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For other articles and previous issues click here. February 21, 2005 Paying
for PACS — The Issue Is How to Do It, Not Whether You Should A popular RSNA session suggests that PACS has crossed a threshold of acceptance. It’s clearly not a luxury; it’s an essential component of any modern facility’s strategic mission. At the most recent version of the perennially popular RSNA presentation, “Making the Business Argument for PACS,” a shift in focus, attendance, and feedback suggest that the issue itself is on the edge of obsolescence. In this case, obsolescence is a good thing. The take-home message of the seminar, presented by Karen Jennings, RN, MS, and Bruce Reiner, MD, and moderated by Paul Chang, MD, is that PACS has crossed a threshold of acceptance. It’s clearly not a luxury in a healthcare organization—it’s an essential component of any modern facility’s strategic mission. In past years, the presentation had provided radiologists and radiology administrators with ammunition for making an economic argument that would persuade the powers that be to climb onto the PACS bandwagon. Presenters coached attendees who were eager to bring PACS to their facilities how to gather the convincing financial evidence and deliver it to administrators focused on the bottom line. They talked about what hot buttons to push to entice capital committees to appropriate funds for PACS. At the top of the session’s agenda in those past years were the components of the business argument: the projected benefits and return on investment, as well as the implementation strategy. The last item on the agenda had been the issue of financing PACS. Attendees learned to tout a roster of impressive benefits. In the “business argument” sermon, the presenters preached the gospel of PACS. It went something like this: The ability to digitally archive images would improve patient care by greatly speeding turnaround time and permitting faster diagnoses, attracting referring physicians and a higher-caliber staff, and boosting radiology productivity. But what would clinch the deal were issues that improved the bottom line. PACS can help facilities bring down operating costs with decreased film costs, film storage expenses, and the number of full-time employees staffing film libraries. Thus, the session’s focus had been gathering support for the concept of PACS and making clear to decision makers the strategic importance of PACS to the healthcare facility. That Was Then Why? Because, said presenters, the audience had already learned the sermon’s lesson; repeating it was preaching to the choir. Chang, who is the director of radiology informatics at the University of Pittsburgh Medical Center and cofounder of healthcare information company Stentor, noted that the tactics involved in discussions about PACS implementations have changed. In the past, he noted, financial officers told PACS enthusiasts, “Convince us that it’s worth buying.” Now, he observed, they say, “Tell us how much it’s going to cost and how to implement it.” Because administrators are clearly already sold on PACS, the presentation’s emphasis is evolving. Next year the focus will be much more about financing options—how to pay for PACS and who will pay for PACS. “In the past, the issue was how to justify the implementation of PACS, how to convince administrators that it was a good idea,” Chang said. “That’s no longer the case. Cost justification with PACS is quite clear. It’s obvious that digital management of images can pay for itself quickly—a fact discussed in a number of papers at RSNA. Experience has shown early adopters that return on investment occurs very quickly.” At the University of Pittsburgh, for example, this return, excluding soft benefits, occurred in 3.5 years, explained Chang. The annualized return, he observed, is close to 30%—a rate that’s better than most information technology (IT) investments. Chang believes the decision to have or not have PACS is something of a dead issue. “Return on investment has proven the value of PACS, and now the issue is how to pay for it,” he said. “It’s similar to a CIS or an RIS system. You don’t hear a lot about justifying those.” It’s a good sign, he said, that no one is asking why—they’re only asking how much. “It’s a subtle but significant transition in people’s attitudes,” Chang added. Facility Decision Now, said Jennings, PACS manager at the University of Utah Health Science Center and adjunct associate instructor in the College of Nursing’s clinical informatics program, “you need to bring in more than just your radiologist, but also the orthopedists, neurologists, and neurosurgeons, for example, because they’re also seeing the benefits of PACS.” “It’s now an enterprisewide proposition and investment,” Chang said. “PACS has become part of the entire organization’s overall mission and a key feature of its electronic medical records [EMRs] initiatives,” Jennings echoed. Chang thinks facilities are “hitching PACS to the star of the EMR.” At his institution, in fact, the term PACS has essentially vanished. It’s now known as the multimedia component of the electronic record. And since radiology is no longer the sole beneficiary of PACS, it no longer has to shoulder the burden of cost or responsibility for its implementation and management. With enterprisewide implementation of PACS, said presenters, there is now an enterprisewide operational cost that shifts from the radiology department to the IT department. “As long as radiology continues to play a dominant role in the implementation process, smart radiologists will want information technology to pay for PACS,” Chang said. Given this shifting soil of the PACS environment, it’s not surprising that the size and composition of the RSNA presentation’s audience have changed. Not only was the number of attendees smaller, but the type of participants has also undergone a transformation. “There’s always an interest in the course,” Chang said. “We’ve given it for a number of years and we tweak it with different speakers.” In the past, radiologists or radiology administrators filled the chairs, but the players have suddenly changed. “The majority of PACS deals were driven by radiology, but now most people understand that PACS just represents the multimedia component of the wider systems,” Chang said. Since the increasing trend is for facilities to link PACS with EMR purchases, Chang said PACS has gone off the books of radiologists. More frequently now it’s considered part of the EMR and thus becomes the domain of IT, and its use extends beyond the radiology department. Not surprisingly, there’s now a larger contingent of IT personnel and other departments at the session. “The fact that there were fewer people this year is a good sign because it means we’ve clearly moved from the early adopters to the early majority,” Chang said. “That we no longer have to sell ourselves is a reflection of the maturation of PACS.” Financing PACS Jennings noted that the traditional capital model often “leads to inadequately configured PACS.” What she means by that is that if you pay outright for the initial PACS when you move from film to digital, you’re not really going to know everything you need, and adding on later is a challenge. You may not know how many workstations you’ll require, and once PACS is rolled out, there will be a higher demand for it by referring physicians. “It’s difficult to go back to a capital committee and say, ‘Guess what? We didn’t ask for enough money and we need more,’” Jennings said. “If you have a capital or operational lease, however, you build back into the contract the ability to add on throughout the term of the lease without having to go back to the capital committee.” She added that capital committees typically meet only once per year, limiting facilities’ ability to add whenever necessary. Hospital departments compete for capital dollars, so you may not get exactly what you ask for, which might force a department to forego purchasing valuable system components that you think might not be essential. Widespread image availability—redundancy in the viewing hardware—she said, is typically the first thing to go. A lease or an ASP model offers the greatest flexibility to acquire, expand, and upgrade PACS. Buy, Lease, ASP? “It’s not like buying a CT scanner,” Chang said. “You can’t just drop it in and upgrade. When you’re talking about PACS, you’re talking about a very complex system that interacts with your entire network, and as such, almost by definition, by the time you get it implemented it’s almost obsolete.” That, he said, is a factor when facilities talk about total cost of ownership. Newer models for financing not only address limitations in available capital but are also trying to address the hidden costs of PACS—the never-ending extra charges that arise during the course of many PACS service maintenance agreements, for example. As a result, pay-as-you-go ASP models are becoming more appealing for many. According to Chang, Reiner surprised the RSNA audience with a slide showing that a significant majority of people who already had a PACS system and were ready to move on to another opted to go with an ASP model for financing it. Chang himself was one of those people. “We had a traditional capital arrangement, but our new PACS system is a pay-as-you-go, primarily because I didn’t want to be nickel-and-dimed—I didn’t want to have to pay the extra costs,” Chang said. This choice wasn’t driven by a lack of capital, he added, but rather by a desire for more predictable expenses and the need to have the most current technology. When considering the price of upgrades and the cost of technology going out of date, leasing and ASP financing models offer users protection against obsolescence, and, Chang added, “allow us to have predictable total cost of ownership.” Another reason these newer risk-sharing models are increasing in popularity, he said, is that it’s not uncommon for a vendor to lose some interest in a customer after the technology bill has been paid in full. “In the old days, I wrote a check for $12 million for a PACS,” he said. “Once you pay a vendor all the money, it’s human nature for them to be less interested. You then tend to get ignored or to simply not get the latest and greatest.” With an ASP system or with many leasing arrangements, however, the attention stays focused on you. In previous years, session participants first and foremost wanted to know how to fuel their hospitals’ administration with a fervor for PACS and gain support to fly the implementation. Now, said Chang, it’s not a matter of radiology representatives justifying the technology to their higher-ups. “People have recognized the importance of PACS and they no longer have to demonstrate the justification. Now all the interest revolves around the total cost of ownership.” Not If—When and How — Kate Jackson is a staff writer for Radiology Today. |
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