Lowering the Cost of Ultrasound Equipment Through Digitalization
The ultrasound unit has been an important piece of diagnostic equipment in hospitals for some time. Ultrasound units use the physics of sound to produce images of soft tissues in the human body. They can produce detailed three-dimensional color images of organs and, by using contrast agents, track the flow of fluids through an organ. A cardiologist, for example, can use an ultrasound in combination with contrast agents injected into the bloodstream to track the flow of blood through a beating heart. In additional to the visual diagnosis, ultrasound also produces an array of quantitative diagnostic information of great value to physicians. Modern ultrasound units are sophisticated instruments that cost around $250,000 to $300,000 each for a top-line model. They are fairly bulky instruments, weighing some 300 pounds, and are wheeled around hospitals on carts. A few years back, a group of researchers at ATL, one of the leading ultrasound companies, came up with an idea for reducing the size and cost of a basic unit. They theorized that it might be possible to replace up to 80% of the solid circuits in an ultrasound unit with software, in the process significantly shrinking the size and reducing the weight of machines and thereby producing portable ultrasound units. Moreover, by digitalizing much of the ultrasound (replacing hardware with software), they could considerably drive down the marginal costs of making additional units and would thus be able to make a good profit at much lower price points. The researchers reasoned that a portable and inexpensive ultrasound unit would find market opportunities in totally new niches. For example, a small, inexpensive ultrasound unit could be placed in an ambulance or carried into battle by an army medic, or purchased by family physicians for use in their offices. Although they realized that it would be some time, perhaps decades, before such small, inexpensive machines could attain the image quality and diagnostic sophistication of top-of-the-line machines, they saw the opportunity in terms of creating market niches that previously could not be served by ultrasound companies because of the high costs and bulk of the product. The researchers ultimately became a project team within ATL and were then spun out of ATL as an entirely new company, SonoSite. In late 1999, they introduced their first portable product, weighing just six pounds and costing around $25,000. SonoSite targeted niches that full-sized ultrasound products could not reach: ambulatory care and foreign markets that could not afford the more expensive equipment. In 2005, the company sold $150 million worth of its product. In the long run, SonoSite plans to build more features and greater image quality into the small hand-held machines, primarily by improving the software. This could allow the units to penetrate U.S. hospital markets that currently purchase the established technology, much as client server systems based on PC technology came to replace mainframes for some functions in business corporations.