Abstract
There are many stakeholders in the vascular marketplace from clinicians to hospitals, third party payers, medical device manufacturers and the government. Economic stress, threats of policy reform and changing health-care delivery are adding to the challenges faced by vascular surgeons. Use of Porter's Five Forces analysis to identify the sources of competition, the strength and likelihood of that competition existing, and barriers to competition that affect vascular surgery will help our specialty understand both the strength of our current competition and the strength of a position that our specialty will need to move to. By understanding the nature of the Porter's Five Forces as it applies to vascular surgery, and by appreciating their relative importance, our society would be in a stronger position to defend itself against threats and perhaps influence the forces with a long-term strategy. Porter's generic strategies attempt to create effective links for business with customers and suppliers and create barriers to new entrants and substitute products. It brings an initial perspective that is convenient to adapt to vascular surgery in order to reveal opportunities. Vascular surgery is uniquely situated to pursue both a differentiation and high value leadership strategy.
Keywords
Introduction
Up to a decade ago, vascular surgeons were the primary care-givers for patients with vascular disorders. The economics of care of patients with vascular disease has changed and vascular programs have been shown to be profitable to their health systems. 1 Although only 15% of peripheral vascular disease patients require an intervention, over one million inpatient vascular cases were performed in 2008 and this is extrapolated to rise by another 72% by 2030. 2 Catheter-based and open vascular procedures generate nearly half the revenues produced by cardiac procedures and are equivalent to the revenues generated by the cardiac catheterization labs or by open heart procedures. 1 This relatively attractive reimbursement margin for vascular procedures combined with the increasing need for interventions based on the aging of the American population and the shift to catheter-based revascularizations 3 are extremely compelling and as a consequence vascular surgeons are facing competition from a variety of specialists.
Taking care of patients with vascular disease is not and should not be a business. However, given the increased competition for our patient base from other specialties, it may be a worthwhile exercise for our specialty to develop our strategic plan as a business would. Using business models as guides could provide the framework to help us develop insight into our identity and shed light on how outside forces influence our specialty. 4 In 1979, Michael Porter 5 , a Harvard Economist, first published his ideas on how industries could gain a competitive advantage by developing a competitive strategy that recognizes the interaction of five different forces acting on a business. He defined the key forces that drive competition as rivalry among existing competitors, the threat of new entrants into the market, the power of suppliers, the power of the buyers and the threat of substitute products or services.6,7
The aim of this paper was to examine the factors affecting the competition in vascular surgery using Porter's Five Forces Model of Industry analysis. 8 It is a simple but powerful model that I attempt to adapt to analyze our specialty's competitive position within the health-care environment. Based on this competitive analysis, I then utilized Porter's generic strategies 6 as a tool to guide competitive management and marketing strategies that the vascular surgery community might pursue.
Porter's Five Forces Model adapted for vascular surgery
Figure 1 depicts the vascular surgery domain within Porter's Five Forces Model.
Porter's Five Forces Model adapted for vascular surgery. Porter identified five key forces that drive competition – competitive rivalry, threat of new entry, bargaining power of buyers, threat of substitution and supplier power. VS, vascular surgery; IR, interventional radiology; CT, cardiothoracic surgery; GS, general surgery; PA, physician assistants; RN, registered nurses; ED, emergency department staff
Competitive rivalry refers to the strength and the intensity of competition. The main factors that tend to increase rivalry among specialty competitors are the number of rivals, the balance between rivals, the level of differentiation between rivals, culturally diversity, brand identity and informational/procedural complexity. For vascular surgery, interventional radiology (IR) and cardiology are currently our closest rivals in the market. More than a decade ago, IR had revolutionized vascular care with endovascular-based treatments but vascular surgeons and cardiologists began to learn the skills and took advantage of their long-term health-care relationships with their patients to draw the business back. There are approximately 3500 interventional radiologists, 9 but IR appears to be rapidly losing market share while cardiology is steadily increasing their numbers.10,11 Invasive cardiologists represent the real threat because the transferability of their technical skills makes endovascular therapy a natural extension of their practice. They also have the advantage that their cardiac patients invariably have peripheral vascular co-morbidities and they are able to leverage their training relationships with the primary care physicians, hospitalists and emergency room physicians.
While cardiac surgeons have not been significant rivals over the past decade, the decrease in open cardiac cases has forced a re-appraisal of the specialty to intervene on more peripheral vascular procedures and realign the training programs towards endovascular repair of thoracic aortas and cardiac valves. They have instituted integrated cardiac surgery residency programs that mirror the vascular surgery training paradigm and have placed emphasis on interventional and endovascular techniques. The cardiac surgeons represent an insidious threat because they are currently regarded as aligned with our discipline but have the capacity to be competitive rivals in the near future. General surgeons still do the majority of vascular open cases in the USA12,13 but as the endovascular market grows this niche will diminish except in the more rural locations. The growing trend for specialization in general surgery in combination with the implementation of a general surgery curriculum outcome that diminishes the expectation for general surgeons to provide comprehensive management of vascular disease 14 will also diminish the likelihood that the future generation of general surgeons will be performing vascular procedures.
Threat of new entry refers to the ease with which new competitors can make inroads into the vascular market. New disciplines, such as invasive nephrology 15 and neurology, 16 are entering the field paved by the trailblazing of cardiology. However, at the minimum, vascular disease management requires both access to the patients and surgical or endovascular interventional skill sets. Cardiology, for example, was able to overcome the entry barrier because of its long-term relationship with patients with heart disease and the low differentiation of skills required for coronary artery interventions compared with peripheral vascular disease. For the newer medical specialties, such as nephrology and neurology, there is the realization that they already have long-term relationships with patients when dealing with the medical management of their target end-organ and this facilitates the transition towards the incorporation of interventions into their practice. Since the procedures they are likely to perform are more focused in scope, less time and rigor in training to perform these interventions, especially endovascular, is required. However, other entry barriers, such as capital requirements, economies of scale, switching cost incurred by re-training and re-differentiation and government policies play significantly into the decision. Although the entry barriers are high, based on our recent analysis of workforce, 17 vascular surgery is woefully understaffed, especially in the rural areas and this presents a serious threat to our specialty and an opportunity for our current and future rivals.
Vascular medicine is a relatively new entrant but is gaining more traction with more than 875 physicians certified in this specialty. 18 The threat to vascular surgery is that these specialists will slowly become the acknowledged ‘expert’ in peripheral vascular disease by taking the lead through vascular research, clinical trials management and non-invasive diagnostic laboratory directorship. Vascular medicine addresses the demand for the management of increasing numbers of vascular patients while relieving the burden for the primary care practitioners, cardiologists and even vascular surgeons. They generate their own referrals and make ‘objective’ determinations as to appropriateness of various interventions. More importantly, they get to decide which specialist will perform the procedure.
Bargaining power of buyers refers to the power of patients or their surrogates in deciding which conditions should be treated and which specialist will treat them. In this context the patient surrogates may be identified as the federal government, health and regulatory authorities, managed care organizations and employers that make medical payments on behalf of the patient.
The impact of government bureaucrats and third-party intermediaries, who mandate how doctors practice and document care is increasingly burdensome. The dysfunctional and increasingly expensive nature of our health-care system creates a continuing reappraisal of different methods to pay for medical services that adds to the confusion and threatens our specialty. These ‘buyers’ not only impact the competitive rivalry between specialists but on the other forces of new entrants and suppliers.
Threat of substitution refers to the extent to which different products or services can be used in place of the vascular services we offer and the cost of the switch. If the patients incur low cost to substitute product or services, the threat of substitution will be very high. If substitution is not easy, this strengthens our specialty's power. For vascular surgery, two big threats are advanced vascular imaging technology and advances in the medical management and prevention of vascular disease.
Advances in use of CT scans, magnetic resonance imaging, and ultrasounds with contrast for vascular imaging have seen a tremendous growth spurt and the need for conventional angiography is decreasing and will reduce diagnostic arteriograms for vascular surgeons. Proliferation of advanced imaging centers has already occurred but is not all bad since the forecast is for an increase in the volume of detected vascular disease because of the ease of screening. 19 This increase, however, is only beneficial to the vascular surgeon if we are the primary recipients of this largesse.
A bigger threat for expansion of volume is improvement in the medical management of atherosclerotic risk factors and vulnerable plaques. For example, several randomized controlled trials are being conducted to demonstrate whether best medical care provides better outcomes for patients with carotid stenoses. 20 This will significantly impact the number of interventions and, with the shift towards endovascular treatment, will especially affect open vascular surgery. A similar scenario would unfold with continued advances in scientific discovery on the pathogenesis of atherosclerosis and plaque stabilization. The development of effective medications and treatments would significantly erode the necessity for vascular interventions21,22 and would be magnified by the emergence of the vascular medicine specialists as discussed above.
Supplier power for vascular surgery, in its broadest sense, applies to different entities that provide us with products, patients or resources. Medical device companies have had a longstanding significant influence in the field of vascular disease. With the explosion of the endovascular era, a broad and diverse array of imaging equipment, catheters, balloons, stents, stent-grafts, plaque busting tools and even sensors have increased the power of these suppliers. If the supplier can change the price of products and drive up prices easily, they have power. Medical companies alter practice by influencing the training of specialists in the new technology or by selection of sites for clinical trials.
There is also a reciprocal influence of vascular specialists on the device companies as they determine device pricing and marketing. Device companies employ large sales forces that are active in interacting with vascular specialists and trainees to demonstrate their products and/or seek traction with new innovations or suggestions for improvements. However, relationships between the medical profession and industry can unintentionally and unconsciously insert commercial bias and influence the treatment of vascular patients. 23
Referring physicians and hospitals ‘supply’ patients and have power because they have built up switching costs and provide benefits through geographic proximity and familiarity with the patients. Vascular surgeons rely on collegial relationships with referring physicians such as primary care providers and podiatrists and in-hospital staff, such as the emergency physicians and hospitalists, to maintain the stream of consultations for vascular services. Interactions with these service providers are variable and dependent on the capabilities of the vascular surgeon as well as the institutional policies.
The role of the hospital as the ‘supplier’ for vascular specialists cannot be underestimated. Hospital profits for vascular procedures are high. The manner by which administration allocates resources, such as cutting edge technology, hybrid rooms or facilitates interaction among competing specialties through revenue sharing multidisciplinary service lines greatly influence the vascular environment. Vascular cases cumulatively account for a large number of procedures, especially when including outpatient volumes.1,17 Hospital's role as supplier is critical since it is necessary to continue investing in sufficient and updated infrastructure for vascular services and ensure accreditation of laboratories and technicians. Equipment and training enhancements are needed to keep up with advances in peripheral procedures and new devices in order to maintain growth.
Porter generic strategies adapted for vascular surgery
Having examined the forces shaping our specialty, we are better equipped to focus on the factors that are driving competition in our field. We begin to understand what our current or future competitors are likely to do and we can start to plan on how best to respond and posture ourselves to achieve and sustain a competitive advantage. The management literature is full of strategies for businesses to pursue 4 but Porter's generic strategies have been the dominant prototype and a reliable place to start strategizing. 6
Application of Porter's generic strategies require vascular surgery to perform a self-examination of our strengths based on an analysis using the Five Forces Model and pick the most appropriate primary strategy of either differentiation, least cost (greater value) or focus (Figure 2). Most business analysts recommend that the key initial strategic decision that needs to be answered is whether the business will have a broad or narrow focus. For vascular surgeons this means that we would have to determine the scope of the markets that we choose to serve. Once this is decided we can concentrate on how we would compete in the selected markets by either a differentiation or value leadership strategy.
Porter's generic strategies adapted for vascular surgery
Focus strategy
Vascular surgery can focus services on a broad-based patient target, thereby covering most of the marketplace (like cardiology), or we can choose a narrow target, e.g. Open vascular surgery, where there is the least amount of competition (like cardiac surgery). The downside of the focus strategy for vascular surgery is that the niche characteristically is small, and may get smaller with the advancement of endovascular technology, and may not be significant or large enough to sustain our specialty. There is even the danger that the niche may disappear over time, as the business environment and patient preferences change over time. It is evident that given the forces around us, for vascular surgery to exist, let alone to at least maintain or even expand, we need to oversee the broadest view of the vascular marketplace. The size of the total market is significant from the revenue potential aspect and we have the capability to provide the specialized services that the patients in the broad market need and want.
Differentiation strategy
In the broad vascular marketplace, how do we separate ourselves from what cardiologists, radiologists and other rivals do? With a differentiation strategy, vascular surgery would strive to be the provider of choice for vascular disease based on access, availability, long-term continuity of care and superior quality. For the past 30 years we have gained the confidence of outpatients and referring physicians by diagnosing and managing vascular disease, both medically and surgically. In the endovascular era we continue this tradition of providing longitudinal care. Endovascular aneurysm repair patients require lifetime surveillance, carotid surgery patients develop re-stenosis and have bilateral disease, while patients with lower extremity disease not infrequently have progression of disease or intervention failures. We manage vascular laboratories, maintain databases, monitor quality and safety and manage the pre-eminent journal in the field. 24 We are distinct from than our competitors!
Quality should be our biggest distinguishing feature compared with our rivals. Greater transparency of results directs patients and referring physicians to interventionalists with better processes and outcomes. As a specialty, we have done a credible job in focusing our attention on quality initiatives and on measurement and publication of outcomes. We need to continue this mission and resolve a common purpose in determining additional clinical and service measures that should be monitored.
Central to this differentiation strategy is that this approach will appeal to a broad section of the market but there is always the danger that the innovation that gives us a competitive advantage will be copied in one form or another by our rivals. This is not necessarily a down side since it is hard to argue against improved quality and safety for vascular interventions independent of the identity of the operator. However, employing a differentiation strategy could incur extra cost, such as spending for lobbying, political action committees, advertising, creation of the Patient Safety Organization, to promote a differentiated brand image of vascular surgery. Our society needs to be careful to gauge if the extra costs entailed in differentiating can actually be recovered by growth, or at the minimum maintenance, of our patient base.
Value leadership strategy
In the case of our medical specialty, it may be more appropriate to think in terms of providing a better ‘value’, rather than least cost in competing for vascular patients. Value for patients translates to obtaining the best health outcomes per unit cost of delivery. Interestingly, the emphasis on value leadership in this sense can act as a form of differentiation. The specialty company with the highest value would be the most attractive in the market place when the competitors are essentially undifferentiated, and deliver standard value.
We need to better define the clinical value we bring to our patients and procedures since there is no correlation between dollars spent and outcomes. 25 A recent report has demonstrated that despite treating younger patients with less severe peripheral vascular disease, cardiologists used significantly greater hospital resources. 26 We need to articulate to our patients and referring physicians (suppliers) that we are also better than cardiologists and IR in providing value because we maximize our health outcomes by being able to provide the best evidence-based treatment since we are capable of performing all options. We understand the natural history of the disease process and the natural history and outcomes of both open and endovascular interventions. We reduce cost by choosing procedures with best long-term outcomes (thereby reducing the need for re-interventions). Outcomes should be measured over the long cycle of the care for a vascular condition, such as limb ischemia, not separately for each intervention, e.g. graft or stent patency.
Our specialty needs to continue to emphasize appropriate utilization of services and procedures that we are engaged in. Several reports have clearly demonstrated inappropriate use of indications and technology, especially as it relates to disease involving the carotid and superficial femoral arteries. 27 Exemplary and valid randomized clinical trials, such as CREST and BASIL, have had results interpreted in diverging fashion, exacerbating the problem.28,29 Abiding by appropriate use does not necessarily translate into a volume decline. Improved adherence to guidelines offers the opportunity to grow volumes in areas with latent demand. For example, enhanced screening of high-risk patient increases abdominal aortic aneurysm (AAA) repair by 74% 30 and the management of peripheral vascular disease and venous disease significantly.31,32
Supporting strategies
Once the strategy of differentiation and value leadership is determined, Porter proposed implementation of secondary strategies including, innovation, growth and the forming of alliances. Our society needs to continue to innovate and perhaps re-invent ourselves. We have been successful in transforming ourselves from surgeons to interventionalists capable of handling vascular disease with open procedures as well as endovascular approaches. Vascular surgeons need to be at the forefront with the secondary strategies by experimenting with novel methods to improve the quality, safety and effectiveness of vascular care at a reasonable cost. Among the many areas that merit discussion are the roles of our mission of clinical care, research and training of the next generation of vascular surgeons. For instance, a recent report has predicted a 67% increase in peripheral vascular interventions in outpatient-based setting in the next 10 years compared with only 8% increase in acute care hospital settings. 33 If we recognize this trend and position our specialty appropriately, we stand to benefit significantly but we must have the courage to act.
Scientific research, both basic and clinical, is the principle driver of growth and advances in vascular disease. Our ability to innovate and develop new products and services provide us with a competitive advantage and will be the foundation of our leadership in the field. Our society needs to make this investment. As medical technology advances, the demand for health-care services increases. One needs only look at the impact made by the development of the aortic endograft by Parodi which has enhanced the volume of AAA repairs. 34
We must educate the next generation of vascular surgeons to think critically and creatively and consider the role of our vascular training programs in nurturing the next generation of vascular specialists. Our current training paradigm is especially conducive for success in this dynamic environment. 35 Our trainees need to be exposed to a broad range of open and closed interventions and develop the capacity to view the patient from multiple perspectives. The critical challenge that is still left unanswered is how to significantly increase the numbers of trainees to match the anticipated demands of the future that some reports are already indicating a shortage of 399 by 2030. 17 The workforce analysis clearly demonstrates that vascular surgery is lagging behind cardiologists11,36 and even interventional radiologists 9 in our numbers. Given the attrition rate of older vascular surgeons that is not met by the new trainees 12 we have to seek some alternative solutions.
In many health markets, alliances have been created among different specialists in an attempt to provide 24/7 availability of vascular services. Creation of alliances with competitive rivals or suppliers may provide enough synergy that grows the total program and benefits everyone. Alliance building is a logical strategy to pursue especially in urban areas or large medical centers but there are many barriers. Physicians are skeptical of financial integration. They fear losing revenue to competing specialties. They fear losing patients to colleagues in other specialties. There is, however, good evidence to support that consolidation of care builds expertise and reduction in short-term mortalities that lead to increased utilization in high volume centers.34,37
Conclusion
Economic stress, threats of policy reform and changing health-care delivery are adding to the challenges faced by vascular surgeons. Vascular surgery in the USA has achieved primary certification under the American Board of Surgery. While this is a big step forward for the specialty, we are not completely free to determine our own future if we had gained independent certification as recently achieved in the UK. 38 Use of Porter's Five Forces analysis to identify the sources of competition, the strength and likelihood of that competition existing, and barriers to competition that affect vascular surgery will help our specialty understand both the strength of our current competition and the strength of a position that our specialty will need to move to. It helps us determine whether we can build barriers to prevent another specialty from entering our marketplace or build up value leadership that would make it difficult for a patient or their surrogate to utilize another specialist.
According to Porter, it is imperative that a business decides whether to pursue a differentiation or value leadership strategy. Otherwise, there is a danger that it gets ‘stuck in the middle’. This happens when businesses try to implement both strategies, i.e. low cost and unique differentiation. These businesses have no clear strategy and are attempting to be everything to everyone. However, medicine should not necessarily be run exclusively as a business, since it is clear that in reality there are some shades of grey in the distinction between differentiation and value, compared with the black and white that is projected in theory. Vascular surgery is uniquely situated to pursue both a differentiation and high value leadership strategy.