someday soon, physicians and care providers everywhere will be relying on an AI “assistant” to help with patient care. One of the drivers behind this utopian vision is the provision of better and more consistent care to patients. Put another way, AI is helping to commoditize healthcare.

This line of thinking can be applied to many other #HealthIT products: population health tools, infection surveillance software and even EHRs. All are designed to help automate and streamline processes so that they are more consistent, defined and repeatable (though admittedly EHRs haven’t made things easier in many cases).

Is this drive to commoditization in healthcare a bad thing? I believe the exact opposite. The drive to commoditize certain aspects of healthcare is good thing and in some cases it is an imperative. If healthcare was more like a commodity, it would mean that we had a uniform and universally accepted definition of the end product. Imagine a world where the definition/output of a knee replacement was as commonly accepted by all healthcare providers as a barrel of crude oil is by gas producers. A commoditized healthcare world would mean we have universal standards of quality, well defined treatment workflows and price transparency. Who wouldn’t want that for healthcare?

There are two areas of healthcare that are already experiencing rapid commoditization: primary care and radiology. According to a 2015 article in Becker’s Hospital Review, CVS Health and Walgreens launched over 1,800 Retail Health clinics over the last decade. The patient experience at these retail clinics is wholly different to the appointment-based model of traditional primary care providers. Patients show up, put their name down and are given an estimate of how long it will take before they are seen, they wander the store and then are whisked into the exam room when their name is called.

Many studies, like this one by the Robert Wood Johnson Foundation, show that patients are choosing retail clinics over traditional physician practices because of:

  • convenient locations
  • longer hours of operation
  • no need to make an appointment
  • affordable care
  • cost transparency

Another area of rapid commoditization is radiology. Whitney Jackson put it succinctly in this Physician’s Practice post:

There’s no question, according to industry experts and data, that radiology has already become commoditized to a degree. ”Radiology is the top area of commoditization based on the fact that teleradiology has made the delivery of radiology services almost frictionless. You can get it wherever you need it. You don’t need a radiologist onsite.” Radiology’s commoditization didn’t take long once it was possible to get radiology services from anywhere in the world at any hour, and consumers started shopping around for the best price.

Some fear that the commoditization of healthcare will lead to a cold and impersonal experience for patients. I believe this sentiment is correct. With commoditization there can be a loss of the one-on-one experience that some patients have with their primary care provider. However, I would question the number of patients who feel they are benefiting from such a relationship with their primary care physician today.

Consider what has happened in the tools and hardware space. Fifty years ago, if you needed to buy a hammer you would go down to the local hardware store where the owner likely knew your name and you would choose the one hammer brand they carried and paid whatever price the owner set. Nowadays we head to the local Home Depot and choose from their vast selection of tools at a variety of prices points. How many of us would choose to go back to the old way of buying home improvement supplies?

At #HITMC the panel will be spending time discussing whether or not healthcare is being commoditized and whether #HealthIT is contributing to it. We will also be exploring whether there are aspects of healthcare that will defy commoditization. I would dearly love to bring thoughts and ideas from the #hcldr community to the discussion.

Join us on the next #hcldr chat, Tuesday April 4th at 8:30pm Eastern (GMT -5, for your local time click here) when we will be discussing the commoditization of healthcare:

  • T1 What aspects of healthcare are becoming more commoditized? Is this a good thing?
  • T2 Is there an area of healthcare that should become more commoditized?
  • T3 To what extent is Healthcare technology contributing to or preventing commoditization in healthcare?
  • T4 Will clinicians and patients need to behave differently when healthcare is more standardized (a commodity)? How so?

References

“Commodity”, Investopedia, http://www.investopedia.com/terms/c/commodity.asp, accessed 2 April 2017

“Is the Reversal of CT Commoditization Possible?”, Frost & Sullivan, 30 March 2016, https://ww2.frost.com/frost-perspectives/reversal-commoditization-ct-possible/, accessed 2 April 2017

“The commoditization of primary healthcare: A guide for health systems”, Ryan Hummel, Becker’s Hospital Review, 4 May 2015, http://www.beckershospitalreview.com/hospital-management-administration/the-commoditization-of-primary-healthcare-a-guide-for-health-systems.html, accessed 2 April 2017

“The Value Proposition of Retail Clinics”, Deborah Bachrach et al, Robert Wood Johnson Foundation, April 2015, https://www.manatt.com/uploadedFiles/Content/5_Insights/White_Papers/Retail_Clinic_RWJF.pdf, accessed 2 April 2017

“Commoditization in Health Care: Can we afford the effects of cheap health services?”, Gokce Ozdemir, January 2016, http://ojs.library.queensu.ca/index.php/qihi/article/view/6069/5742, accessed 2 April 2017

“Radiology Isn’t Alone in Commoditization”, Whitney L Jackson, Physicians Practice, http://www.physicianspractice.com/practice-management/radiology-isnt-alone-commoditization, accessed 2 April 2017

“Radiologist: Commoditize Thyself”, David E Williams, The Healthcare Blog, 28 March 2011, http://thehealthcareblog.com/blog/2011/03/28/radiologist-commoditize-thyself/, accessed 2 April 2017

“How Brands Can Fight Customer Commoditization”, Martin Bishop, Branding Strategy Insider, 19 February 2016, https://www.brandingstrategyinsider.com/2016/02/how-brands-can-fight-customer-commoditization.html#.WOEP3TvyuUk, accessed 2 April 2017

“Is the Commoditization of Healthcare Bad?”, Ron Vianu, LinkedIn, 20 June 2014, https://www.linkedin.com/pulse/20140620134207-10141663-is-commoditization-of-healthcare-a-problem, accessed 2 April 2017

Image Credit

Cotton Bolls – Faungg’s Photos https://flic.kr/p/7hg6Zs

 

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