INNOBLOG

In a recent article ("More Doctors Turning to the Business of Beauty), the New York Times illustrated how physicians not trained as dermatologists are increasingly adding cosmetic procedures to their service offerings. Botox and Resylane injections, hair transplants, and vein removal are just some of the procedures moving into the medical mainstream. This process is symptomatic of a larger trend medical procedures are steadily moving from more specialized to more general practitioners. Why is this occurring? The proximate cause is that family doctors can be relatively poorly compensated compared to scarce specialists, and moreover they are being squeezed by health insurers (including Medicare) who are seeking to contain the spiraling cost of healthcare provision. At a higher level of abstraction, three phenomena are coinciding. First, lower-end providers almost always try to move upmarket. Low cost airlines are now flying all business class flights from New York to London. Wal-Mart is carrying organic groceries. It is inexorable business logic that the high-end will always be attacked, and insurers as well as physician groups are increasingly amenable to seeing this happen with medical procedures. From angioplasty enabling cardiologists to compete with thoracic surgeons, to your family doctor applying a bit of Botox, the medical professions are not immune from low-end disruptive threats. Second, service provision can move to non-specialists because it is becoming de-skilled. One advantage of a robust industry supplying drugs and medical devices is that these firms will compete to make their products easy to administer. In doing so, they can expand the market considerably, as downstreaming service delivery allows patients to consume treatment from providers they trust and are already visiting. Last, the locus of profitability in the value chain of medical care may be evolving, as it does in other industries (think of IBM outsourcing its PC operating systems to Microsoft because historically little money was made there). Revenue is concentrating at the link of the value chain which is still not "good enough for customers. As care provision becomes less risky, that link is increasingly not at the specialist level where highly-trained physicians can ensure effective treatment. Rather, it is at the level of patient convenience and trust these are buying criteria that are almost never "good enough. Care providers would do well to focus on winning in this way. The proliferation of new and simple services they can provide, from Botox to automated nerve tests, pave the way to create a deeper relationship with their patients.