Health Data Management
November 2002
Feature
Story
By Greg Gillespie, Managing Editor
Picture archiving and communication systems
have traversed a long and winding road since their introduction in the mid-1980s.
Although PACS have become widespread among the nation’s largest hospitals, the
market penetration growth rate has been relatively low as smaller organizations
carefully weigh the potential benefits of going filmless against the
potentially hefty costs.
Looking for new avenues of winning over
smaller providers, some PACS vendors are turning to the Internet. For example,
they’re offering PACS hosted via the application service provider computing
model, which lowers some of the upfront hardware costs for the customer.
Ninety-three percent of the 324 U.S. provider
organizations with 500 or more beds are using PACS, according to a study by
Frost & Sullivan, a New York-based research and consulting firm. But the
market penetration declines dramatically as the size of the organization
decreases.
As vendors introduce new, lower-cost
approaches, Frost & Sullivan predicts the PACS market will grow at a
healthy clip, from $856.8 million in 2002 to $1.06 billion in 2006, according
to IDC, a Framingham, Mass.-based research and market analysis firm.
The rise of PACS technology has been slow and
steady over the past few years, says Antonio Garcia, a medical imaging analyst
at Frost & Sullivan.
Frost & Sullivan estimates that nearly 15%
of U.S. and Canadian hospitals had implemented some form of a PACS by 2002.
Frost & Sullivan lumped the two countries together for this specific
report. However, the United States is the biggest market for PACS
technology—more than 90% of the implementations identified in the Frost &
Sullivan report are in the United States, Garcia explains.
The company also estimates the PACS adoption
rate in nonhospital imaging facilities—mainly outpatient imaging centers—was
7.3% by 2002.
In total, there were 1,262 PACS implemented by
2002 in North American hospitals and imaging facilities. This compares with 692
in 1998, the first year Frost & Sullivan started tracking the market.
PACS technology has followed a steady adoption
curve over the past few years, Garcia says. The hospital penetration rate was
8.4% in 1998; 9.8% in 1999; 11.3% in 2000; and 12.9% in 2001, to its current
penetration rate of 14.7%.
“There have been no big spikes in the past few
years—if it was mapped historically, there would be a big spike in the mid-80s,
and then in ‘97 and ‘98 when the prices of components such as workstations and
storage servers started to drop,” Garcia says.
By 2008, Frost & Sullivan predicts that
36% of North American hospitals will have a radiology PACS, along with 20% of
nonhospital imaging facilities. That translates to more than 3,000 installed
PACs.
Those numbers are encouraging, but they only
tell half the story, Garcia says. Installation numbers are skewed heavily
toward large hospitals and integrated delivery systems.
“Make no mistake, there’s plenty of interest
in PACS technology,” Garcia adds. “PACS vendors are making a major marketing
push—check out how many there are at industry conferences now. CIOs will listen
to the sales presentations, be impressed by a sales pitch, but at some point
they ask what the price is. When they hear it, their interest level can take a
hit.”
Although prices for PACS components—such as
digital storage servers and workstations—have dropped somewhat in recent
months, the costs still are substantial.
Some organizations buy all the hardware and
lease software from a vendor, or vice versa. Others pay a fee-per-view via the
ASP computing model to avoid investing in expensive storage technology.
Frost & Sullivan estimates that the
average weighted price tag for a PACS—factoring in components such as storage
servers and workstations—is $3.3 million, though the costs range from vastly
less to much more.
“Some facilities may pay $200,000 for basic
functions, while a large hospital that implements a ‘full blown’ PACS with
enterprisewide image distribution likely would spend over $5 million,” Garcia
says.
Those costs partly explain why PACS technology
resides mostly in large organizations, Garcia says.
But many of those large organizations that
have taken the PACS plunge say the investment, while substantial, has proven
worthwhile.
For example, at The Cleveland Clinic,
radiologists and the rest of the medical staff are convinced that a PACS leads
to better and faster care, says Louis Lannum, manager of radiology informatics.
The delivery system has used digital imaging since 1994. It now uses a PACS
from Siemens Medical Solutions Health Services Corp., Malvern, Pa., to read and
store most of its radiology exams.
“Our PACS is a wonderful tool, especially
because we have fewer radiologists to read images now, and this has greatly
improved their workflow,” Lannum says. “We do more than 800,000 reads a year,
so faster access to images and easier distribution, and other advantages to
using PACS technology, are compelling to a facility like ours.”
Lannum, however, doesn’t gloss over the fact
that the cost of implementing a PACS goes far beyond the initial price tag.
“When we initially bought the PACS, it was a major investment in itself,” he
says. “And back then, the hidden—well, ongoing—costs weren’t so apparent.”
At The Cleveland Clinic, storage is the chief
ongoing cost, Lannum says. In 1998, The Cleveland Clinic had three storage
servers for its PACS; it now has 12.
It estimates that for each 100,000 exams it
acquires digitally, it must now buy a new storage server, which typically costs
$150,000 to $200,000.
That estimate may be conservative, Lannum
says, because the data for each acquired exam continues to grow. For example,
computed tomography, or CT, scans used to generate about 100 megabytes of data
per exam. New and enhanced imaging acquisition devices, however, have caused
the digital size of the scans to balloon. Exams using these new machines—which
capture more detailed images, and more of them—typically create 1 gigabyte of
digital data.
“I’m not sure if many people have taken into
account how new acquisition devices are going to affect their ongoing PACS
costs,” Lannum says. “This is going to hit the PACS environment very, very hard.
Scalability is one of the biggest problems for PACS technology, and it’s going
to be harder to predict storage needs and costs in the future.”
Provider organizations should anticipate a few
other areas where costs will spike upward when implementing a PACS, Lannum
says. The staff needed to upgrade and maintain a PACS is more skilled—hence,
more expensive—than staff for hard-copy film libraries.
In addition, PACS technology has a tendency to
break out of the radiology department. Once a PACS is implemented and working
smoothly, Lannum explains, referring physicians and specialists likely will
want to get into the game. The costs of providing widespread access can be
high, he says.
The Cleveland Clinic, for example, purchased
Web-based image distribution software, also from Siemens, and upgraded the
electronic infrastructure running between its hospitals. While Lannum declined
to give the price of the distribution software, upgrading portions of its wide
area network cost more than $120,000, he says. “Let’s just say there are an
awful lot of costs when using this technology,” he says.
Despite cost concerns, the PACS market appears
to be ready for expansion because of market saturation among larger hospitals,
Garcia says.
“At the largest provider organizations, nearly
75% have a PACS of one stripe or another, so that market is nearing
saturation,” he says. “The market is shifting—has to shift—toward upgrades and
smaller community hospitals. But for the smaller hospital market, vendors haven’t
hit the price point yet where organizations really can afford PACS technology.”
When PACS vendors hit those price points, they
can expect a store full of interested shoppers, contends Richard Howe, vice
president of information consulting at VHA Inc., an Irving, Texas-based group
purchasing organization for hospitals. VHA has more than 1,800 members, most of
which are small and medium-sized facilities.
Interest in PACS is definitely on the rise
among VHA members, Howe says. “Our members realize the prices are coming down,
and should continue to drop. Many members believe imaging is inevitably going
down a digital path.”
However, because many organizations believe
they will have to go fully digital, they are trying to squeeze “the last bit of
juice” out of their aging image acquisition devices and small-scale digital
imaging systems before they invest in a full-blown PACS, he says.
Some small organizations also are playing a
waiting game, he adds. “Prices are dropping, but they still are a little too high
for many of our members. So some providers are keeping a close eye on prices
and waiting until they get to a level they can realistically afford,” he says.
In addition, many smaller hospitals like the
ASP computing model because it offers relatively straightforward costs to
access otherwise unattainable software. But the ASP vendor market still is a
little scary for some organizations, Howe says.
“Many hospitals, while interested in
ASP-hosted PACS, still are not sure if an ASP vendor is going to be around in a
few years,” Howe says. “That’s a scary proposition—for example, what would
happen to images the vendor is storing remotely? It’s something provider
organizations think about.”
Though the PACS market is shifting toward
smaller providers, there still is a stubborn PACS knot to unravel before the
technology makes an impact in new markets, contends Garcia, the analyst.
PACS technology was—and still largely is—based
on proprietary archive software, Garcia says. As a result, PACS technology has
not moved as quickly as other clinical information system technology toward
open architecture, Garcia adds.
The Digital Imaging and Communications in
Medicine, or DICOM, standard is widely used, but PACS vendors concoct many
different “flavors” of DICOM, Garcia says.
By comparison, Health Level Seven standards,
used by clinical information systems to exchange text-based messages, usually
are adhered to closely, which has led to more interoperability in the
non-imaging arena.
“The market is dominated by vendors that
continue to create archives that are not fully DICOM-compliant,” Garcia says.
“A fully compliant archive potentially would bring the price of PACS technology
way down. But vendors now have a lock on their archive technology.”
This means image viewing applications and
other PACS software from third-party vendors are hard to integrate with
proprietary archives.
“To this point, it’s basically been a case of
signing on the bottom line for a PACS, because it’s difficult if not impossible
to create a ‘best-of-breed’ system,” Garcia says. “Provider organizations
really have to twist a PACS vendor’s arm to get them to work with third-party
vendors. That’s happening more often, though it’s still the exception.”
The lack of firm standards means PACS
technology can sometimes be difficult to integrate with other clinical
information systems.
Such was the case at the Houston-based
University of Texas M.D. Anderson Cancer Center, says Kevin W. McEnery, M.D.,
deputy division head of informatics.
M.D. Anderson recently implemented a Web-based
digital image and viewing distribution application from Stentor Corp., South
San Francisco, Calif. However, the PACS currently is used by referring
physicians. Radiologists still use hard-copy film. They initially were
reluctant to use “soft copy” electronic images because they thought a PACS
would disrupt their workflow, McEnery says.
“Radiologists are comfortable with their
workflow using hard-copy film. They read the images while accessing our other
information systems, and while the workflow is not perfect, it works,” McEnery
says. “If we had a standalone PACS, they would have to use radiology
workstations for images and use other computers to access our clinical systems
for data. They refused to practice like that.”
To fold its PACS into clinical workflow, M.D.
Anderson took on the arduous task of integrating its PACS with its homegrown
electronic medical records system. Thanks to this integration, M.D. Anderson’s
radiologists plan to make the transition from hard-copy film to the PACS by
early 2003.
“Integrating the electronic record and PACS
means that radiologists understand the clinical context of the images they’re
looking at, which was crucial to our staff,” McEnery says. “There is a growing
realization that what’s limiting PACS is a lack of integration. Workflow is key
to success for PACS technology.”
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