Three friends had recently completed their degrees from a major Midwestern University. Two had received MBAs and

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Three friends had recently completed their degrees from a major Midwestern University. Two had received MBAs and one had a Master's degree in Health Administration and served an internship in a large health system at Abbott Northwestern in Minneapolis. The business students had also done summer internships; one at Medtronic and the second on the West Coast at Google. After turning down several job offers, they decided they wanted to be their own business owners. After some discussion, the group decided to pursue the idea of establishing a chain of whole-body scanning centers.

As an initial step, the group decided they needed to consider several factors in the market, as this venture would require significant capital expenditure. Although, they believed, as with any such roll-out, the ideal way to approach such a venture would be through a franchising model. As a first step, Ahmed Bulabaid, one of the students, offered to the group that it would be worthwhile to meet with his father, who was a venture capital partner whose firm did some investments in new start-ups in healthcare. At a dinner meeting the following week, Ahmed's father said, "This is an interesting idea, for sure. I admire that you want to strike out on your own, but how many other competitors are there in this industry? Is this segment of the business on the growth curve? How will your centers be different from existing players? It will require some capital. I am not raising any questions that you don't already know, but any VC will ask you these questions right at the start when you present your business plan."

The Whole Body Scanning Market

The interest in whole-body scanning had a major boost in 2000 when Oprah Winfrey had a whole-body scan on national television. By the next year, there were 88 scanning centers in 21 states, and by 2003 their number had grown to 161 centers in 31 states. California had the most centers with 44. These centers are walk-in facilities that require no physician referrals.^[1] The FDA stated that it knew of no data confirming that whole-body scans are needed.

The scanning market boomed in the early parts of the last decade, with direct marketing to consumers. The price for scans was approximately $1,000. Companies like CT Screening International scanned 25,000 people at 13 centers nationwide. American was another national chain. However, insurance companies refused to reimburse the cost of these scans. Prices of whole-body scans started to fall to as low as $500. Shortly afterward, these national chains shut their doors.^[2] Lack of reimbursement and warnings about getting scans resulted in limited demand.

The Business Opportunity

Ahmed and his two potential business partners, Robert and Susan, were sobered by their due diligence. Yet, as they considered the demise in the early 2000s they reflected on several factors that made them wonder whether the whole body scanning center was a concept whose time was too early for the market. "Was it a high learning product?" Susan asked her two friends. She continued to list off several other points for them to think about. "Consider where we are today. There are several factors that may make this concept more viable now but not then:

We have all these aging boomers—they want to live forever
Today we live in a high deductible/health savings account world—people pay for the service—it just means we need to think of our price point and our break-even point.
The fear of radiation must be countered with the benefit of finding a problem.
The low-dose radiation machines are better today for scanning than they were 15 or 20 years ago."

Robert jumped in as he listened to Susan. "I think Susan has a point. It may have been too early and under the wrong reimbursement environment. And, could we find partners such as national fitness centers that might help reduce our costs?"

"I don't know," said Ahmed, "Is it a fad or a high learning product? I am not sure you have convinced me yet. The external market conditions have certainly changed but that doesn't mean this service is now right."

As you reflect on this scenario, discuss the following:

Can a defined, older target market be more attractive to bring the service back?
Will a new healthcare environment, in which consumers are spending more of their own dollars through health savings accounts and high deductible health plans, make consumers amenable to a well-marketed body scanning center? Would this make individuals more or less likely? What target market would be more likely to spend their health savings dollars in such a center?
Would a partnership with a national fitness center work? Why?
What might be a reasonable price point? Previously, as the case noted, prices fell to $500 before the national centers closed, but that was when third-party payers refused to cover the cost of scans.
Are scanning fears still relevant to consumers today, considering body scanning is done at airports?