Guest Editorial

Creative Approach to Financing a PACS1

Ronald Arenson, MD

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In the accompanying article in this journal, “FinancingLarge-Scale Picture Archival and Communication System” (1), the author, Dr. Goldszal, presents a novel approach to financing. A vendor has agreed to assume trisk for filming expenses if the expected reductions infilming costs do not cover the expense of the PACS. Tdeal is remarkable in a number of ways.

The chosen vendor was willing to accept the risk.Rarely do vendors accept risk associated with equipmsales or service. But even more unusual is the fact ththe risk depends on the behavior of physicians outsidethe vendor’s control and even outside of the Radiologdepartment.

In large PACS installations across the country, Radogy departments have often become nearly filmless inthe department, but the challenges of going filmless oside of the department have been much more difficultmentioned in this article, some of the largest challengare found in the operating rooms (ORs), orthopedic anarthritis clinics, and some private physicians’ offices. TORs are difficult because of the need to see images fthe operating table, which is often cluttered with equipment and personnel. And equipping each OR can becostly. Orthopedists, neurosurgeons, and many otherferring physicians need images in each patient examintion room, where often the counter space is not largeenough for a computer monitor. Some of these physicwill demand wall-mounted flat panel displays in the examination rooms, once again driving up costs.

Acad Radiol 2004; 11:1–3

1 From the Department of Radiology, University of California, San Francisco,505 Parnassus Avenue, M-391, San Francisco, CA 94143-0628. Addresscorrespondence to R.A.

© AUR, 2004

doi:10.1016/S1076-6332(03)00712-8

Any enterprise solution requires widely distributed aeasily accessible computers on a robust network for psicians to use. And the PACS must support web-basethin-client image access. The described system apparhas these features. But if one is planning on financingPACS in this manner, the infrastructure must be in plaincluding such computers and networking or else thescosts must be added.

Furthermore, this approach assumes that all imagein digital format, which requires either digital radiograpor computed radiography for plain film images. If thesare not already installed, the cost of these systems mbe added.

Obviously, starting from scratch, installing a PACS,web-distribution, personal computers throughout the eterprise, computed radiography, and digital radiographwould most likely cost far more than the savings fromreduction in film usage.

But getting back to the referring physicians, even ifnecessary computers and monitors are installed wherdeemed necessary, referring physicians may still demfilm. A typical orthopedic surgeon has arranged to havan assistant hang films in the examination room beforgoes in to visit the patient. He does not even have totouch the films, much less log on to a computer, searcfor the proper patient, and choose the examination animages of interest. The assistant could perform thesetasks, but then the physician would be using a compuwith someone else’s log-on. And if the physician takeswhile to get to the patient, the computer should havetimed out. Also, while waiting in the exam room, thepatient could have accessed other patients’ images anreports.

Orthopedists also need to overlay templates for protheses. Either these templates must be incorporated ithe workstations in digital format for the devices used,

films will still be required. Not all manufacturers provide

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these electronic templates at this time. And some PACSvendors only offer these on “special” workstations at ex-tra cost.

The long films for scoliosis or standing images ofknees are difficult to acquire in digital format. These longimages require a dedicated plate holder for computed ra-diography, and one of these special devices is neededwherever such images are taken. And software is neededto fuse the images together. Some of these systems imposean overlay grid, which some orthopedists seem to dislike.

All of these detailed problems can be solved, but re-quire attention before assuming that the referring physi-cians will accept the change from film to filmless access.And referring physicians often want to film images fortheir presentations or interesting cases and need to projectthe images for conferences or rounds. Conference roomsmust be equipped throughout the institution, and a conve-nient way of downloading images of interest must beavailable.

In the vendor deal described in the article, the assump-tion is that 80% of the current filming would be replacedby use of the PACS. Certainly, that goal is achievablewith considerable cooperation from referring physicians.But the remaining 20% may be difficult to penetrate. Ex-amples of residual film use include mammography (unlessthe department is completely digital in mammography),providing films to patients going elsewhere (CDs shouldbe offered first), and isolated areas that are not equippedwith computers. One might be tempted to avoid taking onsome referring physicians. The inability of orthopedists togo digital, for example, would probably exceed the 20%maximum film usage.

Continuing to film studies requires strategically placednetwork printers. Once again, this deal assumes that theprinters are already in place and did not need to be pur-chased. Maintenance and support of such printers is high,and if the institution is not successful in converting a highpercentage of film use to digital, the costs associated withprinters could be very high.

One basic premise in the calculation that the savingsfrom film expenses will cover the cost of the PACS is thecost of using film. Table 1 in the article shows costs/ex-aminations ranging from $6.13 to $11.25 for the varioussites. Previously published reports have shown the cost torange between $7 and $12 for departments using film. Itis interesting that the highest-cost site is the smallest fa-cility in number of examinations. Also, the largest sitehas been partially filmless for years yet still has a cost of$10.26. Obviously, if the cost for film is closer to the $6

range, it would be difficult to cover the costs of PACSafter the conversion. Although many believe that filmcosts are proportional to exam volume and that the costper exam is constant, there is some evidence that the costper exam actually increases with exam volume due to thecomplexity of large departments with satellite facilitiesand a shift to more complicated procedures.

A number of important points are briefly mentioned inthis article. The inclusion of maintenance, managementsupport, staffing, and training are hardly insignificantcosts that the vendor is going to bear. Furthermore, timelyreplacement of both hardware and software are includedin the lease. The details of those replacements were notprovided but probably refer to the major Radiology com-ponents. All of the referring physicians’ computers andmonitors also must be replaced but should fall under theinstitution’s information systems budget.

The system described includes two vital components: along-term archive and a backup archive for disaster re-covery. The long-term archive is based on digital tape,which is a reasonably cost-effective solution but does notoffer rapid access, as Dr. Goldszal mentions. This slowerarchival access is fine as long as the PACS offers robustpre-fetching of prior comparison images. If a large num-ber of cases require on-demand access of the long-termarchive, the system will not be well received.

There is an underlying assumption that the PACS iswell designed, reliable, and very user-friendly. The selec-tion of the PACS vendor is critical to ensure these essen-tial attributes. An efficient, effective PACS requires a ro-bust and integrated Radiology Information System. Andthe image distribution outside of Radiology is best sup-ported by the inclusion of images and reports in the hos-pital’s electronic medical record, if one exists.

Dr. Goldszal describes in a summary fashion many ofthe clinical goals of a successful PACS, including theimproved efficiency of the radiologist and more rapid re-porting and communication with the referring physicians.Although it is difficult to put a financial value on suchimprovements in patient care, the practical advantages aresubstantial.

The financial analysis presented in this article is basedon a simple Return on Investment (ROI). This approachis easy to understand and is a good basis for a quick as-sessment of financial viability. But a complex financialmodel such as this one probably deserves a more sophisti-cated approach, such as net present value (NPV). The netpresent value would take into consideration the futurevalue of investments and revenues or cost reductions,

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bringing them into consideration today. Another usefulcalculation is the internal rate of return (IRR). The IRRpresents a percentage that can be compared to rates ofreturn for other investments. Financial officials like thesecalculations because they can relate to them easily.

This financial approach with the vendor taking risk foroperational cost-effectiveness is unique. Hopefully, fol-

low-up in the next five years will demonstrate a success-ful venture for both the institution and the vendor. If so,we would expect other vendors to follow suit.

REFERENCES

1. Goldszal AF, Bleshman MH, Bryan RN. Financing a Large-Scale PictureArchival and Communication System. Acad Radiol 2003; 10:96–102.

Academic Radiology, Vol 11, No 1, January 2004 GUEST EDITORIAL

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