PACS executives offer market update, glimpse into future

In the first of a three-part series, these executives discuss the current state of the PACS market, the PACS purchasing process, the proliferation of PACS to small and mid-sized hospitals, and the introduction of application service provider (ASP) models.

For the remaining two installments, visit our PACS Digital Community on Tuesday, February 20 and Wednesday, February 21. We’ll also be holding the first in our series of live chat sessions with roundtable participants on Friday, February 23. From noon to 2:00 p.m. (U.S.) Central Standard Time, Vishal Wanchoo from GE Medical Systems Information Technologies will be online to answer your questions. We'll be chatting with other vendor representatives in the next few weeks, so be sure to stop by!

By Erik L. Ridley
AuntMinnie.com staff writer
February 19, 2001

AuntMinnie.com: What is the current state of the PACS market? What are the key trends driving or limiting its growth?

Douglas Tucker, Agfa: The market still has a fairly low amount of penetration, 15% to 20%, so there’s still lots of opportunity out there in the marketplace. Clearly we’re seeing that within radiology, PACS is being adopted as a way to increase business both now and in the future. There are always purchasing dollars available out there for that kind of investment. Technically, systems are becoming less risky.

One of the limiting factors for PACS is people, specifically IT personnel. PACS tend to be very knowledge-intensive systems to implement. While the Web does a great job at bringing knowledge around, PACS still requires a lot of specialized experience to operate and maintain, and that is very hard to come by today.

Caren Mason, eMed: The PACS market is in a growth phase. There are fewer radiologists today reading more imaging exams than ever before. They need ways to speed up the process of handling images. Also, radiology groups or departments are servicing broadening geographic regions. They need a faster and simpler means to communicate between facilities. As a result, the demand for teleradiology and wide-area network PACS is growing.

In addition, radiology practices face growing competition, not only from their own discipline, but also from other specialties such as orthopedics. Radiologists need to outservice their competition. But just as important, radiology must make it faster and easier for specialists to get the information they need. Networks and Web access can provide an answer to these challenges

As far as limiting factors, the cost of PACS, including life cycle and obsolescence costs, remain inhibiting forces. In addition, there needs to be more confidence that these technological solutions really work and can begin to make a difference for a healthcare organization in a short time frame. PACS needs to be simpler to use, install, and administer.

Vishal Wanchoo, GE: It’s a very healthy market, and it’s a global phenomenon. We’re seeing huge market growth, not just in the Americas, but also in Europe and Asia. The marketplace is convinced that PACS is the way to go.

The integration of information throughout the enterprise is a driving force in the market, allowing access to laboratory results and other pieces of clinical information. PACS is a technology that works; it’s no longer a hobby, it’s a tool for increasing productivity and lowering costs.

A big focus for our customers is how to reach out to the enterprise -- to the thousands of physicians that need radiology imaging data. Today almost every implementation that we do touches the enterprise in some form. We’re also having to provide the right solution for the image-viewing needs of referring specialties such as neurosurgeons and orthopedic surgeons.

Richard Hullihen, Marconi: It’s vigorous, and the purchasing activity seems to be going on across all segments of the market, not just in big hospitals. Manufacturers are now able to deploy solutions that meet customer expectations in a more well-rounded way; the systems are actually doing the things we’ve been telling people they would do with respect to productivity and costs.

This growth is being facilitated by the emergence of standards such as DICOM and IHE (Integrating the Healthcare Enterprise) for interoperability, as well as the participation of the information systems companies in helping to make it happen. Also, the PACS industry, even more so than medical imaging itself, gets to ride the technology wave associated with the overall information technology industry.

Rik Primo, Siemens: The PACS market continues to consistently show healthy two-digit growth. Existing PACS sites are expanding their departmental systems to enterprise-wide systems. In addition, community hospitals and imaging centers feel the need to improve efficiency in the radiology department and distribute images and reports electronically in and outside the hospital. PACS is also seen as the instrument to integrate imaging departments with related tertiary-care facilities.

Inhibiting factors are mainly financial issues. Two years ago there were still significant technical challenges and acceptance issues, but these are mostly gone.

AuntMinnie.com: How has the PACS purchasing process changed over the last few years? Is cost-justification still a challenging issue? What implementation trends are taking place (i.e. more interest in large-scale, enterprise-wide digital image management)?

Tucker, Agfa: We’re seeing a healthy mix of both large and small healthcare institutions interested in buying PACS. One of the biggest challenges, however, in converting to a filmless environment is how to handle enterprise distribution and access to images and reports. Therefore, we’re still seeing a large number of customers who want to start small, but are very interested in the scalability and reliability of the system for future enhancements.

In a related trend, we’re seeing what you might call the return of modality miniPACS. Customers are finding PACS easy to cost-justify for connecting a couple of modalites.

Of course, we’re also seeing interest in integrating multiple radiology departments and hospitals within an integrated healthcare network (IHN). These customers want to consolidate those resources, and also use PACS to integrate other clinical departments with radiology.

Mason, eMed: Large-scale PACS purchases consistently follow a long and arduous sales cycle including RFPs, site visits, and committee decision-making. There is a growing trend towards CFOs and CIOs carrying more influence in the buying decision than radiologists. Purchasing decisions are increasingly based upon ROI, expected variable cost reduction, and expected productivity gains. Implementation is becoming far more phased in order to meet with budget constraints and to mitigate risk.

Gary Larson, Kodak: PACS purchases are not as purely radiology-driven as they were in the past, although it still is handled that way at some institutions. As PACS systems have matured into enterprise-wide image and information workflow tools, this decision is being shared by the Information Systems group as well as the broader healthcare provider community -- referring clinicians, specialists, and the like. So, more and more we are seeing radiology playing a key role as a participant in the decision, often holding "veto power" but without full authority.

Cost-justification remains a large challenge. While many industry participants have studied and attempted to quantify some of the more obvious cost savings (such as reduction of manpower and film usage costs), understanding and quantifying the value of the improved service to the customers of radiology, the ultimate patient care providers, is still quite immature.

Perhaps one of the most difficult benefits of PACS to quantify is the improved service to radiology’s customers. What is the true value of a one-day reduction in report turnaround time that provides a more rapid path toward patient treatment and a reduction in hospital stay? What is the value of a reduction in lost prior films? These are some of the burning questions which, when answered, will help all of the players in the industry better understand the true value of automated, digital image and information management systems.

Hullihen, Marconi: The overall knowledge base in the customer world has been rising over time, and that’s decidedly good news. We’re finding customers who are comfortable and confident in their own capabilities for assessing technology-based proposals as solutions for their requirements. There is also still a segment of the market that is pursuing PACS in a more classic IT way, however, with RFIs, RFPs, and consultants.

Quite a few people choose a phased approach. They’ll step into a solution deployment by choosing individual modalities and/or parts of their department that are already mostly digital. The tradeoff there is that the time to realized cost savings gets stretched out compared with, say, a site that says 'we think we understand how this works pretty well, and we’re going to do a department-wide deployment right away.'

We see a mixed bag of implementation approaches, often depending on the vision of the department leaders. All of these projects have internal champions, and the implementation type is often driven by the vision and energy level of the internal champion.

AuntMinnie.com: How successfully have small and mid-sized hospitals adopted digital image management? How important is the introduction of ASP models to this sector, as well as for the PACS market in general?

Mason, eMed: Small and mid-size hospitals have not adopted digital image management much beyond teleradiology. If we take the "purest" meaning of ASP, meaning the rental of application services from a data center on a pay-per-use basis, then I do not see ASP models being of importance to this sector. Rather, this market requires a turnkey solution that takes care of all the application requirements, including software and hardware. This solution should also include support for IS problems such as network design, network installation, system administration, maintenance, application and security management, and up-time guarantees.

ASP models are based on economy of scale; you share the cost of software and hardware across multiple users. Radiology image management is too on-site-application-heavy, however, requiring specialty hardware on-site such as image acquisition equipment, high-resolution monitors, high-end workstations for reading and clinical review, bar code readers, etc. Hence, pure ASP models will not play an important role in the PACS market in general.

Wanchoo, GE: A lot of the growth is coming from the community hospitals. In the last three years, PACS has certainly moved way beyond the academic metropolitan centers and the integrated delivery systems. We’ve had very small implementations, including customers with as few as 70,000 to 80,000 annual imaging procedures.

Clearly, though, there’s a market (around 40,000 procedures or less) that has been unserved. They're really needing the efficiency of PACS, and that’s where the ASP comes in. We’re seeing huge interest in deploying ASP-type solutions, whether it’s ASP-type financing or archiving off-site from this market segment.

That ASP solution is also being discussed at larger hospitals as well, where it’s a very cost-effective model for moving your long-term storage and disaster recovery off-site.

Larson, Kodak: Interest in ASPs is clearly high, judging by the high level of discourse in the press and at trade shows, although as we all know, the ultimate value proposition of this model is uncertain. From an economic perspective, one of the biggest impediments is the high cost of the bandwidth necessary to fully enable an image-intensive PACS system over the wide-area network. Nevertheless, with all the potential attraction this model provides, including reduced capital investment, technology obsolescence protection and ease of deployment and support, ASP’s will ultimately be accepted.

Right now, I believe the most prudent approach for the PACS and RIS industry is to provide a variety of ASP approaches. It is quite likely that the ultimate optimal model will be a hybrid solution, consisting of on-site enterprise PACS components such as near-term storage, workflow servers and primary diagnostic display, with remote ASP image distribution and multisite "image brokering," as well as deep archiving. More exploration still needs to be done before these issues will be understood well enough for general acceptance of ASP models.

Milan diPierro, Philips: Small to mid-size hospitals represent probably the fastest growing sector in the PACS market. As the early adopters (i.e. university and government institutions) continue to validate both the hard and soft cost savings of a PACS, the technology is becoming readily accepted by other sectors of the market.

ASP models for PACS are certainly an attractive concept for all sectors of the market. However, significant education and investigation is needed before a "true" ASP model for PACS will become widespread. In a true ASP model, all PACS components (i.e. the application software, storage, and database management) are housed off-site and are accessed using Internet technology. The customer pays for access on a per-click, per-megabyte, or per-exam basis. A number of performance, image quality, and security issues need to be addressed before a true ASP model will work for PACS.

Many customers are, however, getting their feet wet with ASP concepts by engaging in SSP implementations. An SSP (Storage Service Provider) allows for the majority of the PACS components to be on-site, with archiving (and possibly disaster recovery storage) located offsite.

Primo, Siemens: Eventually policy makers at these institutions will have to face the fact that quality healthcare cannot be delivered in a cost effective way without a massive, long-overdue, infusion of IT. ASPs may be a way to get there without massive investments in a large staff of in-house, skilled, hard-to-find IT workers.

IT has to be part of the enterprise strategy and the resource planning. In-house or ASP? Both may work, but the strategy needs to be defined first. ASP will be a key facilitator, however, for the proliferation of PACS in small and mid-size hospitals. These hospitals face substantial challenges in having access to the necessary capital outlays, and have scarce resources in skilled IT staff. ASP is addressing all of these issues.