Medical Testing For Profit

There is a significant rise in, advertised profit making, genetic and device based medical screening (e.g. BRAC1, whole body CAT scans, etc). What effects will this evolving industry have on healthcare? How do organizations like the American Cancer Society plan for the growth of this trend?

The early market for innovative fee for service diagnostic testing will largely be the worried well, a group that accepts their eventual mortality but has a higher than usual interest in putting it off. While a large number of people fit this profile, the cost and the risk of the new diagnostic technology will mandate that the early adopters have considerable financial resources or access to high-end health benefit programs.

We are entering an era where early adopters of new high tech diagnostics will face considerable risk. These risks include the potential discovery and concomitant treatment of anomalies that may never have become serious disease. Any serious or potentially expensive conditions found will complicate the preexisting condition profile of their health insurance coverage and thus carry the potential to either require considerable future resources or great optimism about the future of universal health care.

From a business planning perspective there are two possible business models to tap the market for these new diagnostics;

Targeting Early Adopters. The economics of this type of testing will make it valuable for a limited number of independent or corporate practitioners who understand and can efficiently target and service individuals in a highly a targeted medical market. As with any technology if this one provides perceived customer benefit, the market size will grow over time. This is the business model we are seeing now.

Screening Inorder To Acquire Patients. Hospitals are reimbursed for needed and covered procedures, such as surgery and radiation what is required is a set number of patients necessary to provide cost effective treatment. Some of the new diagnostic tests will, while expensive to establish, produce a need for profitable after test treatments. In these cases the tests could become effective loss leaders that generate profitable business. In the 1980’s hospitals began free cholesterol screening knowing that it would increase the number of heart surgeries and thus revenue that would more than compensate for the marketing and program costs associated with the free tests. Whole body scans could prove viable in this patient acquisition model.

As marketable tests for more and more diseases become available, the government, employers, and health insurance providers will confront the economic reality that the additional tests result in increased care and rising costs, and the debate over health care rationing will grow more strident. However the health system’s ability to create costs and the private and public sectors inability to pay determines the ultimate outcome. The more that rationing of some procedures becomes acceptable the more acceptable the rationing of others will become.

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  1. Mike, I think the body scan case you bring up is an example of the more general issue of the influences of a burgeoning health care industry—called elsewhere the “medical industrial complex”—offering a cornucopia of new testing technologies which may only offer marginal benefit—or even incur additional risk—but which are proffered to a market of ill people as additional hope whether they are worried well or worried sick. Sick people and their families are not, in my view, able to make “rational” cost-benefit decisions under the circumstances of a pressing illness. And the decision process has gotten more complex as the system has moved from presumably benevolent physician authorities to health care plans, etc. Doesn’t seem to me to be too different than a more developed example, the pharmaceutical market.

    The other question you ask, what’s the Society’s role in these things, is a good one. It seems to me we are not mature, if you will, as an advocacy organization. We’re pretty new at this. As a 30-year employee I’m hear to testify that the very word “advocacy” was a dirty word when I started. I’m amazed at the degree to which we have swung in that direction, especially in the last 10 years. The tobacco industry changed our outlook.

    But what I don’t see yet is a set of specific public policy goals to deal with concerns we have like disparity, the uninsured, Medicare drug benefits, etc. (Maybe I haven’t been paying enough attention.) It appears to me “the system” of laws, regulations is the only way to have significant impact on the marketplace. I can’t imagine our having much impact on the market through education or persuasion of consumers or suppliers.

    Maybe I’m just not aware of what our overall vision is for the health care “system”—if you dare call it that. As I’ve said before, I’d love to see us sit down with a relatively politically neutral group of advocacy agencies and try to come to some consensus about a vision for the future that benefits many interests and is as free as possible of the financial interests and political ideologies that deadlock our system now.