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…

RSNA 5-Day Forecast

Ms. PACS: I was looking into my crystal ball, trying to see what to expect at RSNA 2009 next week, when I saw...a huge smudge - I needed Windex. So in my quest to seek out truth and wisdom, I turned on the TV. Clicked on the weather channel. To my surprise, standing in front of a large map, it was Willard Scott! I wondered if it was an old VCR recording…but realized it was in fact 2009. Maybe Willard’s 401K had taken a nosedive, forcing him out of retirement. In any case, despite his feeble yet rotund state, he did provide some sound data in his RSNA 5-Day Forecast.

Willard said: “You can expect to see:

1. Low res images sent from PACS to EMR: If you go to the BRIT Systems booth, you will see their new Webworks solution. Referring physicians and their patients now have access to diagnostic images with a new browser-based application for viewing patient images and reports on any computer with an Internet connection and a browser. The new application also provides access to radiologists for low volume review. The platform uses AJAX for real-time updating of patient lists and clustering technology for redundancy and load balancing.

INFINITT Accent also allows PACS-based medical images to be accessed along with all other types of medical information on any Internet-enabled terminal. A new PACS offering for EMR, HIS and practice management vendors fully integrates the complete range of medical images with EMR software of almost any kind.

2. Vendor-neutral archiving will be one of the big themes on the exhibit hall floor.
Carestream will show its vendor neutral PACS and storage/archive solutions, which brings disparate PACS and data systems into a shared, long-term data management solution that can streamline management tasks and reduce costs.

3. Bathroom breaks: The bathroom wait times on the RSNA exhibit hall floor will be approximately 3 minutes long (which is a 2 minute drop from last year)…except in the ladies room - that will remain the standard 15 minutes.

4. New PACS: Siemens will introduce the new PACS that appeared on Dalai’s PACS Blog last week (http://doctordalai.blogspot.com/)

5. RSNA unveils structured reporting templates – The RSNA has established a Radiology Reporting Committee to identify and promote "best practices" in radiology reporting. June 2008: RSNA convened a workshop to plan the future of radiology reporting. More than 50 radiologists, medical informatics specialists, and representatives of cardiology, oncology, and pathology participated. Consensus was reached on a global template for diagnostic radiology reports, including standardized radiology report headings.

December 2009: RSNA will release the first set of reporting templates, freely available for downloading and use. (http://reportingwiki.rsna.org/index.php?title=Main_Page)

Have you seen the Google “radiology-report” site with RSNA radiology structured reporting templates. It contains RELAX-NG templates for radiology-structured reports. The code is from the GNU free software operating system. Someone at Medical College of Wisconsin is developing it.

By the way, Stage 6 of the EMR Adoption Model requires structured reporting systems.

6. Fuji 86's its annual House of Blues (HOB) party – is it due to NEMA code of ethics? When did fun equate unethical behavior? Do you really think a doctor is going to buy equipment just because you buy him a beer…and it's only a buffet dinner – not an intimate candlelight engagement with a contract on the table. Granted, I have witnessed some embarrassing behavior at such events…but the moral infractions usually happen after the party, not on HOB premises. The silver lining is that like any enforced code of conduct, there’s a loophole, or a lawyer to find one for you. Some companies are keeping it ethical by throwing a charity event. At least some of the frivolity goes to those in need. It’s all about balance.

7. White flag: The CT slice wars will officially come to a stalemate as attentions focus on lowering the dose.

8. Pocket diagnostics: Ultrasound debuts as a new iPhone feature – for both diagnostic purposes and pure entertainment. Talk about consumer driven healthcare.

9. E-Ordering imaging exams: To meet with stage 4 of the EMR adoption, CPOE and CDSS (Clinical Decision Support Systems). Evidence-based medicine makes sense, but it’s hard to get physicians to actually use it. IT tools that provide decision support at the time they make decisions may help close that gap. Kind of like the little Einstein on PCs (or you can make it a cat) that alerts you when it has a suggestion or detects a potential error. I heard Bill Gates’ wife, Melinda, came up with the idea for that little alert icon – but man is it annoying. I have to use the cat icon so at least its cute and I don’t get as aggravated.


10. Last, but not least. While perusing the IHE demo exhibit, the PACSman will find his true love – she will not be a PC or a MAC this time. But one thing is for sure - she will have a pulse.

Held Hostage

PACSman: In the past three weeks I have had three clients come to me looking for help with image archive, database and data migration-related issues. In each case the vendors have held the customers hostage. Some were semantic issues involving contract language while others simply because the client elected to go with a different vendor rather than upgrading with the incumbent.

Vendor number one wanted a ridiculous fee to do the data migration so the client could go to a competing vendor (nearly double the cost asked by data migration specialists like Acuo and DeJarnette and it didn’t include data reconciliation or data cleansing either). Vendor number two refused to sign a contract saying that they would provide a vendor-neutral archive and had nothing proprietary in their design that would require third party data migration… And the vendor number three.. well... I won’t even go there but let’s just say that what they did to their client crossed the boundaries of decency let alone good business. These weren’t the smaller fish vendors either where you might imagine vindictiveness would be a given. These were some of the biggies…and the contracts dollars ranged from $250K to a several million dollar wonder.

Why then in a world where standards reign do vendors still hold customers hostage by not supporting standards? Simply because they can…

I fought tooth and nail for my multi-million dollar client to get the vendor to put something in writing that the 40 TB+ of data they will be archiving annually (this was a huge contract) would not be subject to the cost and time constraints of data migration. After a month after various contract language proposals going back and forth each which were rejected by both myself and my client time and again as worthless, the big vendor won out on a technicality- since the client never asked for a vendor neutral archive that would not require data migration specifically in their 540 page RFP (although they did ask for this several times in a roundabout way) the vendor indicated they could not be held accountable for meeting specifications that weren’t asked for and they deserved to get the bid. True, but….

The second vendor offered free data migration from a company they just bought if the client upgraded to their (the buyers) system. Here’s the kicker though- the buying company announced that it would no longer support the system they just bought after 90 days, so you either upgrade to our new system or you are outta luck. And, knowing that there is no such thing as a free lunch, the client asked how would this migration be paid for? The vendor was almost brazen in their response- why, from the margins we make on the new system, of course. The client opted to go with a different vendor and now is being held hostage by the losing incumbent vendor who will only migrate their existing data- data the client paid a premium to archive in the first place- at double the price.

As an industry we have lost our most valuable commodity- integrity. Very few vendors seem to play by the book of common decency any more and those who do make sure they are able to write their own rules. Witness the very nature of DICOM itself, the most non-standard standard that ever existed. Standards utilization means virtually nothing because we have no true standards. DICOM, HL7, IHE and others are not only optional (contrary to what one might think nothing dictates the mandatory use of standards support except some basic HL7 support that is mandated by HIPAA) but they can also be interpreted in a plethora of ways. You can write image data in DICOM Part X file format, yet throw on proprietary compression like some vendors still do and it all goes out the window. Data tagging can be done so many ways it makes your head spin and when you talk about tag-morphing people look at you like you are speaking Greek…It’s like the doc meeting the gal at one of several cocktail parties the vendors throw at RSNA. Both enjoyed the free food, booze and music and by the time the clock strikes 12 both are in a very good mood. She asks if his marital status. “I’m currently separated” he says, and after another drink or two they both smile and walk back to his hotel for a “nightcap”….Technically he is right- his wife is home taking care of their 3 kids while he is in Chicago chasing down anything with a pulse…but his statement is accurate- he is “separated”…And so too it is any more with vendors. They say what you want to hear just to get you in between the sheets…and God forbid you ask for something in writing….No can do, soldier boy…

There are a few vendors with integrity left- damn few- but the majority still sing along with Bachman Turner Overdrive:

“….and you'll find out every trick in the book
and that's there's only one way to get things done
you'll find out the only way to the top
is looking out for number one
I mean you keep looking out for number one.”

In their quest to merely stay alive let alone make a profit vendors are selling more yet making less. To quote another BTO song they are “taking care of business” but going about it all wrong. And in doing so vendors aren’t winning. Clients aren’t winning. End users aren’t winning. Everyone in this industry and the people we serve has lost- our integrity, our focus, or desire to do what is indeed right…to “first, do no harm”….And that, IMHO, is just plain wrong…


Ms. PACS: Your point on business ethics is very timely. Especially at a time when some of the wealthiest people in the world recently discovered they were totally ripped-off by Bernard Madoff.

Yes, indeed, business ethics is all over the mainstream media as of late. Just last night on The Office (a TV show which should be required viewing for anyone with a job), guess what the theme was – you guessed it – business ethics. In the show, one of the characters that the boss, Michael, is hot after is Holly. While Holly was doing an ethics seminar, she discovers that the office is hardly an ethical place. When everyone is given immunity to confess any unethical behavior they have conducted, it is revealed that in addition to such offenses as pencil-lifting and ‘time stealing,’ Meredith is doing something very unethical…swapping carnal favors for a discount on paper supplies, oh, and for gift cards to Outback Steakhouse – you can hardly blame her. Of course, this is grounds for termination, says Holly. But Michael defended Meredith declaring that no one should ever be fired from Dunder Miflin because it is a family, and that while her actions were wrong, they were saving the company money, and in these hard times they should just turn a blind eye. His tactics, however, didn't get Holly to bend on carnal favors.

But, PACSman, as far as ethical behavior in PACS - only if it closes a deal. So maybe if PACS vendors realized that ethical conduct paid off, they might employ that strategy. For example, DICOM, HL7, IHE and other standards are just optional, and if you throw in a little proprietary compression, you strong arm the client into staying with your PACS. I understand the vendor wants to keep the client, but if you put someone in shackles, resentment will grow and there will likely be a rebellion.

Are PACS vendors so scared of the competition and have so little faith in their own product that they turn to incompatibility to latch on to clients? I understand making a buck, but how about concentrating on giving the end-user a good experience. If PACS as a product becomes leveled out in price or ‘commoditized,’ then on what basis is the user going make his/her decision on which PACS to go with? It comes down to the end-users’ experience – that is the deal breaker. Have you ever had to get your cable set up? The company gives you a four-hour window of time in which you need to wait at home for the cable guy to show up. If he doesn’t show up, you have to reschedule, and there is little recourse. Sure, there are two other cable companies available in your town, but they all pull the same B.S. – aka, bad service. In the case of PACS, there are more than enough vendors to choose from if the service is poor.

So, how do you create a good experience for the end-user – offering sound support for PACS implementation, a reliable system, flexibility and throw in 24/7 service. A good experience with PACS is as important as a good bartender, keep pouring the good stuff and they get hooked - not by holding ‘customers hostage by not supporting standards.’ And look out – because open source PACS are gaining ground, and there, compatibility is not an issue.

As for ethics in general, part of President Obama's inaugural speech touched on a few:

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends - hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism - these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths.

Oh, at the end of the episode of The Office, the staff enjoyed a free meal at Outback. Can you blame them?

Can PACS Have its Cake?

Ms. PACS: If you look at the entire radiology imaging cycle, according an interview I did with Paul J. Chang, M.D. last week, one of the most efficient areas, he said, is the reading room.

Dr. Chang is conducting a “Closed Loop Imaging” research trial (see video) in which his team identifies the bottlenecks and inefficiencies not just in PACS, but throughout the whole loop - from reception, to the imaging suite with setting up the injector and scanner, to post-processing images and of course getting the report in front of the right doctor in the necessary amount of time – whether urgent or not.

What surprised Dr. Chang was the efficiency of PACS. “What I noticed was that PACS companies in general along with speech recognition companies and the integration of speech recognition basically have resulted in incredibly efficient and very optimized reading rooms,” he said. “Here’s the problem, it doesn’t matter how efficient we are in the reading room if the rest of what we do in radiology is inefficient. I can be incredibly accurate in radiology in the reading room, but if the study was not acquired accurately, it’s the old garbage in, garbage out.”

So this is a good report card for PACS – or is it? Perfection leaves little to room for repair, i.e., if it’s not broken, how can you fix it? Of course we know nothing is perfect – especially not PACS – because it continues to evolve and there are always bugs with every upgrade. So what is the next step in the evolution of PACS?

According Dr. Chang once again (hey, he’s a great source) – it’s Web services. Right, Web-based PACS has existed, but it has provided rudimentary tools and thus far has not been very relevant, until now. So as the world – including healthcare – turns to service-oriented architecture (SOA), the role PACS will play will reside predominantly in Web services.

“Everything is a service. So the first step is to expose everyone of these resources: PACS, 3D, modalities, RIS, EMR, CPOE, all of these things, as services. Web-services is the spinal chord and SOA is the brain. What we are building is a workflow engine that can take as services and orchestrate this complexity…It makes no sense to have a PACS, the RIS or a modality drive this; you need to have an optimized workflow engine that uses all of these services as services,” said Chang. “That’s what closed loop imaging is based on – SOA.”

It will be a long while before they close the loop - air tight - on imaging, but if the researchers can effectively look at the entire loop and improve efficiency, quality and safety – then, according to Chang, “We will have our cake and eat it too.”

So, under the SOA umbrella, will PACS get its just desserts?

Winning and Losing - It’s all a part of the game…

PACSman: Well it’s all over now, but the whining. We have a new President-elect and with him new hopes and dreams and quite possibly, even the reality that change will indeed happen. At least that’s what was promised….sometime…

There are so many similarities between PACS and getting elected it’s frightening. Every four years we elect a new President; every five to six we “elect” a new PACS. The campaigning for a replacement PACS begins before the new PACS has even been installed.

We choose our President based on an incredible limited amount of knowledge, often using nothing more than a recommendation from someone we know, a flier in the church pew, or just a gut feeling to direct us. We often choose our PACS the same way…

Neither the President, the PACS vendor nor the end user knows what is in store for them until they start working together…and many times each wishes they had all known more about the other party before as well.

Typically you only have a few viable parties to choose from…although many candidates and companies throw their hat into the ring trying to get at least a few votes…And sometimes you love the candidates and companies you have to select from…At other times you choose the lesser of the evils...just as in our most recent election…and in too many PACS selections…
Candidates will spend exorbitant amounts of money trying to win, yet the amount of money you spend doesn’t necessarily guarantee victory any more than being part of a major party or company does. Endorsements come from all over and few will say a bad word about their party or company…unless they lose and then the real truth comes out (and finger pointing as well)…And while McCain’s speech may have been supportive, it sounded a bit like he was blaming the African Americans for his loss – “....I recognize the special significance it has for the African Americans and for the special pride that must be theirs tonight...” So, too, does it go with PACS.

Who controls the government just like who controls the PACS is always up for debate. While the President is technically Commander in Chief and Vice President our #2 man, someone forgot to tell Alexander Haig that back in 1981….especially considering there are two offices between the Vice President and the Secretary of State who would take office first (the Speaker of the House and President pro tempore of the Senate would both be required under U.S. law to resign their positions in order for either of them to become acting President if the President and Vice President were incapacitated). But why left some silly little Constitutional law get in the way...Sorta like letting contract issues cloud the real problems…or IT battling radiology for control of the system.

Candidates make all sorts of promises without any fear of reproach. The resounding theme of this year’s campaign was change and people expect that. Yet before the final votes were even tallied there was a little backpedaling on exactly when this change would occur…Gotta love the acceptance speech… “The road ahead will be long. Our climb will be steep. We may not get there in one year or in one term, but America, I have never been more hopeful than tonight that we will get there....There will be setbacks and false starts...” This sounds like a man who is already second guessing his campaign promises...Of course PACS companies do the same by handing out 99.9%+ uptime guarantees without any associated penalties or provide a list of exemptions that are a mile long to whatever guarantee they offer…

So – four more years? Thank God for term limits because at least in my book it seems like it’s been eight too many already…

Personally I’m making the first contribution in Doctor Dalai’s war chest. After all 2012 is just around the corner and we need a man who is both fiscally responsible and a strong man isn’t afraid to speak his mind. Who better than the Dalai himself? (if his wife lets him that is (laugh)!!!

Dealing with Absurdity

PACSman: I am a consultant. I am paid an absurd amount of money to address questions my clients have about PAC systems they are looking at buying or contracts they are about to sign and other items of a similar ilk. If I don’t have the answers to the questions they have immediately I am expected to find these answers out within a reasonable timeframe. For being paid an absurd amount of money I also have to deal with absurdity at all levels on a daily basis…absurd sales claims, absurd systems that don’t perform as designed, absurd contracts – a Cirque du Soileil of absurdity.

I’ve also been called absurd many times before as well. Like the time I turned down a job that would have guaranteed me four times the income I make now; or when I told a potential client that they don’t need my services or anyone else’s for that matter – here is how to do it yourself for free; or when I told yet another client to walk away from a deal that seemed too good to be true. Of course the job would have required me to travel 80 percent of the time and that was a sacrifice I just wasn’t willing to make with two teenage sons still at home. There will be no Cats in The Cradle here. The “free” deal turned into a very lucrative contract years later when the client who recalled my honesty moved on to a bigger (and better) facility. And the client’s deal that was just too good to be true was, one that would have left the customer with a brand new unsupported half million dollar legacy system just a few months later had they signed it. So why am I struggling for answers tonight to a question that hasn’t been asked yet? Because I simply don’t have the answer I need and don’t think anyone else does either.

I just got back from a viewing for the mother of one of my youngest son Matt’s friends. I had never met this woman before and talked to her on the phone only once briefly. I know her oldest daughter who, at 15, is Matt’s age from his high school marching band where I see her and the 180 others every Friday night as the official photographer of the Marching Seminoles (you learn something new about the PACSman every day). I had never met her youngest daughter who is 10.

Now people live and people die every day, both younger and older than the 51 years this woman lived. That is a fact I can accept. But to die in the way she did was absurd. Police are investigating it now to determine if it was accidental or deliberate, but it involved a gun and a boyfriend at eight in the morning …yet until the facts are known we can only speculate. It’s bad enough that a mom has to die in such a horrendous way, but her two children’s last view of their mother should have been something other than her lying on the bedroom floor of her house with a gunshot wound. Which brings me to the question I haven’t been asked – yet – but for which there needs to be some answer – why?

I’ve read all the self-help books until I was blue in the face when going through some personal issues in years past – Kushner’s “Why Bad Things Happen to Good People,” Dobson’s “When God Doesn’t Make Sense,” and others of a similar ilk. Most tend to compartmentalize it all using stock answers that, at least to me, and seem to be completely trite. I’ve both heard them and tried to rationalize each and every one of them as well. “We are fallen people in a fallen world,” “It’s all part of God’s master plan.” But as a consultant I deal in facts and the fact here is this makes no sense. How does having a mother who pretty much raised her two girls alone being taken from them make any sense at all? And why now, when she recently left a lucrative career as an attorney in private practice to become a public defender just so she could spend more time with her kids? God’s master plan? Fallen people? Tell that to the kids left behind…and those of us who have to answer our own kids’ questions as well...

I dealt with this very same issue several years ago while working with St. Jude Children’s Hospital, asking the doctors there how they handled knowing a child was going to die. That too made no sense to me at all. Their answer seemed logical to me at the time – that more children leave here walking than any other way and those who don’t we learn from to help heal others – but when I got home and saw my own kids that logic just disintegrated. Faith like a mustard seed indeed…

It’s times like this I wish I wasn’t a consultant or at least not one who is so damn analytical because I know I won’t sleep tonight wondering what I’ll say if the question comes – “Why, dad?” It will be worse yet if the question never comes – not for Matt, but for me, because one of the beautiful things about being a consultant is I learn as much if not more from my clients than they ever do from me. Yet another PACS Secret revealed. Maybe if I listen to Matt, I might learn something still. Or maybe his silence says it all – his trust in what is and not questioning anything.

Some may say I’ve watched too many episodes of The X Files and their mantra “Trust no one” has been embedded in my brain. I wish it were that easy. Instead life lessons have taught me that trust is something that… well, I won’t go there. And for those who believe, know I am also very familiar with all 61 references to the words trust and God together in the Bible as well.
“The truth is out here” was another X-Files mantra. I’m sure it is….somewhere…. and I’m listening for it…but all I keep hearing are the words of Chris Rice’s song “Naïve” echoing in my head instead….…

“How long until You defend Your name and set the record right
And how far will You allow the human race to run and hide
And how much can You tolerate our weaknesses
Before You step into our sky blue and say "That’s quite enough!"

Am I naive to want a remedy for every bitter heart
Can I believe You hold an exclamation point for every question mark
And can I leave the timing of this universe in bigger hands
And may I be so bold to ask You to please hurry?

I hear that a God who’s good would never let the evil run so long
But I say it’s because You’re good You’re giving us more time, yeah
˜Cause I believe that You love to show us mercy
But when will You step into our sky blue
And say "That’s quite enough, and your time is up!"

Am I naive to want a remedy for every bitter heart
Can I believe You hold an exclamation point for every question mark
And can I leave the timing of this universe in bigger hands
And may I be so bold to ask You to please hurry?

Am I naive...
Can I believe...
And can I leave...in bigger hands
And may I be so bold to ask You, to ask You, to ask You

How long?

Ms. PACS: These tragedies are like a broken record and instead of growing more sensitive, we become desensitized. The only good that can come out of it is that times like these cause us to reflect on our own lives and reevaluate our relationships.

You may have read the article, “Top 10 Reasons to Change Your PACS Vendor - SIIM News Spring 2007” by Chris Meenan and Paul Nagy, PhD (1), where they discuss how buying a PACS is a long-term commitment. They warn that shared values between you and your vendor and your company's direction may diverge, prompting you to ask the question: “are we right for each other?”

The second most important telltale sign on Meenan and Nagy's list was the "top 10 signs it's time to consider changing your PACS vendor." This is when you find yourself “buying PACS hardware on eBay.” Almost as sad as surfing Craig’s List on the sly for that special encounter. The authors note that while “older UNIX equipment has historically had great reliability,” they warn, “don't be lulled into a false sense of security.” As equipment ages, failure rates increase - there is no Cialis for this. And if your PACS vendor is no longer available in the general market, find a new one…but not on eBay.

In PACS as in life, we tend to hold on to things, people and concepts that are in reality a false sense of security. Not to trivialize the tragic loss to the family by any means, but these types of tragedies are almost commonplace in the news and in our neighborhoods. Why? In this case, the false sense of security for the family was protecting the home from outside invaders with a handgun. Once again, the security measure backfired. The fact is, a large number of handgun related deaths occur in a domestic setting and are the result of one family member or friend killing the other.

In 2005, 76.1% of all homicide deaths in the U.S. were caused by a firearm, according to National Center for Injury Prevention and Control (2). The next item on the list of homicide deaths was a “cut” or “pierce” which weighed in at a meager 10.1% comparatively. So when will it end? Never. As long as people in this country keep clinging to a false sense of security.

I live in what unfortunately is ranked in 2008 as the number one murder capital of the nation, according to USA Today. Many of you will be attending what is known as the "largest medical show in the world" very soon in this same city. The town earned this deplorable title largely due to the spiraling rate of handgun-related homicides. This type of urban environment can be likened to a modern day Wild West. Back then, outlaws met at high noon to have a pistol slinging show down in the middle of town, while merchants, women and children, and other passers-byers, originated the gaper’s block. What’s not so funny is that when you’re walking down the mean streets of any major city and some suburbs the outlaws these days lack the courtesy of formally challenging you to a face-to-face dual. No, they take you by surprise, and unless you’re Quick Draw McGraw, your handgun is more likely the nail in your coffin than in theirs.

By the way, the number one reason to find a new PACS vendor was a “Poor understanding of your needs.” Maybe that's the first step to dealing with absurdity.

Reference:
1. http://www.scar.rad.washington.edu/index.cfm?id=2538
2. http://webapp.cdc.gov/cgi-bin/broker.exe?_service=v8prod&_server=app-v-ehip-wisq.cdc.gov&_port=5082&_sessionid=qCTHRMaxK52&_program=wisqars.details10.sas&_service=&type=H&prtfmt=STANDARD&age1=1&age2=40&agegp=1-40&deaths=12830&_debug=0&lcdfmt=custom&ethnicty=0&ranking=10&deathtle=Death

Paradoxes of Our Times

PACSMan: The older I get the more reflective I get. A friend of mine sent me a Powerpoint with these words in it set to music and pictures, and I just felt compelled to share it. It has more to do with life than PACS, but so much of it can applied to our day to day life in a PACS world as well….I’ll let you be the one to figure out how….

Paradoxes of Our Times
Today we have bigger houses
and smaller families.
More conveniences, but less time.

We have more degrees,
but less common sense.
More knowledge, but less judgment.

We have more experts, but more problems.
More medicine, but less wellness.

We spend too recklessly;
Laugh too little,
Drive too fast,
Get too angry too quickly,
Stay up too late,
Read too little,
Watch TV too much,
And pray too seldom!

We’ve multiplied our possessions,
but reduced our values.

We talk too much, love too little,
and lie too often.

We’ve learned how to make a living,
but not a life.
We’ve added years to life, not life to years.

We have taller buildings,
but shorter tempers;
Wider freeways, but narrower viewpoints.

We spend more, but have less.
We buy more, but enjoy it less.

We’ve been all the way to the moon and back,
but have trouble crossing the street to meet our neighbors.

We’ve conquered outer space,
But not inner space.

We’ve split the atom,
But not our prejudice.

We write more, learn less; plan more, but accomplish less.
We’ve learned to rush, but not to wait.
We have higher incomes, but lower morals.

We build more computers
to hold more information,
to produce more copies,
But have less communications.

We are long on quantity,
But short on quality.

These are the times of
fast foods and slow digestion;
Tall men and short characters.

More leisure and less fun;
More kinds of foods, but less nutrition.
Two incomes, but more divorces.
Fancier houses, but broken homes.

That’s why I propose, that as of today,
you don’t keep anything for special occasions,
because every day you live is a special occasion.

Search for knowledge. Read more.
Sit on your front porch and admire the view without paying attention to your needs.
Spend more time with your family and friends.
Eat your favorite foods and visit the places you love.

Life is a chain of moments of enjoyment,
not only about survival.
Use your crystal goblets.
Don’t save your best perfume, use it every time you feel you want it.

Remove from your vocabulary phrases like
“one of these days“ and “someday”.
Write that letter you’ve thought about writing.

Tell your family and friends how much you love them.
Don’t delay anything that adds laughter and joy to your life.

Every day, every hour, and every minute is special.
You don’t know if it will be your last.

Another One Bites the Dust...

PACSman: The headlines blared out today what NostraPACSMan predicted almost a year ago – Health Systems Solutions Enters into Agreement to Acquire Emageon to Create Healthcare Technology Leader. OK so I didn’t predict the actual company who was buying them – I have enough challenges with the government agencies already without the Securities and Exchange Commission (SEC) coming down on me for divulging insider information I had no knowledge of – I swear!! But anyone in their right mind had to have seen this one coming (and no comments about whether I am in my right mind or not either please).

I can imagine the folks over at Oliver Press Partners, who own almost 17 percent of Emageon stock, aren’t too thrilled with getting back about 35 percent of what they paid for their “investment” in Emageon…but it beats losing it all too which was the direction the company was going even though they have a decent product and excellent marketing.

I find it sad in a comical way (or comical in a sad way) that the company didn’t even bring in enough revenue to cover the value of their Initial Public Offering (IPO) let alone any residual value. I’m not sure if that is a sign of the economic times or sign that the company was hurting in a big way. Word on the street has it that Dynamic Imaging’s sale to GE was nearly double that of Emageon’s sale value...and many other PACS sales have been significantly higher as well. Of course, times were different then too, and the companies different as well. The Rolling Stones said it right though – “You can’t always get what you want...but you get what you need…” and this is what Emageon needed… I guess. For my taste this deal was much too close to dating on Match.com or e-Hominy Grits – and frankly, if that’s the best deal I can find that’s out there, I’ll do without (and have).

Financing $85M to purchase the company for $62M is a smart move on HSS’s part, but HSS needs to inject some serious new blood at Emageon to make them start movin’ and groovin’ because at their current burn rate they will be out of money in about a year...or less… Of course, by then, management will no doubt have cashed in whatever stock they haven’t already (after the mandatory waiting period of course)…and then add to that any golden parachutes and such. So if they actually succeed, it’s an added bonus, and if not…well, I got mine so. Again, reminds me too much of dating (and me NOT getting mine thank you very much). It’s visions of Merge all over again…I just sincerely hope that none of the many guys and gals I know in the company get hurt like so many others have when companies were bought and sold or are laid off in the struggle for a company just to try and stay alive another day…

Whether the market reacts favorably to this sale and to the new buyer is anyone’s guess. I have never heard of HSS, and while they claim that their “portfolio of products and services extends across many segments of healthcare including home healthcare, medical staffing, acute and post-acute facilities, and telehealth/telemedicine, grouped into three segments: technology solutions, software and consulting,” their web site reflects something totally different. Time will tell though – and ya gotta give them a chance…Even the PACSman gives out chances…once…and only once….cuz as our fearless leader George W. Bush once said “…fool me once, shame on — shame on you. Fool me — you can't get fooled again.”

Ms. PACS: At least our God fearing leader had an appreciation for The Who.

And ‘fear’ – of the evil empire, that is – was the crux of his re-election campaign – sans special effects. It also is the resounding theme today on Wall Street, across all world markets, in bottomed out stock indices – the Dow, FTSE, Nikkei – as well among consumers and homeowners.

It sounds like you, PACSman, see something fearful about this transaction. Fear that CEO’s go unchecked and rape and pillage companies, while all the workers get are sweat and tears. True, the company owners did whatever it took to go public, and once they did and growth teetered, the stockholders were ready to cash in as fast as they could. It’s not about the heart and soul of the people who build it, but about how big a buyout you can get. It is about fear - or better yet, about not fearing because whoever is willing to assume the risk, will likely reap the most rewards.

As for rape and pillage, if it’s consensual, then no one’s at fault, unless there’s a minor involved. The workers get to work in a company that’s growing, hopefully gives them raises and if they are smart, they will get a deal on their company’s stock – I know I did with my last company and now I get a check for 6 dollars and fifty-six cents – every month!

True, life isn’t fair, or is it? Although the golden parachutes that the greedy CEO’s get are outrageous, we have to recognize that was part of the recruitment process. Also, who’s fooling whom? The CEO pay off becomes part of the next overpriced deal. That’s why they need $85 Million, not just $62. Look, when you buy a house – that’s just breaking ground in a very large money pit. But maybe in 10 years you’ll build some equity. As for those money grubbing CEOs – they are no geniuses – they just know how to play the game. The real fear in this scenario was that there would be no buyers for Emageon. But they managed to sell the farm. As for the employees, don’t you think they had some insight into the company’s plans even before NostraPACSMan did? Hopefully, most got out while they could.

No, “my friends” (said in a Senator’s eerie geriatric voice), the real fear is what will happen in November. To that, even Bush might mutter: “Meet the new boss...same as the old boss.”

PACS Hits 90% Penetration - NOT!!!

Ms. PACS: There is something going on at the Guinness Centre in Dublin, and its not research. I hate to be a cynic, but when there is a flashing neon light that says “The Sky Is Falling!” You think, ludicrous, right? Unless, of course, it’s 1980 and you are within a stones throw of the mouth of Mount St. Helen’s.

So, I had to bring this to your attention PACSman. I saw a headline on an industry web site that announced, and quite officially I might add, that the PACS market penetration in the U.S. healthcare space is almost at 90%. Since you tend to keep your finger on the pulse of the PACS market, I wanted to fact check this startling report with you before joining the rest of the herd, blindly believing everything I read, and heading out to pasture.

If this were true, it is a sobering reality that would close the doors on more than 90% of the PACS vendors. So 90% is a very dubious figure in my sheepish eyes. Might this be one point we can agree on?

While you're thinking about it, pass me the bottle Mister Jones.

PACSman: Ay, pass me the Irish Whisky cuz someone’s been drinking again!!!

I just read the aforementioned press release where the Irish research firm who calls itself “a leading source for international market research and market data” indeed indicated that their research has found PACS has 90% market penetration in the U.S….Now unless they are endowed like John Bobbit in his post-Lorena days no one has come close to achieving that degree of penetration in the U.S. PACS marketplace…What’s funny is that PACS is even less embraced in Europe that in the US – the site of this publisher’s headquarters. So who’s been hitting the corner pub and is it the whisky that’s doin’ ya or the Guinness… The editor of one U.S. publication that reported their release I know is laughing like the rest of us since he issued this caveat at the end of the release – Editor’s Note: This report’s findings must be limited to large hospitals and academic medical centers within the U.S., as our knowledge about the market would reflect much less penetration — especially within smaller hospitals, diagnostic imaging centers, cardiology practices and physician offices. So true, JB, so true…

There are so many errors from this company in this report that it defies logic. Their own excerpt starts out “During the past 35 years, ultrasound and nuclear medicine were introduced into clinical medicine...” Methinks someone should read on the history of ultrasound
(http://www.ob-ultrasound.net/history1.html is an excellent start). A quick search will show them that ultrasound was tested in medicine in the late 40’s and used clinically since the early 50’s. And according to the Society of Nuclear Medicine (SNM) web site, nuclear medicine has been around since the mid 40’s as well. Let’s see – 2008 minus 35 equals……yeah, early 70’s for sure….40’s, 50’s , 70’s, hey it’s all just numbers, right, so pass me that number this way please (what are they smoking in Ireland?) The report also noted “X-ray morphed from analog films to digital, and virtually all medical images became soft files on the electronic networks…” Virtually all? Quick, someone call the CR and DR manufacturers and even digitizer vendors and let them know that they can pull their shingles in now because everything is already in soft copy form…

I also love how they define a PACS (or PACSs as they call it). “A PACS network typically consists of a central server that stores a database containing the images connected to one or more clients via a local area network (LAN) or a wide area network (WAN) that provides or utilizes the images. This allows remote viewing and diagnosis…” Last time I checked, the modalities provided the images, not the central server…and…let’s see….we have the picture…and we also have the communications…but wait!! Where’s the archive? Oops…it’s missing in action from their “Statement of Report”…Never mind….PCS it is!! I’ve also never heard CT, MR, NM, US and PET referred to as an “imaging instrument” and the last time I checked a mammogram was what a mammography device produced, not the unit itself. This report is fraught with silly errors like these….

The overview indicates the author is an M.D. with a specialty in clinical radiology, while the senior editor a doctoral-level clinical scientist with a PhD in biochemistry. I’m impressed — NOT. If they interviewed “senior managers from major company players” plus conducted literature searches and discussed this with “professionals in the imaging marketplace” how come I wasn’t included? Or my good buddy the Dalai? Or PACS luminaries like Dave Clunie, Elliot Siegel, Paul Chang and others? Huh? Huh? I didn’t get a free copy so I have to assume I’m not in it (major bummer), but I sure as hell am not going to pay 1497 euros (about US$2,008) for the electronic version or 2957 euros (about US$3,967) for the “enterprise edition” to find out if I’m cited or not.

It’s also apparent that they have been drinking their own Kool-Aid for way too long since the “primary sources” of the studies come from “hundreds of database tables and many comprehensive multi-client research projects and Sector Snapshots that we publish annually…" Can you say rehashed information? More Kool-Aid please, Reverend Jones….thank you…

I, and 90% of this market, buyers and sellers alike, will tell you right now that there is no way PACS is 90% penetrated in the U.S. because if it is, someone is seriously missing out on the action…

The best and most accurate part of this study seems to the disclaimer itself that reads “The information set forth in this study was obtained from sources we believe to be reliable but we do not guarantee the accuracy, adequacy, or completeness of any information contained herein or the results obtained by the use of such information.” I wonder if they will let me borrow that verbiage when working with my own clients….after all, I’m a bargain compared to these guys...and my information slightly more accurate as well.….

If You Can’t Beat Em, Buy Em

PACSman: I looked at the breaking news of Nuance Communications, Inc. buying yet another competitor today, Philips Speech Recognition, for $96.1M, and had to shake my head. This makes the fifth (5th) speech recognition company Nuance has bought in just under three years. The purchases started with Nuance’s Dictaphone acquisition back in February 2006 for $357M followed by Focus Informatics, a Web-based speech recognition editing service provider’s purchase in March 2007 for $58M; then Commissure’s purchase for an undisclosed amount in October 2007, Vocada, a voice-driven test results management company who was also a partner of Commissure’s back in 2005, who was purchased by Nuance in November 2007, and now Philips for $96M. Ever heard of the Sherman Anti-Trust Act guys? Must be if you can’t beat ‘em it’s easier to buy ‘em- or sue them- whatever works. Nuance also has a great track record of doing the latter as well. Nuance has failed in an attempt to purchase Canadian software provider Zi Corporation for $40.4M this past August, so they followed up 10 days later by filing a lawsuit against them. Nuance also filed patent infringement against another potential acquisition target, Vlingo, in June 2008 for infringement of their speech-to-text technology. Mere coincidence? You tell me…

Nuance isn’t just gobbling up companies in the speech recognition area but others as well, notably, eScription, a medical transcription software company is April 2008 (for $363M), among others. Is it any wonder that the company showed a net loss of $14M on $602M in sales in FY ’07? Maybe if they stopped buying competing companies and started selling their own products they would be in the black instead of the red…

A September 4, 2008 report on iStockAnalyst (http://www.istockanalyst.com) by Ketul S. starts out “The acquisition machine which fueled growth at Nuance might be slowing down due to the high debt that Nuance has accumulated in the last two years.” Oh really? Sure could have fooled me from what I’m seeing, although the analysis of the company was right on target.

There was an excellent response to the post by a gentleman named Walter Tetschner whose blog site is called gethuman (http://blog.gethuman.com). I love what he says:
The basic business model that they are pursing does not make any sense at all. The basic Nuance market approach is to acquire companies in order to enter a market segment and then acquire competitors to obtain market share leadership in that market segment. The individual markets in which Nuance has chosen to compete are highly competitive and are subject to rapid technology changes. Nuance states that achieving Technological Superiority is an essential requirement in order to compete effectively: Yet this is virtually impossible for Nuance to accomplish on a sustained basis. True R&D at Nuance is non-existent. The money that Nuance shows that they spend on R&D is mostly just integration of products/technology that they acquire. The R&D people that they acquire leave Nuance shortly after the acquisition occurs. Meanwhile, innovative companies continue to invest in R&D and quickly field products that are superior to what Nuance has. In order to compete, Nuance responds by either acquiring these innovative companies at grossly inflated prices or attempting to drive them out of business by suing them for patent infringement. This is a vicious cycle in which Nuance ultimately loses. Nuance gains technological superiority for a very brief period and quickly loses it. The high acquisition price that is paid and the legal costs of suing competitors is much higher than the cost of the R&D to advance the technology. When you include the acquisition costs and the stock dilution, it becomes apparent why Nuance needs to resort to pro-forma (non-GAAP) financial reporting to show a profit. Nuance also identifies having Broad Distribution Channels as an essential requirement in order to compete effectively: Yet – Nuance is clearly alienating their channel partners by regularly competing with them. Nuance is on a path to reducing the broad distribution channel that they had at one time. Nuance is a house-of-cards that will crash.

I have seen properly designed RIS’s that incorporate bar coding of normal reports along with digital dictation and transcriptionists who can turn a report around in a timely fashion that can effectively compete with SR technology, yet SR definitely has its place in radiology and in healthcare in general. The question is will Henry Ford’s approach to the Model T – “You can have it in any color you want as long as it’s black” be the same approach the radiology marketplace has with VR – “You can have any VR solution you want as long as it’s from Nuance.” Only time will tell…..

Ms PACS: Okay, PACSman - how many years have you been in the business – 20 plus? And how many companies in healthcare do you know expand via acquisition? Look no further than the big three in radiology.

So what’s your beef about Nuance growing its business by acquiring all of the speech recognition technology it can front cash for? Guess what – they also own decision support tools like the critical test result solution (Veriphy) it got when it swooped up from Vocada.

Now that it has gobbled up all of the local competitors, it is going to try its luck in Europe. Lets see what they can do with their new European language-solutions. Maybe they’ll learn to how speak “Fur-e-nch.”

I would be more worried about why Philips dumped the business unit. Philips explained that the PSRS’ SpeechMagic platform is "not a strategic fit for Philips’ healthcare business" because it “tend(s) to focus more on improving document creation and information management, as part of a hospital’s administrative process." Whatever that means. It's interesting that Microsoft just announced this week that they were incorporating the Philips SR product into Amalga – yet they compete with Nuance in the EMR world. Why would Philips sell off its VR division if they were going to get this new contract with Microsoft? Maybe Philips got out while the getting was good. Even so, Nuance seems to have a few more tricks up its sleeve with its broader portfolio of products in hand – Dragon Naturally Speaking, Dictaphone’s speech recognition and a slew of radiology products.

It sounds like the Nuance executives hope to redirect the $2 billion Europe spends annually on manual processing of clinical information toward its digital solutions. Plus, European governments are now investing heavily in healthcare IT. Apparently, the U.K. alone sunk $24 billion into its national IT healthcare program. Lets hope for Nuance’s sake, the limies will sink some more in.

So, PACSman, since your broker has yet to convince you to buy stock in the new ‘conquistador’ of voice recognition, its no skin off your nose if they do what every other company would like to do – buy out the rest. Anyhow, wait and see – they still need to come up with the deferred payment of $64.5 million in cash due Philips by September 21, 2009.

Should PACS Functionality be Patentable?

Ms. PACS: There is a reason that there are only a few good open source radiology PACS available today – contributors to open source need incentive to improve the software. Meanwhile, proprietary software developers are the ones making innovations and money.

With the open source business model since you cannot reap profits off the technology, you need to upsell users on ancillary services like systems integration, support, tutorials and documentation – which proprietary PACS providers already do. So, if you are a PACS provider and you want to stay in business, you need propriety software and that means patents.

Did you know, PACSman, you can even patent your business model. Yes, it’s considered intellectual property. Ever hear of Netflix, the online video rental company? The company patented its computer-implemented approach for renting flics to customers. Once it received the patent, Netflix turned around and filed a patent infringement suit against its number one competitor – Blockbuster.

As you can see, in any industry, if someone invents innovative technology, then they are entitled to receive money for it. Besides, if we didn’t have patents, then everyone would copy everyone else, making all PACS the same and leaving little incentive to develop technology to improve PACS.

And how does the radiologist benefit – he/she gets technology enhancements that help him/her do his/her job more efficiently and ideally deliver better care to the patient, not to mention make a decent living.

Unless you’re running a charity, and even in that case someone is getting paid, a PACS vendor needs to make money to pay for all of this R&D and that involves patenting new technology. Wouldn't you agree?

PACSman: I believe in a system that rewards those who come up with something new. I’m all for Superman’s “…never-ending battle for truth, justice and the American way” (as if we really have any of those today. Just ask OJ – “if the glove doesn’t fit, you must acquit”). But are the “patents” that have been issued in the PACS marketplace really new or just an opportunists taking advantage of a system where the patent reviewer really doesn’t have a clue on what existed before? In fairness to the patent reviewers, there have been so many vendors who have come and gone in the PACS marketplace (over 500 at last count) that its hard to know what was and wasn’t real from a software design perspective. But should basic software features and functionality really be patentable at all?

All PAC systems share many of the same basic features: window, level, zoom, roam, flip and rotate, to name just a few. The burning question is where do we draw the line at what constitutes advanced (“patentable”) vs. basic (non-patentable) features? Hanging protocols are basic to PACS; the same can be said about a DICOM CD having an embedded viewer in it. Without either the functionality each offers is highly limited and almost unusable. So why are these and others the subject of patents? Because when the patents were issued no one knew what did and didn’t already exist – and revoking a patent is about as hard as getting Bill Clinton to try and define what does and doesn’t constitute…. oh never mind…

History is fraught with patent horror stories. If Alexander Graham Bell hadn’t beaten Elisha Gray to the patent office by a few hours, Gray would have been considered the creator of the telephone even though Gray’s design was much more advanced than Bells. And look at television – Paul Nipkow invented a scanning disk way back in 1884 that was the precursor to TV. That was followed by Vladimir Zworykin’s patent for the iconoscope in 1923 and yet another by him for an image dissector in 1927. Yet Philo T. Farnsworth is considered the father of television, receiving patent #1,773,980 for the first television system – on August 26, 1930. It wasn’t till almost 10 years later though, after much wrangling that stunted TV’s growth, that RCA and others broke down and paid patent royalties to him. Even though he technically won, Farnsworth’s victory was short-lived though and in 1949, depressed, drunk and addicted to painkillers and with his patents about to expire, he reluctantly agreed to sell off Farnsworth Radio and Television. Once RCA owned the patent and had the resources to properly develop and promote the technology, the golden age of TV actually began…

So what of patents and patent cases being pursued in the PACS arena? A few of the smaller vendors have signed royalty agreements, but nearly all because the cost to fight a patent infringement case exceeds the value of paying the extortion fees being charged. The majors are fighting it and rightfully so…

The U.S. Patent and Trademark Office issues nearly 700 patents a day – over 182,00 patents annually – so to say it’s a daunting job would be an understatement. That said, they have a responsibility to the market to insure that the patents they issue are ones that are ones that reflect innovation. Most patents in the PACS arena, at least those I’ve seen, do not. Much of the areas that companies who have gotten patents on has been done before, but other vendors just never patented it, that’s all. After all, who woulda thunk??
Bottom line – is it wrong then to be an opportunist? Only if it hurts the market. The patents being fought over today have the potential to hurt the market….and that is not good at all. The last thing we need is a market that is depressed, drunk and addicted to painkillers like Farnsworth was just because a few companies decided to try and win the battle, while the marketplace loses the war.

Do You Really Need Service?

Ms. PACS: From the imaging centers to the radiology groups to the hospitals, money is tight (although I’m not sure how much the healthcare insurance providers are feeling it). Wherever you go these days, people are trying to find a way to save a buck. I bet even the PACSman has considered riding his bike to the store rather than throwing more money at America’s most expensive commodity – gas (technically crude oil). The PACSman may even opt to cut his losses and take a cheap date out on Fridays.

But there are some things you don’t cut corners on and that is PACS service. I realize imaging centers in particular, hit hard by DRA reductions in imaging reimbursements, are looking for ways to stretch their shrinking budgets. But to suggest a radiology group would be better off without IT service is like buying a new car and never getting a tune up. Eventually, you’re not going anywhere.

Like all technology, PACS breaks down, and when it does there better be a hotline where you can call the PACS guy or gal to fix it. No one knows this better than the radiologist trying to get through a cycle when suddenly his PACS freezes up.

This especially makes sense when PACS downtime translates into dollar and cents. And no one knows that better than IT administrators. In the 19th Annual 2008 HIMSS Leadership Survey IT (which included 317 healthcare IT workers), 26% of respondents cited “a lack of budget as the most significant barrier to successfully implementing IT at their organization.” Despite this, they said spending due to growth in the number of systems and technologies would increase throughout 2008, as would the number of FTEs in the IT departments. Obviously they are not all working on PACS – lets hope not – but the point is that even those most affected by the crunch are not going cheap on IT – and that includes PACS.

PACSman: I agree there is a need for service, but by whom and at what cost? You say that “money is tight” and quote the 2008 HIMSS leadership survey that states “a lack of budget as the most significant barrier to successfully implementing IT at their organization.” My survey may be able to beat up your survey but the reality is most software “failures” can be remedied by a simple system reboot about 95+% of the time with known “bugs” that are slotted to be fixed in a future software update constituting the balance of the problems. Does hardware fail? Yes, but it’s cheaper and faster to get hardware service directly from the hardware vendor than pay the PACS vendor an uplift and wait for them to call the hardware vendor on your behalf (that’s how it usually works anyway). And if a system is properly designed, hardware failures can be kept to the bare minimum as well.

My issue isn’t necessarily with service itself but rather the cost of service agreements (or SA’s as they are better known). Most vendors charge between 12 and 18% of list price per year. This equates to 16-24% of system net since most systems are significantly discounted. After four or five years you basically have bought another complete PAC system. And what do you get for your ever-declining dollar? Basically support for something that was defective when you bought it. Cut that cost by half to a third and we’ll talk…maybe….

Vendors love to talk about uptime and response time guarantees, but rarely, if ever, will accept any financial penalties for failure to meet these, so why pay for something you aren’t getting? As for being a “preferred customer” and getting preferential service because I have an SA…puleaseeee!!!! If I’m spending $1M or more with you, I better damn sure be a preferred customer…with or without an SA.

Now there is one strong reason to have an SA and that is because you can’t get updates (bug fixes) without one. Most vendors don’t even have a mechanism for buying a software update without a SA in place if you wanted to… and that is a sad but true reality. True, it may have been broke when we sold it to you, but without an SA we won’t fix it...and with few exceptions most vendors charge extra for system updates that provide you with added functionality so… what’s the big deal here? At least Robin Hood gave something back to his merry men…

Sorry, Ms. P, but my bike is in the shop so my ‘98 Jeep with 150K miles gets the privilege of carrying my fat bootay all over East Jesus at a whopping 15 mpg (21 highway). As for the dating arena, I’ve opted to cut my losses there too and don’t even bother dating - be it a cheap date or otherwise. They are too much like an SA- what is covered you don’t want, what you do want isn’t covered, and the ROI basically sucks (which is more than most dates I’ve had did…) And so it goes…