A New Beginning (after the end)

PACSman: I was doing a Google search for songs that have the lyrics “All Good Things Must Come to an End” in them and only two songs came up from people I never heard of — a country singer named Joe Nichols who has a song titled, “All Good Things” and Nelly Furtado’s “All Good Things (come to an end).”

My sons and I don’t live in Texas, so Joe Nichols isn’t exactly a household name here, even though I have one friend who does live in Texas and knows the lyrics to every yippee-kai-yeah song known to man — those “I Want a Beer as Cold as My Ex-Wife’s Heart” genre-type songs. I also have another good friend who has a horse farm here with ten horses, five of her own, who should know all these songs but, thankfully, has a much more balanced and well rounded musical taste than my Texas friend…But Nelly?

“God, Dad you never heard of Nelly Furtado? You embarrass me sometimes.” OK, so what else is new?….

Then I broadened my search to just the words “The End” and got to a few groups I had heard of, although most of the songs weren’t always familiar. These included The Doors and Black Eyed Peas, both with songs titled, “The End” (although BEP I know more for the controversies they cause than their music — people after my own heart), U2, Norah Jones (the romantic still in me lives), Linkin Park and 2PAC (heard of them, don’t listen to their music, though, although anyone who has PAC in his name can’t be all that bad), Traveling Wilburys, Breaking Benjamin and Smashing Pumpkins, and a few others.

I stopped at Boyz II Men to listen to their tearjerker song, “End of the Road” that I haven’t heard in years. I am a sucker for intricate a capella harmonies and these guys have it for sure…until my manhood was called into question by my sons as I sang along with Wanya, Nathan, and Shawn “… Although we’ve come to the end of the road. Still I can’t let you go. It’s unnatural, you belong to me, I belong to you….”

“God, you are sooooooooo gay dad!!!” OK so I’m gay and an embarrassment, while they invoked God’s name twice no less. Have I missed anything? I should have stuck with David Bowie’s “Changes” instead…”Time may change me. But I can't trace time”…

If you’ve read PACS-aholic with any regularity over the past several years, you have realized that Cristen and I had an interaction between us that was just like a married couple. Most times we loved each other — okay, we liked each other. Sometimes we hated each other, sometimes we did things without the other person knowing or even liking what we were doing and we never made whoopee, either. In the end, though, we still respected each other in the morning, even before that first morning cuppa Joe. So when Cristen unexpectedly elected to move beyond the great white world of publishing, it left me with a chasm to fill the size of the Grand Canyon relating to the PACS-aholic blog. Do I keep the blog or….

The answer was easy. I am not the PACS-aholic nor was Cristen. We together were the PACS-aholics, and so since there is no official “we” any more, Joe and Nelly both sang it right “….all good things must come to an end.”

And so it will right here, right now – with apologies to Jesus Jones as well. (Fuji used the band’s “Right Here, Right Now” song as its CR theme several years back, when John Strauss was the head of marketing there and Fuji allowed John’s creativity to flow unimpeded. He unquestionably had some of the best marketing ideas I’ve ever seen in this industry.)

Know though that just as God shuts one door, another one opens. Instead of watching what I say and how I say it, lest I offend a potential group as I have done more than once, requiring me to “set the record straight,” I have elected to start my own blog — The PACSMan Pontificates. You can visit it here — http://thepacsmanpontificates.blogspot.com/.

I’m going to try to have at least 4-5 blog posts up per week — not as many as Dr. Grumpy does by any means (one of the funniest blogs I’ve read in ages by the way, http://drgrumpyinthehouse.blogspot.com/). But probably close to the amount of postings my good friend the Dalai does (http://doctordalai.blogspot.com/) when he is in his blogging mood and doesn’t have to work for a living, which lately has been more often than we both like it. Dalai is also helping me get this blog in order, so please be patient with us both. It, like me, is a work-in-progress.

The blog will be 80% about my life and 20% about PACS, or as I promote it, “The trials and tribulations of a middle-aged PACS consultant, father and garage sale junkie as he engages in his never-ending search for sanity in an insane world.” I’ve been having a lot of fun doing my own thing over the past few decades in the PACS arena and for the past nine years as a single dad to two teen sons. Many people who have read my private musings have said I should share it — and so I will. Should be interesting to see where it goes.

As for Cristen, we’re still friends — and always will be — that is, until she gets “involved” with someone and forgets her true friends, which happens all too often with women. That said, though I don’t think that will happen any time soon. She’s not quite as cynical as I am — hell, no one on this planet is. But she’s been on the Love Train often enough to know it’s not nearly as much fun as riding the El late at night like Tom Cruise and Rebecca de Mornay did in the movie Risky Business either. ”Joel, have you ever….” Someone cue Tangerine Dream please….”My name is Joel Goodson. I deal in human fulfillment. I grossed over eight thousand dollars in one night. Time of your life, huh kid?”

So, bookmark the site http://thepacsmanpontificates.blogspot.com/ and get ready for the ride of your life! Topical? Of course! Informed? I wouldn’t have it any other way! Opinionated? Moi? Please, bite your tongue! Censored? Nope. Irreverent? Well cointenly!! Politically correct? Well cointenly not!!

So this isn’t goodbye but rather “until we meet again,” which I’m sure we will. I’ll still be involved with ITN by being on its Advisory Board, doing the PACS, RIS and CR charts and maybe even a new category this year on storage options, which will include VNAs, Clouds, MSPs and others, if I can convince the new leadership to do this.

So I leave you with the immortal words from Risky Business, when Joel is being interviewed by the recruiter for his Princeton admission in the middle of his “party.” It reminds me so much of the times we had here on PACS-aholic and how it will be even more so on my own as well…

Recruiter: “Your stats are very respectable. You’ve done some solid work here. But it’s not quite Ivy League now is it?”

Joel puts his hand on the recruiter’s knee and says, “You know Bill, there’s one thing I’ve learned in all my years. Sometimes you gotta say what the…. Make your move.”

Cruise lights a cigarette.

Recruiter: “I beg your pardon?”

Lana: “So how we doing?”

Joel: “Looks like University of Illinois!!!!”

A li’l up-tempo music by Prince – D.M.S.R., if you please, as the curtain slowly closes on the PACS-aholics. I’m making my move to The PACSMan Pontificates…. Hope to see you all there!!

NOTE: The ITN staff expresses its thanks to the PACSman, aka Michael Cannavo, founder and President of IMC, for sharing his opinions and insights with the PACS-aholic world for the past few years. We look forward to reading more from him in his new blog, The PACSMan Pontificates. http://thepacsmanpontificates.blogspot.com/

Is Cloud Computing Annoying?

Ms. PACS: Has anyone seen him? The PACSman I mean. I filed a missing person's report, posted his face on a milk carton, but still no sign of him.

Of course, he must be moonlighting on some other blog. I don't mind being cheated on, as long as you're honest about it (oxymoron?).

Well the only thing more frustrating about him running off with another blogger is the pretentious attitude of IT "geeks" (they love to be called that) when you talk to them about cloud computing. They act like you are so behind the times, or just a moron, because cloud computing has been around for awhile. Didn't you know?

Even when you say you realize Amazon, Google and Facebook, which you've been using for years now, are clouds (because someone recently tipped you off), you're still scoffed at. But for you PACS admins, what business are you in anyway? This is health care. It's always been a decade behind the consumer curve when it comes to IT. Blame it on incentives; compared to consumer markets, there is less in health care.

Let's face it, much of the PACS user interface is a rip off of Adobe Photoshop anyway. How's that for being an early adopter?

Besides, cloud computing may be yesterday's news amongst IT geeks, but it is still relatively new to PACS and even advanced visualization for medical imaging. Ergo, it is relevant in radiology today. And should be in radiation oncology where image volumes are going through the roof. But who knows when the RT image management systems will catch on. And when it does in 2020...it will be relevant too. So lose the attitude.

Speaking of lost, have you seen the PACSman?

What about cloud economics. The adoption of cloud-based architecture is assured if it benefits hospitals financially. This makes it very relevant.

A cloud environment enables ubiquitous access to programs, reduces the dependence on the users’ bandwidth and computer power and eliminates the danger of obsolescence.
This may be a scary step, but it would enable hospitals to share infrastructure with systems linked together. This would reduce cost, plus force interoperability, which is still lacking today.

Another benefit, you don't have to pay up-front costs for apps if it offers pay-per-use pricing. You don't have to upgrade your PC. You don't have to upgrade your hardware or networks.

If you don't like a vendor, you can easily switch - once there are enough cloud-based apps to choose from in health care. Another bonus is there is less of a threat of obsolescence because data centers and on-site technology can be continuously maintained and upgraded. That also removes barriers for vendors, allowing for more start-up Web services and more competition, which tends to favor the end-user.

It kicks in speed too. The cloud leverages available bandwidth and local computing power to optimize performance and speed. So now radiologist may be able to work faster and process more of those exams. That's what radiologists want - to be able to read more exams and make up for reimbursement cuts. Or is that the administrators' agenda?

Let's look to the cloud icons, and trend setters in IT. The Google's App Engine will let you run whatever program you want - as long as you specify it in a limited version of Python and use Google's database. I can run everyday programs like Word and Excel on Google and store it all right there. But you can't save your document to a folder, and you can't start a new document in a folder. That's REALLY annoying. We suspect Google is trying to rid users of the concept of folders. But then how do you organize things? Through search? What if I can't remember the name of the doc? SOL?

Sorry to be annoying, but cloud computing is not just trendy, it is relevant in health care and will change how you use your PACS - it will now be a service you access online. Talk about disruptive technology - I guess that's annoying too.

Top 10…or 19 PACS Problems

PACSman: I love how I’m given a list of the "Top 10 PACS Issues" to comment on, and it’s 19 items long. Mars and Venus says it all, if it wasn’t a list drawn up by a guy. Although, maybe Ms. PACS translated it into 19, adding her own stuff that isn’t in bold, which makes more sense. Who knows.

Here are the Top 10 PACS Issues, according to Richard (Skip) L. Kennedy, MSc, CIIP; Kaiser Permanente Medical Group, Sacramento, that will be discussed at the SIIM 2010 educational session on Thursday, June 3, 2010 in the "Practical Imaging Informatics Learning Track.”

 Top Ten PACS Problems

1. “It doesn’t go through…” Part 1: Network layer issues
2. “It doesn’t go through…” Part 2: DICOM layer issues
3. “It doesn’t do what I want/need/expect…”:
4. -Managing user expectations and user education
5. -Vendor feature requests and customizations
6. “It’s really slow…”:
7. -Performance management
8. -Scaling issues
9. “That can’t be right…”: Data QA management
10. “Everybody wants on board now…”: Imaging content outside of Radiology (Cardiology, Dermatology, etc.)
11. “You didn’t tell us about…”: User community communications and change management
12. “We need to get a new…”:
13. -PACS-to-PACS migration issues
14. -PACS hardware refresh issues
15. “We need to know…”: Dashboards and reporting issues with PACS
16. “What to do when the lights are out…”:
17. -Availability and uptime
18. -Downtime processes and procedures
19. -Disaster recovery

About 3/4 of the items on the list are technical issues. For the most part, those are a piece of cake to deal with. While they may not be solvable right away, they are solvable nonetheless. The other issues aren’t so easy.

My #1 is managing user expectations and user education. Will PACS solve every problem you have and meet every need? No. Will there be no downtime? No. Will it…the list goes on and on, and the answer typically remains the same - No. It’s even worse when you are replacing a PACS, expecting the new one to do things the old one didn’t do while you use the same RFP and get the same answers from the same vendors and expect the outcome to be different. Isn’t that the classical definition of insanity?

My #2 would be creating a vendor neutral system or at least incorporating a vendor neutral archive (VNA).  Despite 20 years of standards development, the vast majority of systems out there can still be considered proprietary or closed systems, each having at least one component from the database structure to the archive that locks in the end user. That is just plain sad. Vendors say they support a standard - all images are in a DICOM Part X format, for example, then they throw on a proprietary compression algorithm that only they provide. So much for an open system .

My #3 would be making sure the system is designed right. That didn’t even make the list. When you buy a PACS you buy what the vendor says is the solution based on your needs. The question remains: did you adequately outline ALL of your needs and did their solution meet it? This is easily addressed contractually, but few people include the proper contract language to address this.

My #4 would be…..well, you get the gist of it…problems are just masked opportunities for improvement. If you address #1, everything else is a piece of cake, but it’s like marriage - you never know what you are in for until you are in it so…Maybe that’s my #4. Once you make a decision to implement a PACS vendor, accept what you have and make the best of it. You are going to have it for a while, and getting out of it isn’t easy or cheap either. The upside of a PACS is that you get to choose a new one every 5-7 years without penalty.  If life were only that simple

           

Splain Me Some More Ricky

PACSman: I love how women like Ms. PACS bait me by putting things up on a blog, then tell me about it after the fact once it’s up, as a comment in an e-mail in a “by the way” fashion. This must be her way of playing the Wicked Witch of the West, “I’ll get you my pretty and your little dog too ah ha ha ha ha …..” only her version of it is closer to “I’ll get you (to post something up on here one way or the other) my pretty (PACSMan)…” Once again, using her feminine wiles, she has succeeded…although if she keeps this up I’ll have my little dog Elvis (not Toto) hump her leg, then pee on her bookshelves too…although she might actually enjoy the former (laugh).

Yes, Ms P., I have been following the Merge/AMICAS story closely, and a lot of what is going on has me completely stumped. That said, I am not an investor in either company - my objectivity in this market would suffer if I invested in either of these PACS companies. One look at the past six months is enough to make any investor cry, although Merge stock has rebounded $0.50 in the past two weeks - although why is anyone’s guess.

Now we come to the good stuff.

On April 2, Merge completed a private placement of preferred and common stock totaling $41.75 million, which is specified for use in funding a portion of the proposed acquisition of AMICAS. The merger agreement contains a commitment from Merge to provide $40 million in preferred equity to the acquisition. This private placement will satisfy that commitment and is scheduled to close prior to the close of the tender offer to AMICAS shareholders.

Merge entered this securities purchase agreement with 14 institutional and other accredited investors, pursuant to which Merge will issue an aggregate of 41,750 shares of Series A Non-Voting Preferred Stock and 7,515,000 shares of common stock for a total purchase price of $41.75 million, before fees and expenses.

Now here is what I don’t understand. 99.45% of the $40M in stock issued is common stock, while only 0.55% is preferred. So what’s the big deal? A couple of days later Merge then announced its intent to offer $200 million aggregate principal amount of senior secured notes due 2015, which will be used to fund a portion of the proposed acquisition of AMICAS. The notes will be senior obligations of Merge and will be guaranteed on a senior basis by all of Merge’s domestic restricted subsidiaries.

Now what am I missing here? Fourteen investors said: “Yup we are in!!” and get 7.5M shares of common stock with no guarantees attached to it whatsoever. Four days later, Merge announces its intent to offer $200 million aggregate principal amount of senior secured notes due 2015, “guaranteed on a senior basis by all of Merge’s domestic restricted subsidiaries.” So if I read this right, the $200 million comes with guarantees, while almost all the $40 million comes with nada since it is “common stock.”

I have many friends in the industry that have been issued common stock before as employees, as have I, so that is my only frame of reference. Some have even been former e-Med employees (now part of Merge coincidentally). They worked hard and long for many years in the hope that once their company was sold they would finally get their just reward. And they did, right in the ……This isn’t just e-Med folks who have had this happen to them, I can give you a list of at least half a dozen companies where the rich got richer (a.k.a. management and investors), and those who truly made the company what it was were left to squeal like a pig Deliverance-style….

So what happened? Once all the preferred stock was paid the old Italian proverb that goes “Con nulla non si fa nulla” got put into play. Translated this means “Of nothing comes nothing.” And that is what they got. Top management and investors got theirs, but what of the people who made these companies what they were? Niente….nothing…They couldn’t even use the stock as TP, which they needed after the “good lovin” they just got by the companies they sacrificed their lives, marriages, and families for, all in the hopes of achieving the Great American Dream called financial freedom. They had common stock - just like the 7.5M shares that were issued on the 4th are…..

I hope I am wrong here, but….it sure seems to me like someone needs to be kissed. Would these 14 investors have ponied up and laid $40M on the bar knowing $200M in guaranteed stock would be offered a few days later? You’ll just have to ask them. But I bet a few are as confused as I am, if not outright pi$$d off. I know I would be, assuming my assumptions are right that is.

The other interesting thing (to me, at any rate) is with the $40M “the securities to be issued in the private placement have not been registered under the Securities Act of 1933, as amended (the Securities Act) or any state securities laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission (SEC) or an applicable exemption from the registration requirements of the Securities Act. Merge has agreed to file a registration statement with the SEC covering the resale of the common stock issued in the private placement, provided however, that pursuant to the terms of the securities purchase agreement the investors shall be restricted from transferring the shares acquired in the private placement without the prior consent of Merge (other than to an affiliate) until the earlier of the first anniversary of their issuance or the occurrence of a “change of control” as defined in the securities purchase agreement.”

And the $200M? “The notes and the related guarantees will be offered in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and outside the United States pursuant to Regulation S under the Securities Act. The notes and the related guarantees have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.”

One seems to be registered, the other isn’t. Now again I’m way out of my comfort zone here and have no idea what the difference nor can I explain it, but I’m not putting more than $250K of my hard earned money per bank account lest the FDIC not insure it. The same probably holds true here. Gimme a guarantee any day… Of course the FDIC will probably go bankrupt anyway, but at least I can say I’ve been prudent in trying…

Now, if Merge has already obtained $200 million of bridge financing from Morgan Stanley and has also started a cash tender offer for all of the outstanding shares of AMICAS, has been extended to 5:00 p.m., New York City, New York time, on Friday, April 23, 2010, unless further extended, why then do they need all this money? That’s sorta like your wife asking you to wear a condom five years after you had a vasectomy - and she is on birth control to boot…Someone please ‘splain me that to me, Ricky, too…

I’m not sure I buy the statement made that “The successful acquisition of AMICAS will enable Merge to acquire one of its main competitors and widen its customer base. This will in turn expand the company’s top line.” Merge and AMICAS competed in very few accounts in both the PACS and RIS arena over the past five years – a few handfuls per year at best that I know of if that - so who is coming up with a blanket statement like this is anyone’s guess. That is like me putting up my profile on Millionaire Match in the hopes of finding my very own gold digger once I hit my first million later this year (provided the FDIC doesn’t go belly up that is).

That same report said the following: “In the past, Merge has been paralyzed by several issues like a dwindling cash balance, management turnover, accounting miscues and litigations. The real turnaround started in the second quarter of 2008 when the company received the much-needed cash infusion of $20 million from Merrick RIS LLC in May 2008.” Real turnaround? You mean from $0.26 to over $2.00? Oh yeah, my bad again. But how soon some people forget the past:

Now let’s be fair and show the same time period they are referring to

Wait!! Does that not show $4 a share in June 2009? Then a $3 a share in 2010? Below $2.00 a share in March 2010? Maybe jumping back up to over $2.50 is the turnaround they are referring to here but in my book this is more of Mr. Toad’s Wild Ride or a trip in the Tower of Terror at Disney than anything else. Turnaround? Look closer...


Income Statement:

View: Annual Data | Quarterly Data
All numbers in thousands
PERIOD ENDING 31-Dec-09 31-Dec-08 31-Dec-07
Total Revenue 66,841 56,735 59,572
Cost of Revenue 19,377 20,072 29,348
-------
Gross Profit 47,464 36,663 30,224

Operating Expenses
Research Development 10,689 13,240 21,065
Selling General and
Administrative 22,208 29,774 48,057
Non Recurring 2,838 11,816 124,131
Others 2,766 3,530 8,209

Total Operating
Expenses 38,501 58,360 201,462

Operating Income or Loss 8,963 (21,697) (171,238)
Income from Continuing Operations
Total Other Income/Expenses Net (6,097) (296) (481)
Earnings Before Interest And Taxes 2,866 (21,993) (171,719)
Interest Expense 2,716 1,750 89
Income Before Tax 150 (23,743) (171,808)
Income Tax Expense (135) (60) (240)
Minority Interest - - -

Net Income From Continuing Ops 285 (23,683) (171,568)

Non-recurring Events
Discontinued Operations - - -
Extraordinary Items - - -
Effect Of Accounting Changes - - -
Other Items - - -


Net Income 285 (23,683) (171,568)
Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares $285 ($23,683) ($171,568)


Um…. to me this looks like they still lost over $23.6M in 2008. I guess compared with losing $171M this is a turnaround for sure…but that’s like comparing me to John Holmes (God rest his perverted soul).

This year Merge made $285K (K is the symbol for thousand for those economically challenged) on almost $67M in revenue - although they would have made more if they didn’t lose over $2M in the 4th quarter. To me that’s hardly worth getting out of bed for…Now let me say that given the softness of the imaging marketplace ANY profit is commendable - you go Merge, especially since big boys could have used some Viagra this year their sales were so soft - but I’d feel a lot more comfortable if Merge made their profit on actual SALES rather than through a $20M (that’s million) reduction on operating expenses. Still a profit is a profit so…

Now I hear a lot about longs and shorts, and I’m not talking about anything other than Merge’s 2008 10K I found this:

Common Stock Market Prices:

2009     4th Quarter       3rd Quarter          2nd Quarter      1st Quarter
High     $4.25                 $4.78                         $4.48                    $1.84
Low     $2.93                  $2.98                        $1.25                     $1.07

2008
High    $1.75                  $1.60                          $1.37                   $1.26
Low     $0.26                  $0.60                          $0.26                   $0.33

And this:
COMPARISON OF THE 5 YEAR CUMULATIVE TOTAL RETURNS
FOR THE FIVE YEAR PERIOD ENDED DECEMBER 31, 2009

Now for those who have a hard time interpreting what this means, $100 invested
in Merge would bring you a $15 ROI today…Of course that is triple what it brought in 2007 and, yes, nearly as much in the turnaround year 2008 as well so again we have a turnabout…so to speak…


Index

Date                    Merge Healthcare Inc.    Nasdaq Computer Index    Russell 2000 Index
                              (Nasdaq: MRGE)             (^IXCO)                               (^RUT)
12/31/2004             $100                                  $100                                   $100
12/30/2005            $113                                   $103                                    $103
12/29/2006              $29                                   $109                                    $121
12/31/2007                $5                                   $133                                    $118
12/31/2008                $6                                     $71                                      $77
12/31/2009             $15                                    $121                                     $96

So what’s going to happen?

Merge has a very very sharp, financially savvy management team that understands the financial marketplace. They are some of the best of the best from the finance world and know how to turn a profit. That, no doubt, is what they will do.

So here are the PACSMan’s predictions. A few months after the sale goes through (assuming it does go through, that is), the boys up top will get out their Ginsu knives and slice and dice both companies to maximize the investment and show a decent ROI to the investors. They will keep what the products and services they feel they can grow and profit from and ditch the rest. And if a few (or more than a few) people happen to get hurt along the way, well that’s called collateral damage. “It” happens and no one, especially not the investors, give a rat’s…..It’s all about the buck.

Now the burning question - will AMICAS PACS survive? I sure hope so. It’s a great product with even better potential - the best in the entire Merge/AMICAS portfolio.

What about the other products in the line, including the ones that have the strongest OEM relationships i.e. Cedera, Camtronics, and eFilm? That remains to be seen… I’d put money that there are a few buyers lined up for some of these products already. Don’t ask me who, though, cuz I’m not saying, but I have some very strong hunches.

In my hometown this week, we experienced nothing short of a miracle. A mere two miles from my house an 11-year-old girl who was lost in dense woods filled with snakes and alligators got rescued. Very near the 96-hour point where a search and rescue operation becomes a recovery operation, a volunteer from her former church, who really shouldn’t have been in there looking for her, found her - bug bitten and dehydrated, but very much alive… Everyone I know shed a tear or two. I have kids as well and know how it feels to not be able to find your child. When my “baby” Matt, who will be 17 on Friday, was age two he was “lost” for a whole 30 minutes, very well hidden in our house. During the time from when we called 911 until he was found, we had five sheriff’s deputies inside and out plus a chopper overhead looking for him. God bless these people. I can’t even fathom going for four days now knowing how or where our child is except being lost somewhere out there.

Yet the girl, her rescuer, and her parents all quoted a single bible verse that sustained them, Proverbs 3:5 “Trust in the Lord with all your heart and lean not on your own understanding.”

I put my trust in Him always and sincerely hope that the trust I have in Merge management to do the right thing for both its and AMICAS’ people, and not just the investors, is not displaced…

Only time will tell…stay tuned…

Merge/Amicas Deal: Place Your Bets

Ms. PACS: It's time to place your bets ladies and gentlemen.

The odds were in favor of Merge pulling off a $248 million acquisition of Amicas when it issued a statement guaranteeing it could back the offer. Morgan Stanley even put its good name behind the deal. But let's face it, this Merge/Amicas merger keeps dragging out...although it has provided hours of fun for the PACSman...and its getting a bit messy.

According to the PACSman, "They raised $40M from 14 investors on the 2nd then came out with another $200M offering on the 6th." This would prompt anyone to wonder if their loan from Morgan Stanley has fallen through. Or are there some existing conditions in the loan, forcing Merge to raise capital from other investors?

They say, never let them see you sweat, but it's pretty hard not to in a pickle like this one. So, if you don't mind a little sweat, and want to enjoy this as much as the PACSman does, then let's play a favorite game of mine, Texas Holdem Poker.

Get ready to place your bets.

Lets look to an impartial party, Moody's Investors Service. Moody's recently demoted its rating of Merge Healthcare Inc. slightly to a B2 corporate family rating. Why did Moody's drop it five notches below its previous investment grade? Risk. Moody's said, in a nice way, it was due to "Merge's small scale, integration risk, and risk that it could continue to pursue growth through acquisitions are behind the rating."

Place your bets...

But there was a tone of optimism. Moody's said, "We believe, however, that if the Amicas acquisition is well-executed, there could be substantial opportunity for cost synergies..."

Place your bets...

"...And the combined company to generate strong free cash flow. Another beam of hope.

Place your bets...

But Merge is a "relatively niche player" in an industry dominated by large imaging equipment vendors and IT companies.

Place your bets...

Plus, it relies heavily on radiology.

Place your bets...

In the meantime, while the company figures out how to diversify its consumer base, the $35 million to $40 million it will get following the acquisition's close will provide "adequate cash" over the next year. Whew.

Place your bets...

Wait, one more thing, it’s lacking a “revolving credit facility,” which apparently could lead to the depletion of its cash reserves.

Now, show your cards

And you wonder what really happens on Wall Street.

Beware of Ninjas

Ms. PACS: It seems like everyone wants to be a black belt these days. Just go to Ballys Total Fitness, all you need to have is a bank account and a pulse to move up in the ranks.

And while the ‘fitness’ business has sadly denigrated the art and the term black belt, business management has upgraded it to guru status -- as a rank for experts in Lean Six Sigma management methodology.

I get it, it’s sounds more Ninja than just a boring old MBA. And now it is being adopted in PACS. Yes, radiologists can qualify for Ninja status too.

One of the big adopters of Six Sigma is applying its industrial methodology to radiology workflow. The company is spearheading a study to improve radiology productivity by finding where they can enhance PACS. I know about this because I included it an article in ITN’s April issue: Best Practices in Radiology Workflow.

The goal of the project is “to understand the exact work efforts of a radiologist and make changes to products/solutions to take the wasted effort away through better software and/or configuration.” The company enlisted its team of Lean Six Sigma Black Belts (LSSBB) to watch radiologist, actually timing them with a stop watch, to analyze the workflow process. The plan is to then apply industrial engineering techniques combined with Lean Six Sigma methodology to the radiology workflow. Finally, the Black Belts’ is to find opportunities to reduce wait time, excessive mouse clicks, redundant actions, and repetitious movements. The idea is to help radiologists make a leap to increased efficiency - Hiyaa!

I like the theory, but would karate chop my boss if he stood over me with a stop watch.

But there is a colony of Power Rangers out there in the making. The other day, this guy who runs a marketing company called Power…something asked on a certain networking site: “How can the Radiology industry use Lean Six Sigma? I am looking to market my LSSBB to a greater extent. Any suggestions?”
There were suggestions. One that stood out was: “The January 2010 issue Vol 65, Iss 1 of the ACR bulletin may be a good place to start.”

I googled and i found: “Get your black belt in ACR MRI accreditation.” So the ACR has Ninjas too. In fact, a number of different organizations in the U.S., Canada and the UK are applying Lean/Six Sigma concepts to help improve efficiency, utilization, productivity, cost containment, etc. Between decreasing reimbursement rates, increasing imaging volumes, shortage of radiologists, etc. there is certainly growing interest in finding new ways to streamline and improve the delivery of imaging.

According to another Radrounds participant: "While there is a lot of info on the web about Radiology process improvement, key performance indicators (KPIs), etc – there seems to be a technical gap in terms of how people are able to analyze results/performance." He said he is working on a new solution to take data from any source, combine it into useful perspectives, and help organizations to improve workflow, reduce costs, increase utilization, patient volumes, etc.

Those are some useful tips, but is it just more pseudo black belt speak?

One thing is for sure: everyone thinks it’s cool to be a “black belt.” And, every field has one - whether it's radiology, the music industry, or its the originator of Lean Management itself -- Toyota -- but look how that turned out. The term “black belt” is a business buzzword. What the heck, Ballys Total Fitness runs a “black belt” mill.

For those who actually want to know, the real black belt is only the very beginning stage of becoming a master in either karate or tae kwon do or judo. It takes many, many years to move up the ranks and to understand it. That leaves just a few real Ninjas in the world - those who understand the real meaning of the belt (that does not include Yoda). So shhh...keep the secret. Kamsamida.

I wonder how long it will take to get a black belt in PACS? Anyone know?

PACS Divorce Rate Spikes!

PACSman: So why aren’t second PACS purchases flawless? One only needs to look at marriage and divorce statistics to understand. It is pretty much agreed by most experts that first marriages end in divorce about 40 to 50 percent of the time. The PACS “divorce rate” is much higher than that.

What surprises me is that the divorce rate increases with second marriages to 60 percent and more, while third marriages end in divorce at least 70 percent of the time. Does that mean third generation PACS are more doomed than second?
One would think that an individual who has gone through a marriage and divorce would have “learned his (or her) lesson” and will, therefore, not repeat the mistakes of the past. Alas, this is often not the case. Those who marry to fulfill certain needs, but are not prepared to give in return, usually marry with the same intent the next time around.
The same holds true with PACS. The second or replacement PACS becomes nothing more than a walk down a precipice, a courtship leading to fresh disaster, only because it involves a new partner.

Avoid Disaster
So how do you avoid the disaster? Make a list of what you liked and didn’t like with your first PACS. Evaluate your new PACS partner not just by the freshness they bring to the relationship but by how well they performed during the time you were together.
In doing the detailed evaluation and assessment, it is important to understand that while newer systems might perform better – after all it does run on newer hardware and is one of the primary reasons why you are upgrading – you have to also ask if the better performance helps you or hinders you? That may sound contradictory, but sometimes faster and cheaper isn’t always what you need, especially if you lose a feature you really used before.
Look at the company’s track record in delivering what they promised relative to software updates and upgrades. Did they meet the promised delivery dates? Did it work right the first time? Did it include everything that they said it would or merely provided a fraction of what they said?

Get the Top 10 Considerations for PACS Replacement here and read the complete article in the April issue of Imaging Technology News