It Must Be True – I Read It In The Enquirer!!

PACSman: Each year it seems like “RSNA previews” come sooner and sooner. Each publication tries to beat the other to the punch by being the first to identify what new and exciting will be shown at RSNA. The three marketeers in the PACS companies do their very best to spin something new and exciting about their products but it usually comes off about as exciting as a new nightgown on an old body with the lights turned off….

I got one online journal’s RIS/PACS preview today and said to myself “Gee, someone actually reads my stuff” when their intro started out “Contrary to some reports that RIS and PACS have become commodity-level systems, these imaging informatics essentials continue to evolve and expand their capabilities—judging from the offerings that will be available to attendees of the upcoming 2008 RSNA conference in Chicago.” Now I’ve been saying PACS is a commodities market for ages so….in the interest of editorial integrity I’ll agree to modify my posture- PACS has become a continually-evolving and expanded commodities market…Is that better? Of course nowhere in this summary did I read about PACS 90% penetration either…especially since they were one of the only trade journals that published the release (with caveats of course). This got me wondering where those magical numbers came from…so I did some fact checking…and, lo and behold, 90% seems to have been THE magic number for many people, much like 99.9% uptime is the magic number when discussing PACS uptime (a guarantee that almost always comes without any penalties attached making the industries best non-guarantee guarantee).

A November 2002 article in Health Data Management magazine cites a Frost and Sullivan report that stated “93% of the 324 U.S. provider organizations with 500 or more beds are using PACS…” That would have left just 26 hospitals where PACS could be peddled to- six years ago!!! The report probably didn’t sell well…cuz the big boys don’t wanna hear those sorts of numbers, although it does build a strong case for the PACS replacement market today. They also added “But the market penetration declines dramatically as the size of the organization decreases.” No duh!! The magic 90% number shows up once again in the same report “However, the United States is the biggest market for PACS technology-more than 90% of the implementations identified….. are in the United States….” This sounds great until you realize less than 5% of all institutions in the U.S. have more than 500 beds, while almost half (49%) have less than 100 beds and another 35% have between 100 and 300 beds…Their numbers also fly in the face of statistics offered by the American Hospital Association (AHA) that indicate in 2005 there were only 242 community hospitals more than 500 beds in the US, not 324. Maybe we lost 82 hospitals in three years when no one was looking…or they added VA’s and a bunch of others to make up the difference…who knows…but it’s kinda hard to hide a 500 bed hospital, don’t cha think?

This might also be the source that an unattributed Sectra Powerpoint done in September 2005 used that had U.S. penetration at 90% for the “big” hospitals, but only 30% for the small and 10% Ortho. Of course the same Powerpoint stated that Scandinavia had 100% PACS penetration (you expected a Swedish-based company to have less than 100% penetration in their own back yard? (laugh); Holland, Austria and Australia (big) at 75%; Germany, Switzerland, Canada and Japan at 50%; the UK, Spain, Italy and France at less than 15% and Latin America, Eastern Europe and the rest of the World under 5%. Where they got these numbers God only knows…but if I’m selling PACS I’m gonna hafta start speakin’ Spanish cuz that seems to be where the business is….

Even Emageon believed these numbers, with a twist, as quoted in their 4th quarter 2007 investor call held in late February 2008. Their CEO said “Since late 2006, we have been in a mature PACS market for large hospitals and hospital networks. Industry analysts have published data suggesting that close to 90% of the hospitals with greater than 200 beds have implemented a PACS System. As a result of the 90% penetration rate of PACS in a large hospital market, our sales effort almost always involve a replacement of the legacy departmental PACS System.” 200 beds? Now where did THAT come from? Maybe that’s why Emageon’s sales were down 14.7% over the 4th quarter in 2006 and down 15.6% year to year- they were chasing after the wrong markets. This also might explain why the didn’t sell for as much as anticipated or why their sale price didn’t even equal what they raised in the IPO a few years back…Go ahead, shoot the messenger will ya?

The bottom line is can you believe everything you read? Of course…if it’s from the PACSMan (laugh). Many journals do a great job of fact checking before they put something in print or on-line. I’ve had many an editor ask me for source confirmation before they would print it. That is how it should be. But when you are selling reports for $2,000-$4,000 a pop though you are held to a higher standard - sorta like Hebrew National hot dogs are - and that includes not improperly interpolating data to meet your own needs…After all, people are making decisions based on these lies, damn lies, and statistics so if we can’t be accurate the least we can do is be consistent (laugh).

Ms. PACS: While you are busy debating the accuracy of a 90% figure on the penetration of the U.S. PACS market, first time buyers are not the end all be all targets for PACS vendors. There is still more in the jackpot to be had even in a mature market. Take the hospitals and imaging centers who already have PACS. They will still have to drum up more cash to “seamlessly” interface their systems with the endless variety of disparate PAC systems, i.e., the next blood letting stage. There will still be more upgrades in the next stage of PACS – if they want ‘true’ interoperability. Did you think the PACS companies were going to give that away for free? No. They were saving that reality for later, after everyone was already hooked on their brand, service and/or sales pitch.

By the sound of it, PACSman, you will not likely buy a market research report to figure out that the PACS market among large U.S. hospitals is mature, nor will you need it to know there are still new customers within the U.S. market to be had - try rural markets - although diminished in size and offering lower returns for most PACS vendors' time. However, you might want someone to do some market analysis if you are a PACS provider venturing beyond U.S. borders…like to Alaska, for example, they are practically foreign – I mean they say they can see Russia from there.

Here’s a thought – what a good PACS vendor should do now is to anticipate where the technology is headed. An advocate for healthcare’s adoption of service-oriented architecture (SOA), Stephan Erberich, assistant professor of Research Radiology and Biomedical Engineering, Children’s Hospital Los Angeles, believes SOA is breaking up the traditional concepts of what it means to be a PACS. Since an SOA provides, for example, radiologists access to multiple services on the internet, hospitals and imaging centers can save on purchasing a costly PACS by using an online service - not to mention eliminate maintenance fees. Plus, because a large pool of users can rent a utility, the overall cost of service will be less. There are other services that can eliminate the cost of outright buying a software solution. For example, with image processing there could be an online service providing cardiology reconstruction. In this scenario, the user only pays the effective costs. This model is already common in image storage and teleradiology, right? Of course, SOA also changes in-house resources and creates a huge dependency on the network environment – and that’s not free. In any case, while some PACS vendors will see SOA as a threat, others see it as an opportunity to offer more services.

So PACS vendors should stop worrying about arbitrary figures suggesting the U.S. PACS market is saturated and focus on what’s to come. Anyhow, the model we use today in the U.S. may evolve to the point that by the time hospitals in 3rd world countries are ready to purchase a PACS, it will already all be online. Now, that is more exciting than a new nightgown on the PACSman…with the lights turned on.