Real Options in Diagnostic Radiology
Richard HellerAs radiologists, we work in the options trade without even realizing it. Every day, we help clinicians make the best decisions by providing them with opportunities termed real options. These options are analogous to their financial counterparts, such as options on stocks. For example, when you buy a stock option, you have bought the right (but not the obligation) to purchase the stock later, at a preset price. If you think that a stock’s price is going to double from $5 to $10 per share, you could buy the stock itself at $5—or (for a fee) you could purchase just the option to buy the stock later, at perhaps $7 per share. If the stock’s price per share then rose to $10, you would buy it at $7 and gain $3 per share (less the small fee you paid for the option). If the stock’s price went down to $2, however, you wouldn’t exercise the option. You would lose your fee, but if you had bought the stock, you would have lost much more: $3 per share. Real options also provide a nonobligatory right to undertake an initiative later. Instead of building an expensive plant now, a company could use real options: Wait six months and perform research on market trends. In six months it would have still have the opportunity, or right, to build the plant, but not the obligation. If research indicates that the plant is a poor investment, the company would have avoided significant losses. For real options to have value, two criteria must be met. First, the decision to be made is irreversible (you can’t unbuild the plant). Second, delaying the decision is feasible. If both of these criteria are met, then real options are likely to have value. Many of the decisions that we make in medicine meet both of these criteria. For example, a surgeon might think that a patient has a renal-cell carcinoma, based on clinical findings, and wish to take the patient to the operating room. Surgery is the initiative, and it meets both criteria for real options. It is irreversible, even if nothing but exploration is done. The other criterion (possibility of delay) also is present. While timely surgery is prudent, immediate exploration is unnecessary. Instead, the patient could be examined using CT or MRI. Imaging provides the surgeon with real options: the right (but not the obligation) to go to the operating room after imaging. If the imaging exam is negative—or shows pathology not requiring an operation—surgery can be avoided. Protocols and Algorithms If this example seems obvious, it’s because we deal in real options every day. What is the use, then, of thinking about options, if we already understand them? There are at least two ways that thinking about real options, in a formal way, can be useful. The first is to help us understand why clinicians order certain exams; studies that provide more useful options to referring clinicians have greater value. Specifically, studies that can also diagnose alternative pathology are more useful than exams that provide only a single answer. In the diagnosis of pulmonary embolism, for example, both CT and ventilation/perfusion scans provide reliable and important information, but CT has largely taken over the role that ventilation/perfusion scans once dominated. Is it because CT exams are more accurate? That has been a point of controversy, but real options help explain why CT has become the leader in pulmonary-embolism diagnosis. With a CT exam, you get the yes/no answer to the question of pulmonary embolism’s presence, but you also get other information that aids the clinician. Is there pneumonia or an aortic dissection? The second reason that it can be helpful to think of real options is that they influence the design of exam protocols and imaging algorithms. The value that we (as radiologists) provide is in the form of information. That information gives our referring clinicians the opportunity to make the best decisions for their patients’ care. When designing exam protocols and imaging algorithms, we should maximize the options that the exams provide the clinicians. This can involve optimizing an individual exam to provide the greatest number of potential diagnoses. At our hospitals, we administer both intravenous and enteric contrast for appendicitis CT exams. We wish to offer our clinicians the maximum number of reliable diagnoses from a single exam. In addition, it is extremely useful to think about how imaging exams reduce the cost, discomfort, and side effects of other exams. This is particularly true in pediatric radiology. For example, we routinely do ultrasound if there is a clinical suspicion of intussusception. If the ultrasound exam’s result is negative, we will have avoided the radiation exposure and discomfort associated with a reduction enema, and we might also find an alternative explanation for the child’s symptoms. The greater the uncertainty about the value of an initiative, the greater the importance of real options. If a surgeon were completely sure that a patient had appendicitis, he or she would go straight to the operating room. The more unsure that a clinician is of the diagnosis, the more important imaging becomes. In the same way that delaying the construction of a manufacturing plant while performing market research provides an option, delaying exploratory surgery while performing imaging provides an option. The next time that you are thinking about which exam to recommend, remember that we’re in the real-options business. Exams that provide more options provide more value. Your clinicians will thank you, and your patients will benefit. Richard Heller III, MD, MBA, a partner with Radiology Imaging Consultants, is the chief of pediatric radiology at Advocate Hope Children’s Hospital and Advocate Christ Medical Center, Oak Lawn, Illinois.