Time Capsule: Medical Equipment Sales Boom While Health IT Struggles

I wrote weekly editorials for a boutique industry newsletter for several years, anxious for both audience and income. I learned a lot about coming up with ideas for the weekly grind, trying to be simultaneously opinionated and entertaining in a few hundred words, and not sleeping much because I was working all the time. They’re fun to read as a look back at what was important then (and often still important now).

I wrote this piece in April 2006.

Medical Equipment Sales Boom While Health IT Struggles
By Mr. HIStalk

GE Healthcare just announced quarterly profits of nearly half a billion dollars. While much of that came from diagnostic equipment sales, it’s still worthy of reflection — whether you helped boost the company’s bottom line through your purchases or whether you have to compete against them.

An interesting phenomenon occurs on the non-IT side of healthcare technology. Vendors of diagnostic imaging equipment and Star Wars-like treatment gadgetry use a little bit of science and a lot of scientifically-designed propaganda to create demand for the latest Gamma this, 64-slice that. Customers plant public relations articles in the local newspaper, bragging on their new toy with a subtle message: “Our competitors are cold-hearted cheapskates for not shelling out for the cool patient care stuff like we do for you.”

What’s the downside?

1. In many cases, the equipment has no proven benefit for patients. Seeing an image more clearly doesn’t necessarily mean anyone gets better faster.
2. Supply creates its own demand, ensuring that all those new private office MRI machines are humming from constant use on patients who didn’t need it until Doc got his first invoice.
3. More billions in costs are piled onto a poorly performing healthcare system.

So how can GE, Siemens, Philips, and other conglomerate vendors make so much money on this stuff and still not necessarily make much of a dent in healthcare IT? More specifically and paradoxically, why are customers so willing to spend millions on a given company’s non-IT technologies while fighting tooth and nail to avoid using that same vendor’s IT products?

The most obvious reason is that providers can make money by running expensive tests, particularly when coached by vendor reimbursement experts who can influence the companies who write the checks (and who eventually increase premiums in response). The patient’s not paying anyway, so everybody’s happy, at least until the next round of healthcare and insurance cost increases.

The science behind this equipment is often no better than the shaky anecdotal suppositions about CPOE or ambulatory electronic medical records. Still, it creates its own demand, mostly because customers have a financial incentive to fit it into their practice, while those other IT technologies are largely ignored and unsuccessful because they require extra work for no extra payment.

The takeaway message is that, science aside, doctors and hospitals will utilize the hell out of something when they’re paid to do so (equipment, drugs, supplies, and for-profit referral centers). While it’s nice if patient care is improved, it’s only mandatory that it not be worsened.

Few health IT technologies have ever caught on that didn’t benefit users directly. The stuff being touted today (RHIOs, CPOE, clinical decision support) doesn’t, so it wallows around with unenthusiastic little pockets of interest here and there. The cheerleaders keep complaining about low adoption and the need for someone else to pay for it.

If providers were paid to reduce utilization and improve outcomes, advanced IT support would be demanded, not refused. Until then, the conglomerate vendors will thrive on the medical equipment side and struggle on the IT side unless someone bribes customers to get on board.