PACS Market Conundrum

Executive summary

A recent Vermont-based CapSite Consulting survey suggests that most hospital and health system leaders are putting their purchasing plans of picture arching and communications systems (PACS) on the back burner, while they turn their attention to meaningful use matters under the federal American Reinvestment and Recovery Act/Health Information Technology for Economic and Clinical Health (ARRA-HITECH) Act.

As if vendors of picture archiving and communications systems (PACS) solutions didn't have enough to worry about, a new survey by the Williston, Vt.-base CapSite Consulting confirms what most in the industry had already guessed - the PACS vendor market is already heavily saturated, with relatively poor prospects for new sales in the next couple of years.

In fact, even the one real silver lining in the CapSite survey, released this spring-the fact that large numbers of hospitals and health systems are entering the replacement market phase, and the accompanying perception of the need to upgrade capabilities to satisfy clinicians-is overshadowed, say CapSite researchers, by the preoccupation of CIOs, other senior executives, and clinician leaders, with issues around meaningful use under the federal American Reinvestment and Recovery Act/Health Information Technology for Economic and Clinical Health (ARRA-HITECH) Act.

The fact that we found that literally 96 percent of the organizations we surveyed had a PACS was a bit surprising. - Brendan FitzGerald

The CapSite study polled over 600 hospital and health system leaders, including CIOs, other IT executives, physician chiefs of clinical departments, department managers, PACS managers, and others, all of whom are stakeholders in decision-making processes around PACS selection and usage. The survey sample, taken during November and December of last year, was relatively evenly distributed among organizations of different bed sizes, ranging the spectrum from under-50-bed organizations to those with over 400 beds.

As for the level of PACS market saturation, “While we certainly understood that we'Re in a saturated replacement market for PACS purchasing, the fact that we found that literally 96 percent of the organizations we surveyed had a PACS was a bit surprising,” says Brendan FitzGerald, CapSite's research director. “Indeed, only hospital organizations with fewer than 50 beds or under 40,000 diagnostic imaging exams per year in volume are without PACS systems now.”

On the other hand, with 60 percent of survey respondents saying that their hospital or health system purchased its current PACS system prior to 2007 (see figure 1), large numbers of patient care organizations could theoretically be in the replacement market right now. However, when asked whether they currently have plans to purchase a PACS system (new or replacement), only 17 percent answered in the affirmative (figure 2).

In addition, says Gino G. Johnson, CapSite's vice president, healthcare technology solutions, “The two factors that are complicating the market dynamics here are, not only is it a saturated market, but everyone is so focused right now on EHR [electronic health record] adoption and meaningful use, so it's the combination of the two factors together that is making the market so difficult for vendors.”

Functionality concerns could help vendors

If there's one real bright spot in all this, it is in the areas around PACS features and functionality. When asked about the “solution strengths” of their current PACS systems, functionality represented only 16 percent of the responses provided by survey respondents; in contrast, asked what the weaknesses of their current solutions were, functionality represented 47 percent of the responses (figures 3 and 4).

Meanwhile, when asked what the functional strengths were of their current PACS systems, the biggest responses (see figure 5) were customization (16 percent), enterprise-wide capabilities (11 percent), reporting capabilities (7 percent), and hanging protocols (7 percent). Asked what the functional weaknesses were of their current PACS systems, the biggest responses (see figure 6) were around image management (12 percent), reporting (9 percent), customization (7 percent), and hanging protocols (6 percent).

What do these results mean? FitzGerald says that “What seems clear is that the pain points aren't that severe” when it comes to solution weaknesses. “The current customers do talk about drawbacks in functionality,” he says. “But in terms of how we'Re interpreting the mindset of people who purchased between 2001 and 2006, they'Re really focused on meaningful use, and are bolstering their current storage with additional storage capacity.”

Referring back to figure 3 and perceived solution strengths, Johnson says that “I think it's interesting that you've got service/support at only 5 percent. Part of the environment is that when you think of a market at a saturation point, and functionality is more commoditized, companies are left with trying to differentiate based on service and support capabilities. But it seems that if only 5 percent see service/support as a strength of their solutions - the companies that really have an opportunity here are ones that can differentiate themselves around service and support.”

“I agree,” says FitzGerald, adding that “I also see the remote viewing and web-based aspects as really standing out. The industry has really come a long way from having to be physically standing or sitting in front of a workstation in the hospital; I would have thought the remote viewing and web-based platforms would have been stronger.”

Are there types of hospital organizations that PACS vendors might be able to look to as hopeful purchasing prospects anytime in the next few years? FitzGerald says yes. “We found that over 80 percent of the PACS solutions in the top two categories of organizations by exam volume-between 120,000 and 170,000 exams per year, and above 170,000 exams per year-were purchased before 2007,” he notes. “Those are also going to be the early adopters working on meaningful use. So when the buying activity picks back up, it's going to be in those areas, and by 2012, 80 percent of them will have a PACS system that will already have been 12 years old.” If any category of organizational size will pick up in the relatively near future, it will be that group of hospital organizations with the highest imaging volumes, he believes.

For more information on the CapSite study, please go to: http://www.capsite.com/pdfs/Imaging-IT-TOC.pdf

Healthcare Informatics 2010 July;27(7):18-20