Perplexing PACS Market Projections

PACSman: Just like the statistically-challenged geniuses who gave us a hearty belly laugh by saying PACS had 90%+ market penetration yet another group of market prognosticators are at it again - this time projecting PACS growth to hit an astounding $4.8 billion in 2015. Did I miss K-Mart's blue light special on crystal balls or have they been tippling a wee bit too much Irish whiskey again? These are the only things that would explain these incredibly optimistic prognostications by these Nostradamus- wannabes.

Now normally prognosticators don’t do any harm when they prognosticate for prognostication’s sake. But these guys seem to have no basis whatsoever besides a dart board guesstimate for their vision of the future. They seem to be completely out of touch with what is going on not only in the U.S. but in the world PACS marketplace as well. Someone needs to play Quick Draw McGraw and say “Now youuuuuu hold on thar little buddy”. Instead when I read stuff like this it reminds me of an old episode of Huckleberry Hound “"Three and three is . . . . uhh, Seven? Nine? Fourteen? Sixteen!" An inexact science indeed…

You have to ask yourself why a company that is trying to sell market reports has no hyperlink to the report being offered in its website, none in the press release that works, and won’t even allow you access to their press releases on their web site unless you are an “approved publisher”. After all, issuing 34 press releases in 3 days is a massive undertaking for any company especially since 22 of them include the world “global” in the heading and the rest, if PACS release is any indication, have also addressed things from a global perspective…I guess when you put out 900 Global Strategic Business Reports (large multi-client research programs); 45,000+ Market Trend Reports; 95 Global Industry Outlooks; and 114,000+ Market Data Capsules and a partridge in a pear tree you have to always think big picture (laugh). It’s also telling that a company that is “strongly committed to upholding the highest standards of research integrity and diligent reporting” has three year old user satisfaction data on themselves- the results of which don’t bode well for the company either showing that just over half their clients think their work is good or above…and the rest either satisfactory or not commenting. That’s like my son asking me to get excited about him getting a C in a class when I know he is capable of at least a B if not an A. If my clients can’t give me an A then they don’t pay- it’s that simple…and as it should be.

I’m desperately trying to figure out what they mean by saying “…as the technology evolves from being a radiology-centric technology to a core data management technology for healthcare departments, pharmaceutical companies and academic institutions, the PACS market is expected to offer significant opportunities for vendors.” Now I know about radiology PACS and cardiology PACS and even orthopedic PACS but pharmacy PACS? What am I missing here? And don’t academic facilities have radiology, cardiology and orthopedic departments or did I miss this too?

Here’s another rocket scientist statement “Also, PACS in Europe, where the market is less robust compared to the U.S., there is significant potential for PACS growth due to the European healthcare community’s need to reduce healthcare costs while simultaneously providing quality patient care and services…..” As Homer Simpson would say, “NO DUH!!” The last time I checked the U.S. also had the need to reduce healthcare costs as well, hence the DRA. And while we are at it, lookie here!! “In Asia-Pacific, growth in demand for PACS is likely to be driven by the cost efficient initiatives being implemented by the hospitals in the region. Software licenses represent the largest segment, while services is the fastest growing segment.” Let’s see- “reduce healthcare costs” and “cost efficient initiatives”- can you say redundant? And in English it’s "services are", not "services is"….While software licenses may represent the largest segment (of what though, one might reasonably ask) they are also the highest discounted “segment” as well and represent a fairly low overall margin. Service, on the other hand, is a lower dollar figure but overall provides the highest net margins.

So how did they come up with this $4B+ number? As I initially stated my first guess involved a blindfold and darts. If the global market is $2B now (which is a huge stretch by any imagination unless you add in CR, DR, VR, RIS, archives and anything else that can be remotely construed as PACS) even them you are talking about an average of 20% growth per year. And let me tell you- that ain’t happenin’, Quickstraw, and even if it did that doesn’t mean the companies will be around another 7 years either. Every day I see the same press release on yet another company- sale up, net margins down- and last time I checked the bills don’t get paid based on sales alone but on net profit margin. That’s like listening to Rod Stewart singing “Tonight’s the Night” when the reality is the situation is Jackson Browne’s “Rosie”. It’s a nice try but….So even if sales do increase almost 150% in 7 years that doesn’t mean companies will still be in business…Look at the market leader, whose stock has lost nearly 300% of its value in the past year going from almost $40/share down to $11/share. But let’s be optimistic- their stock may be somewhat depressed but their sales are up…

I recall a similar study done several years ago by a company I shall not mention who predicted a $1B PACS market and it did come true - 10 years AFTER they predicted it would indeed happen. Of course they failed to factor in things like reduced hardware costs which brought the average sale price down about 20% or increased competition which did the same not just to the sale price but net margins as well… but those are just trivial details…

One day someone will offer a report that tells the truth about this market from people who really know the market instead of just throwing together a report with hyper-inflated numbers. Until then stick with those who know and live this market 24/7 like I have for the past 25+ years. Quickstraw was right - “I'll do the "thin'in'" around here! - And “don't you for-git it!”

Ms. PACS: Haven’t you ever heard of the luck of the Irish? In this case, PACS vendors will be really lucky if the world PACS market actually does reach $4.8 billion in 2015, as the report says.

To you, PACSman, the eternal and infernal pessimist, this is preposterous. And while I acknowledge your years of dedication to the PACS market and your infinite wisdom, I would like to ask you a simple question: Have you looked at the frequency and price of replacement PACS in the U.S. alone?

If you tuned into our latest Webcast “Cardiology PACS Integration Can Be Seamless,” the topic covered how PACS vendors are offering so-called integrated solutions, and how all too often this integration does not go as smoothly as expected. So, the Webcast targeted those planning on purchasing a cardiology PACS or integrating a cardiology system with an existing radiology PACS. Just to lend some credibility to my argument, the panel consisted of an Enterprise Imaging Administrator (Christopher Oropeza), a Cath Lab Manager (Richard Sanders RN), and Cardiology IT Specialist (Lori Crissup, RN) all of whom work at The Heart Hospital Baylor Plano in Texas.

According to the poll taken from the Webcast registrants, most of whom were IT people either in a cath lab or radiology department, and from the panelists, on average, the lifetime of a PACS was less than 5 years and often just 3! At $250K a pop, I would say someone’s making money somewhere.

Plus, by the questions submitted, it was revealing how much advice these hospital IT professionals need – that’s a nod to you PACSman – and good technical support they would benefit from. Knowledge is power...and money...cha-ching!

Here are some of the questions they submitted:

- Are both the radiology orders and the CathLab orders entered in the same RIS? If so, who manages the orders that aren't completed or need to be canceled?

- Are the reading workstations for cardiology different than the reading workstations for radiology? Or can they view both types of images on the reading workstations as they can on the web?

- Are your physicians still dictating and you are working on structered reporting? How did you deal with interventional caths which are so varied?

- Is a Single Sign On being used at a workstation? Or will the physician have to login into each system when they start?

- For how long have you been storing to reach the 2TB figure you gave? With how many studies?

- How are you handling the other cardiology modalities outside cath?

- Do the clinical nursing floors use the Web-based PACS to see patient images, and if so how did you train all those employees (all three shifts)?

- Here’s one for the turf wars - Who reads the cardiac CTAs and cardiac MRAs? The person was asking if it was the cardiologists or the radiologists.

As you can see, the integration between radiology and cardiology PACS and the integration of cardiology PACS with the hospital EHR and the rest of the systems not only raises a lot of questions about workflow and the hospital infrastructure in general, but cardiology PACS is the next gold rush for PACS vendors and it has only just begun. Then of course there is orthopedic and pathology PACS and so on.

So, you are probably right that the report exaggerates the prospects of the global PACS market and that PACS vendors may be chasing a leprechaun…but when they find him, he’ll be sitting on a pot of gold.