| |||||||||||||||
|
Home
|
PACS-Man —
How Does Big Companies Gobbling Up Smaller Ones Affect Purchasers? Big business. Conglomeration. Amalgamation. Tycoons. Big wigs. These are terms synonymous with the American business market, maybe even the American way of life. Every day, mergers occur, acquisitions are finalized, and good business aims to be big business. But this business model is much like a game of Pac-Man, with the giant gobbling up the insignificant dots that lie in its way to the next level. Home Depot now stands at the former site of Harry’s Hardware. And even if you are not a smoker, you support big tobacco every time you enjoy a Miller Lite, a cup of Maxwell House coffee, or an Oscar Mayer bologna sandwich—all products made by companies owned by Philip Morris, the world’s biggest tobacco company. Business is increasingly becoming big, name-branded, and homogenized. Just like business-as-usual corporate America, in recent years, PACS has increasingly become big business for the companies providing it, and the companies that acquired companies that merged with a company that provides PACS. One of the most significant shake-ups in the PACS pack was Philips Medical Systems’ acquisition of Stentor for $280 million. Philips had previously partnered with Swedish company Sectra for its PACS. Belgium-based Agfa acquired Heartlab’s cardio-PACS for $132.5 million and Emageon bought Camtronics Medical Systems, the cardio-PACS subsidiary of OEM manufacturer Analogic Corp., for a mere $40 million. The most recent deep-pocket showing came from the purchase of IDX by GE Healthcare for $1.2 billion. Yes, that’s “b” as in billion. All the purchasing, selling, acquiring, and merging may make the age of GloboPACS seem inevitable. If so, where is the motivation to buy mom-and-pop PACS? Some healthcare facilities are already answering that there isn’t any for fear of PACS-Man devouring their provider, and with it, their support. Customer Concerns Bockmon’s reasoning is legitimate with all the movement going on in the healthcare market and now with PACS. “There are a number of hospitals that bought one product and their PACS provider was purchased,” he says. “Then suddenly, the new company has their own product or product line and the reason they bought out the smaller company was to reduce competition and get some of the customer base that the company that they purchased already had.” Bockmon says the end result for these facilities was the sunset of their support for the old system and therefore, the facilities were forced to switch to the new product provided by the buyer or find another PACS vendor altogether. Because of this, he says, “our strategy up front was to avoid having that come back at us later. We based our planning on other facilities we knew about who experienced that.” He fears the same would happen to HCA if they went with a smaller provider, even though the trickle-down effect would take time. “Initially, it would have a relatively small impact, but over a period of a couple of years, we could see a reduction in coverage and support and then need to start evaluating options, basically forcing us to shop around for a new PACS provider.” Of course, more than a few small PACS companies have dried up and blown away over the years. But, getting gobbled up by a big company is better than having your PACS disappear completely. Service can go either way after a merger. “You are potentially going to have better service because bigger companies should have the resources to provide better resources, but if they continue buying up companies, they aren’t going to have five or so subdivisions of support that are going to concentrate on those smaller companies they bought out,” Bockmon says. “What usually ends up happening is consolidating support into two or three groups and, before you know it, it’s down to one group supporting all the legacy equipment and products from the purchased company. So over time, support backs off, and then eventually they just say, ‘OK, we aren’t going to support this anymore,’ and you have to change what you have in place or go to a third party.” Bockmon also fears that billions of dollars in purchasing power will hurt PACS in the long run because companies can buy their smaller competitors, and less competition means companies aren’t constantly pushed in the direction of innovation—one of the time-honored potential advantages of small, nimble companies. PACS-Man Speaks Out Tanjore says that in some cases, companies aren’t actually buying an entire smaller company, just parts of it. “What we have done is we have not really purchased PACS companies. What we have been doing is acquiring other strategic parts of PACS, other pieces like IDX because they had a huge footprint in the IT industry. GE is primarily clinically driven and we wanted a bigger footprint in healthcare IT,” he says. “We were not players in the IT world, so this acquisition [of IDX] was not complementing anything we already had in the market so we did not displace any major products. What we did was supplement what we had so it would be a good strategic marketing position for us to provide an end-to-end solution for our customers.” While there is no foolproof way for smaller businesses to stave off an acquisition, growing large enough to offer a complete enterprise solution could diminish the interest of larger companies just looking for parts to complete their own solutions. “The market is beyond radiology right now,” Tanjore says. “The industry is changing toward how we purchase PACS; [it’s trending toward] common simplified data storage across the ’ologies.” End-to-end is no longer the niche but the market itself that businesses are vying and buying to get into. Tanjore says for not just giants but anyone in the PACS business to be competitive in the future market, they need to present a whole clinical solution. Interoperability is the buzzword at trade shows and Tanjore says this translates to enterprise systems, even purchased from different vendors, needing to interface fluidly like a handshake. The upside, he says, to companies merging or competing to purchase one another is singular accountability. “Instead of just giving you a handshake, we will take you from end to end without having to chase multiple vendors,” he says. The goal of acquisitions for the vendor, Tanjore says, is a unified system—a one-stop shop; an integrated health enterprise. “It’s not gobbling the market share, it’s providing an enterprise solution rather than saying, ‘Hey, my solution works well with HeartLab or whatever,’” he says. “We want to say [with GE] you’ll have one single service, one single deployment, one single project management, so that helps the consumer to not have to chase the vendors so they can focus on productivity.” As for the fear of dissolving support in the event of a buyout, “we would definitely support and have a contractual obligation to continue work,” Tanjore says. However, perhaps validating Bockmon’s worry of smaller PACS being phased out upon purchase, Tanjore adds, “There is always an advantage to using an integrated product within our product system: You have better data sharing, no data replication, and less overhead with better performance.” Mind Your Business Another best practice, whether you sign on with the PACS version of your local farmers’ market or a global chain, is doing your homework before you buy. Know who and what you are buying into and protect yourself because in an economy where everything has a price tag, no company is 100% safeguarded from being bought out. Indeed, many small companies’ goal is to be bought out by a bigger company to generate a big payday for the founders instead of building an ongoing concern. Since there are few ways to predict which companies will be purchased until an offer has been announced, it is up to your facility to decide what is the best maneuver for purchasing PACS. Maybe the small PACS company will be bought out, maybe it won’t, but if it is, what will that mean for your facility? Having protection like a prenup may lessen the fall should your PACS fall victim to PACS-Man. — Meghan A.T.B. Reese is assistant editor
of Radiology Today
|
June
5, 2006
|
3801 Schuylkill Rd • Spring City, PA 19475 Publishers of Radiology Today All rights reserved. |