Going digital

With the requirement for digital data to be archived for up to seven years in some states, the need for efficient picture archiving and communications systems has never been greater. Frost & Sullivan’s Nadim Daher fills EHM in on the current state of the PACS market.

“When you have to do more for the same amount of money, IT is a solution for that, but at the same time you can’t spend the required money on it. That has been the deadlock for the PACS market during the last two years”
-Nadim Daher

Picture archiving and communications systems (PACS) have become important tools in a hospital’s digital data management arsenal. According to Nadim Daher, Senior Industry Analyst for Frost & Sullivan’s North American Healthcare Practice, one of the challenges is managing data throughout its lifecycle, while also minimizing the incredibly high cost of using expensive storage media.

“Today PACS is also a lot about the distribution of images to other stakeholders in the imaging enterprise,” he says. “This is often outside the radiology reading room and into certain physicians’ office spaces and sometimes to other hospitals or to the electronic library of patient records.”

Daher explains that the advantages of PACS are those of a digital environment when it’s working well. There are challenges pertaining to the transition to digital, which has been going on in radiology for about two decades in the more advanced countries. This has taken place progressively, but Daher says there are still many places that are lagging behind and still largely printing out films.

“There is also a challenge regarding the investment that needs to be made into it,” he continues, “both from a clinical standpoint where you get a high resistance to change, especially among the older generation of radiologists and other users, and also financially. You have an important financial investment in those systems, which have typically been acquired as a capital purchase. For an average 200- or 300-bed hospital with an average volume of 100,000 procedures annually, it can easily cost up to $1 million to install PACS.

“Because PACS has an important hardware component, it requires a lot of equipment in the IT room, from servers and storage and networking, as well as probably the most expensive element, the software license. Then you have all the services, both to put it in and to support it, because most of these systems are supported through maintenance contracts, typically over five years, and usually throughout the lifecycle of the systems.”

Investment
One of the first considerations for hospitals considering a major capital outlay is return on investment. As Daher points out, for those facilities that have never used PACS before, the ROI model is pretty straightforward, because they’re going to be replacing film, which costs about a few dollars per sheet, with digital. “Once they have the system in place it’s going to cost less per procedure to manage study data,” he says, “unlike the film-based model where every study is going to cost tens of dollars for printouts on high quality silver-plated film.

“Various case studies that have shown that PACS pays for itself in anywhere from two or three years to six or seven years, depending on the case. But, replacing film would be the main ROI item for first-time PACS users.”

However, market penetration is already high, with the majority of US hospitals  – as many as 60 or 70 percent – already having a PACS in place. Daher believes the bigger question today centers on the users of first-generation PACS who are looking to replace their systems. “The replacement PACS market is what’s attracting the attention of the entire PACS industry,” he explains. “This tends to leave the few remaining first PACS opportunities out there to the smaller companies, who are happy to take on a contract for a 60-bed hospital or a rural community hospital that doesn’t have PACS. That represents a small contract value.

“The big players are all focused on the replacement PACS market and on being selected as a replacement vendor to put the next generation system in place and get that new $2 million or $3 million deal for the large hospitals and hospital chains.”

With the next generation of PACS, the return on investment on all models is much less certain. There are a number of benefits, but according to Daher they’re not easily quantifiable the way replacing film is: “They are not very quantifiable because they would be something like reducing the turnaround time from study to report from two hours with the current PACS, to 1.6 hours with the new PACS, for instance. While a business case can be made for that 0.4 hours when you look at the productivity of the radiologists, what they’re being paid and what they could be doing if they saved time on their current workload, it’s not as obvious as that for installing a first PACS.”

Nevertheless, Daher believes there is a place for the next generation of PACS, to help improve workflow, make the imaging enterprise more productive and open up better communication with referring physicians. “At the end of the day, as an imaging enterprise, your customers are those referring physicians who send you patients to get images done. It’s important to have efficient IT solutions and to make it work better for them.

“On the clinical side, a better PACS infrastructure can help physicians make better decisions, because they have greater access to imaging over time, comparing priors to new, comparing with other patients, when you start doing things like data mining. It’s mainly clinical benefits, but also with a strong business component.”

PACS has been around for 10 or 15 years, so the first few academic centers that implemented the digital PACS that we know today are now at their third generation of the technology. Another large chunk of the marketplace is coming up to its second generation PACS, and Daher’s view is that this is probably the main thing that’s still driving the market forward.

“Although the uptake has slowed down in the last two years, it’s a continual process. Technology has to be upgraded at some point. You can’t keep 10-year-old servers running in your IT department.”

External pressures have also exerted an influence, resulting in the last two-and-a-half years being very challenging for the American PACS market. “The macro-economic pressures that occurred in 2008 did not spare the PACS market,” Daher says. “Traditionally it has been more immune to outside market conditions, but this time it was hit pretty badly. The IT projects hospitals were doing were put on hold, if they weren’t cancelled.

“The fact that the reimbursement pressure is so heavy on imaging in general makes the ROI model for PACS less and less solid, because individual procedures are getting left without reimbursement. Some of it is offset by the fact that procedure volumes continue to grow at a single digit of five or six percent a year. When you have to do more for the same amount of money, IT is a solution for that, but at the same time you can’t spend the required money on it. That has been the deadlock for the PACS market during the last two years.”

International
Comparing the US market to parts of the world like Canada, the UK and Scandinavia, Daher sees the major difference being that the US has a mostly privately operated healthcare system, and Canada, the UK and Scandinavia have a publicly managed system.

This has had a direct impact on the way that technology has been implemented throughout the years. It has been more of a grass roots movement in the US, of individual hospitals getting PACS and wanting to be competitive with respect to the technology and the neighboring facilities. On the other hand, in Canada, the UK and Scandinavia, PACS adoption has been planned more from the top down; province-wide or state-wide agencies have planned, to put on PACS in several hundred facilities at once,.

“Places like Scandinavia,” Daher says, “have been able to reach 100-percent penetration. They’ve been able to do it much more cost-effectively than in the US. The national program for IT in the UK was also one of those top-down forces that has planned for PACS. They have had some big failures and some important challenges, but they have been able to put in more PACS technology in more remote places and do it more cost- effectively than in the US.

“They’re also able to get the systems to better talk to one another, because the first phase when you look at it over a long period of time is to have digital data everywhere. And the next phase, which is the major debate in US healthcare IT today, is interconnecting all of these individual healthcare facilities into something more widespread, so you can track diseases, track trends, track everything the nationwide.”

Daher underlines that in the US, vendors have not been forced to comply to industry standards and have not been prevented from using proprietary technology, which has created a very challenging situation. “It’s very hard to get the legacy systems to talk with each other. In the legacy systems there is a lot of proprietary technology; it’s almost like secret recipes the vendors are using, and when it comes to replacing the system, providers find that they’re not able to read them.

“You don’t see this kind of thing much in the other countries I mentioned, where the vendors are more forced to align themselves and the way they do things. There was more in the long-term planning that one day these systems will talk to each other, we will interconnect them. And you’re starting to see that in Canada and Scandinavia and the UK.”

Looking ahead
Looking to the future, Daher says systems will be better integrated with each other and there will also be better integration with electronic medical records, where PACS will become the imaging element of the EMR. “The EMR has a lot of components, an important one of which is images, and PACS is likely to be the underlying system that handles this component.

“Also, we have what we call enterprise PACS, and there are two sides to this. One is enterprise, meaning multi-departmental, so going beyond radiology and having a single system, or again, multiple systems, but that talk nicely to each other; one for radiology, one for cardiology, for orthopedics. All the imaging is done in the departments outside radiology that are also producers or users of images, so that you can have an effective way of managing those images throughout the multiple departments.

“And the other side of it is by enterprise, which can mean also multi-site. When you have a hospital organization that has two or three hospitals in different locations, with imaging centers at each, they can bring together these geographically dispersed locations through an enterprise PACS system. That’s probably the biggest market shift in those larger scale systems.”

Nadim Daher is Senior Industry Analyst for Frost & Sullivan’s North American Healthcare Practice.

This article was first published in EHM magazine: www.executivehm.com/article/Going-digital