photo David S. Lackner, M.D., chairman of radiology at St. Francis Medical Center in Pittsburgh. St. Francis last year signed a five-year lease with Cemax-Icon in which the hospital pays a minimum monthly charge based on 85,000 images. The price per procedure drops as the number of images rises.

photo Dennis McQueen, PACS network administrator at Saint Joseph’s Regional Medical Center, trains staff to use their newly implemented system.

PACS in 2000 is not unlike the Internet circa 1995: Everyone knows it’s out there, but not everyone is in on the act.

Much like the big corporations that were among the first to sign up, buy into and log onto the Internet, large hospitals and academic centers of excellence became PACS pacesetters, the first to benefit from the technology that is helping shake up and shape the medical marketplace. But, just as the Internet had to devise strategies to capture the multitude of small businesses and organizations, the healthcare industry is having to come up with ways of making it possible for the majority of health providers — the smaller 100- and 200-bed facilities — to get in on the PACS revolution.

While many administrators and physicians may think that some sort of PACS is a “must have” for their institution, they also continue to face questions of paramount importance, sometimes beginning with the inquisitive, “How will we benefit?,” but always followed by the moment-of-truth, “How do we pay for it?”

Those men and women who have spent years evaluating their facilities’ needs and exploring their organization’s various financial options will tell you there are no easy answers to those questions. So will industry consultants. No one-size-fits-all strategies, they all agree. No guarantees, they point out. No returns. No exchanges (receipts notwithstanding).

“I come in and initially want to discuss with the departments and get their reasons behind why they want to move toward PACS,” says Gary Fammartino, senior PACS consultant with SG&A Consulting (Arlington, Texas). “I think that is the first question that needs to be asked. It could be as simple as ‘we want to go filmless’, to ‘we really want to get a control over our management of film,’ because in many environments there is a lot of lost film, there are a lot of delays in reporting X-ray procedures based on the fact that it is such a manual process, a labor-intensive process. Most of them have a pretty good understanding of what [a PACS] does, but there is a lot of tunnel vision with regard to what it can do and what they want to get out of it.”

Prior to joining SG&A Consulting last year, Fammartino, who holds an MBA in management and finance, was administrative director for radiology, oncology, cardiology and respiratory therapy at St. Elizabeth’s Hospital (Youngstown, Ohio), part of the Humility of Mary Healthcare Systems. Previously, he had been administrative director for imaging and centralized scheduling for two hospitals in the NCH Healthcare System (Naples, Fla.).

“Most people I work with are not convinced they want a PACS,” offers Mark Bakken, executive vice president at U.S. Radiology Partners (Dallas), which partners with small, often rural, radiology practices. “Most look at the evaluation to see what they can do.

“In healthcare today, especially in the facilities that have to be penetrated, you have to look at funding,” Bakken continues. “There are tremendous PACS solutions out there, but they are very intense. They do a lot of things that are whistles and bells, nice add-ons, but you don’t need an electric window to drive a car.”

Trying it on first
When the 289-bed St. Joseph’s Regional Medical Center (South Bend, Ind.) decided to take the PACS plunge, hospital administrators took three years to kick the tires, look under the hood and even test drive their “vehicle,” so to speak. They leased equipment in phase one of their installation, then purchased equipment in phase two.

“My main desire to get out of a PACS was image management. It meant that we would no longer be dealing with lost films or films that were only available in one spot at one time where they are needed in multiple locations at multiple times,” says Gary Jensen, St. Joseph’s manager of diagnostic imaging. His department takes some 91,000 images annually.

“We devised a strategy to implement PACS in stages, and we went live with stage one in March 1999, essentially taking our emergency room and our ICU filmless, Jensen adds. “We put in a CR system, and we did all portable X-rays. We put image review stations in the ER and also in the ICU. For everything we did we also printed hard-copy film and that’s what the radiologists read, but the images that the ER does and the ICU physicians used were on image review stations.”

photoStorageTek provides image archives capable of storing images on-site for several years.

When phase one went “live” in 1999, it included a CR system from Agfa-Gevaert Group (Mortsel, Belgium) paired with RadWorks monitors and network from Applicare Medical Imaging (the Netherlands). All equipment was leased through Comdisco Inc. (Rosemont, Ill.) for a term of three years.

The hospital launched its larger phase two around Memorial Day this year and purchased the equipment.

It stayed with Agfa for CR and Radworks for workstations, but expanded its PACS reach by putting CR into the main radiology department and installing review stations in the physicians’ general reading room, the radiologists’ general reading room, and one each in the cardiac care unit, the cardiothoracic recovery unit and the neonatal intensive care unit.

Phase two included the addition of three more readers, another dry laser and what Jensen described as a “huge-capacity” image archive from StorageTek (Louisville, Colo.) that is capable of storing images on-site for several years. There is no off-site storage component. The hospital had been assured that its existing radiology information system (RIS), a McKesson-HBOC (Alpharetta, Ga.) product, could accommodate and work in concert with the new PACS.

“We took a little leap of faith when we did this linkage with what we consider to be best-of-breed Agfa CR and RadWorks software,” Jensen adds, “because nowhere else at that time in North America were these two products being linked together. The only other place was in Helsinki, Finland.

“It was worth the risk,” he continues, “because I knew a greater risk was having software and review stations that were not user-friendly because of the great spectrum of computer literacy on the part of the physician staff. If we put review stations out there that were difficult for them to access their images on they A— would not use it and, B — would complain to high heaven to administration and that would shoot any plans about a phase two project, because the administration would think the project was not successful.

“Our strategy was,” Jensen confides, “if we could successfully pull off phase one, we would not have to politic hardly at all for phase two. We would let the referring physicians pound on the doors of administration saying, ‘Let’s get workstations, let’s get workstations; we really like this.’ But if it did not come off smoothly, no matter what we said, phase two never would have been funded.”

photoSt. Francis’ David S. Lackner, M.D. (left) and resident physician Nooruddin Punjwanni, M.D., (right) examine PACS images.

While both phases of the installation generally went well, the hospital is experiencing technical difficulties with pre-fetching images for comparison, a situation that Jensen regards as “resolvable, just a matter of making it happen.”

Jensen says the hospital chose to lease the first time around, because it did not want to be locked into equipment and technology that would be outdated in a few years’ time. The decision to purchase, rather than lease, the phase two installation came down to an operational decision made by the hospital’s financial department.

Now Jensen is moving ahead with “informal” plans for a Phase Three PACS expansion that will include a few more review stations and the possibility of web service so that physicians could access images from their offices or homes. Meanwhile, St. Joseph’s has hired two in-house PACS administrators to maintain the network and the system.

Customer service appeal
Jensen recalls that St. Joseph’s approached its PACS decision by creating an advisory committee and by calling in a consultant to help determine the tangibles — film costs, for example — and the intangibles, such as increased primary physician satisfaction levels. When it came time to make his appeal for PACS, he played the intangibles card — and won.

“I read a lot of articles in the journals about cost justification for PACS, and it can be a really difficult case to make because what you are asking for is an initial huge outlay of money with the promise that somewhere down the line, through the reduction of film and chemistry and film room FTEs (full-time equivalent employees), it will catch up. And somewhere even further down the line you will be ahead of the game. I knew that pitch probably would not work with the financial folks because they are looking for a more immediate return on investment,” he asserts. “I chose instead not to even go there as far as cost justification or reducing cost. I chose to mainly define the decision to go with PACS as a customer-service issue — customer service for the patients, customer service for the referring physicians, the service excellence concept.

“At the time, there was quite a big emphasis in our organization placed upon service excellence,” he elaborates, “and I made the argument that this is one clear way in which we could show our commitment to it by ensuring we were going to be producing images of a higher quality than ever before, images that could be manipulated and more information could be gained, images that were available to the user more rapidly. Arguably, it was less radiation exposure and images would never be lost, and with the carrot being dangled way out in the future that, gosh, it will probably save us some money, I said not to do it for that reason, to do it for the reason of technical and clinical excellence. Well, I won — that one,” he admits, amusedly.

When capital won’t do
While St. Joseph’s enjoyed the financial flexibility that allowed it to invest capital dollars in PACS, St. Francis Medical Center (Pittsburgh, Pa.) did not.

As the flagship hospital in the St. Francis Health System, the medical center — at the time it first considered PACS in 1994 — had been ranked one of the largest hospitals between New York and Chicago with approximately 700 beds. A recent and ongoing reorganization due to financial difficulties, however, has reduced that number to 175 medical-surgical beds with additional, yet still unspecified, beds for psychiatry, possibly 100 to 150. A second facility involved in the PACS project, St. Francis Cranberry in Cranberry Township located 25 miles north of Pittsburgh, in 1994 was exclusively an outpatient facility that in November 1998 added 32 beds. A third facility closed in August. A fourth is not involved in the project.

David S. Lackner, M.D., on staff at St. Francis since 1989 and chairman of radiology since 1993, says the hospital completed acceptance testing and is just now ready to start going filmless with its pay-per-procedure system.

Earlier this year, Lackner discussed his hospital’s financial justification for PACS based on 85,000 procedures a year and estimates of $15 to $18 per film study. (See Medical Imaging, February 2000, “PACS Pays (Really).”)

Despite the recent closing and consolidations in the system, Lackner says it is too early to predict if and how those numbers will change.

In November 1999, after five years of due diligence, St. Francis Medical Center signed a five-year lease with Cemax-Icon (Fremont, Calif.), an Eastman Kodak (Rochester, N.Y.) company, for which the hospital pays a minimum monthly charge based on the 85,000 images. The price per procedure drops as the number of images rises. Procedures are tallied and the price reconciled on a quarterly basis.

What kind of setup did St. Francis get from Cemax-Icon?
While the agreement allows for the purchase of off-the-shelf items and some non-Kodak equipment, such as digital fluoroscopy rooms, the system is close to being a single vendor turnkey system with the following pieces:

  • An ArchiveManager digital archive and automated workflow management system at the Medical Center;
  • Seven AutoRad primary diagnostic workstations in the radiology departments at both the Medical Center and St. Francis Cranberry;
  • Five ClinicalAccess tertiary review systems in the ICU and ER departments; and
  • 100 ClinicalAccess tertiary review systems at various locations throughout the hospitals and referring physicians’ offices.

“We did a lot of due diligence, calculating whether or not this could be cost-justifiable, having a system at all, and we designed it and we redesigned it,” Lackner explains. “There was no purchase; there was no capital outlay — zero capital outlay. It is in essence a lease arrangement, but it is in a nonstandard, innovative lease arrangement. For this to happen we could not show on St. Francis’s books any more debt. St. Francis has a lot of long-term debt; they have had a lot of big projects.”

Among those projects was a multimilltion-dollar commitment several year ago to establishing an electronic patient record (EPR) by buying a new hospital information system (HIS) network that includes new lab information, pharmacy information, material management and radiology information systems.

Industry consultant Mike Cannavo, president of Image Management Consultants Inc. (Winter Springs, Fla.), emphasizes that one main reason to engage in PACS planning is to do what St. Francis did during its five-year evaluation: take inventory and assess the facility’s existing network.

“We didn’t have a RIS until last September [1999] and that we recognized as being a very necessary step as well, and that is another reason for the timing being what it is,” comments Lackner. “You have to have a good backbone-infrastructure; you have to have a RIS in place. And those costs are not factored into the pay-for-procedure program, so those are costs that the institution bore. It is important to recognize that if you are looking at a hospital or health system that does not already have those things in place, it is a different ball game, so that was part of this. We tried to do all this planning and implementation in a coordinated way so the PACS has to have an interface with the HIS/RIS, which we have been successful at putting in.”

Aware of its financial commitments and limitations, yet still willing to bet that PACS was right for St. Francis, hospital request for proposal solicitations included the criteria that vendors be open to unspecified “creative financing.” Vendors eliminated themselves as their ideas of creative financing and the hospital’s did not gel, Lackner observes. When it came to final negotiations, Cemax-Icon was the only vendor left at the table.

“They were willing to come back again and again and say, ‘Let’s tear that one up and throw it in the wastebasket; let’s try it again.’ In the end, they were really the only vendor we were working with, and I was a little bit uncomfortable with that,” he admits. “So prospectively, I was concerned about that; in retrospect, I really think things worked out very well.

“The beauty of the five-year lease,” he suggests, “is we are not necessarily going to be saddled with a system that becomes obsolete. I would anticipate that what is going to happen is there will be certain pieces of equipment — hardware, software — that will be upgraded and updated, and at the next go-round, with the infrastructure we already have in, maybe it will be substantially less expensive.”

PACS predictions
Consultants point out that as more and more hospitals eye PACS, vendors will be required to consider new systems and new financing schemes to help potential customers acquire those systems.

“The PACS that have been implemented out there presently that cost $18 million, $20 million have every bell and whistle,” opines Bakken, “but the rural facilities may not get the equivalent of a compact-disc player, but they are going to make sure they have something that is going to move them to their objectives and ultimately their objective is to sustain themselves from a reimbursement standpoint, not necessarily making more money although they would like to do that, but just sustaining what they have. The big manufacturers out there have got to re-gear how they are selling their PACS.”

“I think you are going to see a lot more interest in the Application Service Provider (ASP) model,” offers Fammartino. “How these things are set up, how effective they are, only the future will tell that; in concept, it surely looks to be a workable solution to some of the heavy costs associated with the purchase of everybody’s own individual software system and solutions.

“No doubt the ASP is used to avoid up-front costs,” he adds. “The only difficulties will be, as the ASP models grow and with the concerns with the speed of that entire network, the more hits you have from more users, is that going to be something that needs to be looked at more closely? Is that going to degrade the service that is offered? The speed or response of getting the images or information — that is something that still needs to be looked at. Only time will tell that, too.” end.gif (810 bytes)