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Advantages of outsourced storage surpass expenses


Outsourcing disaster recovery is the most economical approach to compliance with the Health Insurance Portability and Accountability Act's mandate that healthcare institutions retrieve 100% of imaging studies in case of component failure or actual disaster. This may be costly, but the added expense should be considered an insurance policy for maximum productivity, risk management, and prompt delivery of healthcare services.

Outsourcing disaster recovery is the most economical approach to compliance with the Health Insurance Portability and Accountability Act's mandate that healthcare institutions retrieve 100% of imaging studies in case of component failure or actual disaster. This may be costly, but the added expense should be considered an insurance policy for maximum productivity, risk management, and prompt delivery of healthcare services.

The information that can be outsourced consists of fixed content files of images and variable content files (e.g., the RIS, HIS, etc. databases and related reports) associated with those images. Other fixed and variable content files can also be outsourced, such as payroll and accounts receivable.

Initially, there are four copies of an image (fixed content file):

  • On the modality generating the image for a short time;
  • Tier 1: online storage, containing three months or more of studies;
  • Tier 2: long-term storage, for the legal life of the study; and
  • Tier 3: disaster recovery copy retained offsite for the legal life of the study.

Tiers 2 and 3 can be outsourced.

Management of fixed content files includes providing functionality to locate and rapidly retrieve these files, whether they are stored locally on the vendor's storage cache or offsite in a secure data center. These files must be encrypted, secure from unauthorized access, and tamper-proof while being maintained in a DICOM-compliant format. The files must be periodically validated and available to authorized users at any secure location. The vendor should provide the means to delete files (clinical studies) based on defined rules and client validation that includes documentation and an audit trail prior to deletion. Finally, the storage service provider (SSP) must be able to rapidly restore the files to the healthcare institution storage media in a usable and accessible format.

Variable content files, or databases, must be managed differently, since they are constantly changing. To ensure the information in these files is not lost, it must be continually or periodically replicated and backed up with a copy maintained in a secure offsite location. The replicated and backed-up copy can be outsourced. This may require bandwidth greater than that required for fixed content files. The SSP providing this service must be able to restore the databases 24/7/365. Although less expensive tape backups can be used and manually stored offsite, this approach is less reliable and does not provide business continuance. Storage management for both fixed and variable content files can be outsourced in a manner that can provide business continuance for the institution. The SSP vendor must provide a 24/7/365 help desk and proactive remote monitoring for all onsite storage management components.

To decide whether outsourcing is an option, several questions must be answered:

  • Does the institution want the responsibility and can it afford the cost of supporting an in-house HIPAA-compliant Tier 3 storage system for disaster recovery (DR) copies of clinical images and related databases as well as a system for Tier 2 storage of fixed content files and associated databases?
  • Have the healthcare executives evaluated the potential legal and cost implications of maintaining these services in-house as compared with outsourcing?

What is the financial cost and public relations impact of losing patient information?

Outsourcing storage management can provide a partial solution for business continuance at a significantly reduced cost. An institution considering this approach should determine if it needs business continuance and whether it can afford it and should ask itself the following:

  • In a near-paperless and filmless environment, how long can you tolerate losing operational capability?
  • What does it cost for your imaging modalities and information systems to be down for 15 minutes, one hour, or four hours in terms of patient care, public relations, productivity, lost revenue, and impact on cash flow?


Some of the tangible benefits to outsourcing storage management over and above the economics are related to the storage solution, such as the need to upgrade or plans to migrate studies or expand beyond the capability of the existing data center. Other, intangible, benefits that may not be appreciated by healthcare administrators are related to changes to the digital environment, such as a new PACS or RIS vendor.

  • Tangible benefits. One significant advantage is the potential to reduce the costs for a secure and compliant tier 3 data center. These costs include the construction, security, uninterruptible power supply, redundant HVAC, and power with an associated fuel supply. The cost for hardware and software is significantly reduced, even though media costs are only 5% to 10% of the total system cost, and the cost for hardware refresh every three to five years due to technology obsolescence is eliminated.

Other savings include IT salaries and the expense of replacing trained IT personnel. Outsourcing eliminates the maintenance and licensing cost of storage management-related hardware and software and the migration cost of stored information resulting from technology obsolescence.

  • Intangible benefits. Financial considerations for institutions initiating or expanding their digital initiatives include a reduction in upfront capital expenditures and the benefit of funding from the operating rather than the capital budget. This can be very important if the institution is reimbursed based on the cost of a procedure. The future cost of storage management is known as compared with the uncertainty of the cost of managing storage in-house.

Other benefits are more difficult to quantify on a fiscal basis. These include availability of prior studies in electronic format, facilitating the transition to a paperless and filmless workplace; risk sharing; definitive compliance with HIPAA; and having a DR copy of images and data in a secure data center located 100 miles or more from the primary data center.


SSP vendors offer two basic service models: DR for Tier 3 storage of fixed content file DICOM studies and a combination of Tier 2 (long-term storage) and Tier 3 storage. Other financial models that require greater IT support from the facility are listed in Table 1.

The SSP vendor should offer backup and replication service for variable content files such as HIS, RIS, and demographic databases. Other services commonly provided are additional onsite storage up to seven years, information migration, information restoration, and web viewing and distribution of studies to other healthcare facilities.

  • Fee per study for just DR. This model typically has a modest implementation fee, an HL7 integration fee if required, and a fee for additional onsite storage if the institution requires more than that normally supplied by the SSP vendor. Telecom costs are typically the responsibility of the healthcare institution. The factors that affect the cost per study are listed in Table 2.
  • Fee per study for DR and offsite long-term storage. Typically, the cost for both Tier 2 and Tier 3 outsourced storage management is 150% more than just Tier 3. The SSP vendor must store a copy at each of two secure data centers at least 100 miles apart. Most SSP vendors will charge an added one-time charge for the additional onsite storage. Outsourcing both Tier 2 and Tier 3 may increase the telecom cost slightly depending on the amount of onsite storage and patient populations that require prior studies not existing on the vendor's onsite storage system. If the SSP vendor provides clinical information life cycle management, telecom costs could be further reduced by retaining onsite studies that will most likely be needed to compare with a current study.
  • Variable content file. The cost to outsource storage management of variable content files will depend on the number and size of the databases as well as whether asynchronous or synchronous technology is deployed. The SSP vendor will install an appliance onsite that stores onsite replications and/or backups of the databases and acts as the device to transmit the database to the offsite secure data center. There will be a modest implementation fee as well as an increase in the telecom cost, which will depend on the quantity of data that need to be transmitted daily and weekly.


This total cost of ownership (TCO) analysis is an educated estimate for a hospital or outpatient imaging facility. Figure 1 shows an example of a facility performing 100,000 studies per year with a 5% per year growth rate that generates 5 TB of lossless compressed RAID 5 storage. A complete list of costs is provided in Figure 2.

The cost to outsource just Tier 3 storage for fixed content DICOM studies without rapid retrieval of prior studies stored offsite is shown in Figure 3 in line 2. This example assumes an average per study charge of $0.70, a $5000 implementation fee, and a $1000 per month telecom cost.

The cost of just Tier 3 storage for fixed content DICOM studies with rapid retrieval of prior studies plus outsourcing the variable content file (RIS and demographic) databases asynchronously is presented as line 3. The one-time DR cost averages $0.90 per study. The cost to replicate and back up the variable content files offsite would be $500 per month. There is a $25,000 implementation fee and a $2000 per month telecom cost. These numbers are greater because of the additional hardware, integration, and bandwidth required for these additional services.

The cost to outsource long-term storage (Tier 2), DR, rapid retrieval of prior studies, and variable content file databases asynchronously is presented as line 4. The estimated one-time Tier 2 and Tier 3 per study costs are $1.35.

The cost to replicate and back up the variable content files offsite would be $500 per month. There is a $35,000 implementation fee and a $2500-per-month telecom cost. These numbers are greater because of the additional hardware, integration, and bandwidth required for these additional services.

The additional cost to outsource storage management is shown in line 5. To determine the monthly cost of the insurance premium for the tangible and intangible benefits gained by outsourcing storage management, divide the TCOs by the appropriate number of months (line 6). The additional cost must be considered against the tangible and intangible benefits received, however. The costs attributed to the in-house solution were conservatively calculated, while the outsourced costs are based on current market pricing and will be driven down by market competition and cost reductions resulting from an increase in market size.

Some tangible benefits can be directly attributed to the insurance premium cost:

  • eliminating the need to refresh hardware and software every three to five years;
  • eliminating maintenance and licensing fees for the storage management system;
  • eliminating the need to migrate data resulting from technology obsolescence of hardware and software as well as changing or upgrading PACS;
  • reducing implementation costs for storage and the continuing cost for maintenance, personnel, and data center support;
  • maintaining clinical studies in a vendor-neutral DICOM storage system that will reduce costs when changing or upgrading clinical applications; and
  • eliminating the need to build or lease space and support and maintain a second secure data center 100-plus miles from the primary data center.

The intangible benefits of business continuance derived from the outsourcing model include high availability of medical and business databases, availability of prior studies, and the goodwill of patients and referring physicians.

Also considered is the cost of system failures, resulting in loss of revenue. Other intangible benefits include avoidance of the complete loss of medical and business information from a Katrina-like catastrophic event.

When performing the TCO analysis, make sure all costs based on your facility are included and get current quotes from several SSP vendors. Make sure the tangible cost savings from outsourcing are carefully documented and the intangible savings and benefits are taken into account. Intangible benefits in almost all cases outweigh tangible benefits.

Lack of tangible cost savings should not be reason to reject outsourcing storage management. You can start by outsourcing just DR storage (Tier 3) with rapid retrieval of prior studies not locally available. As you experience the benefits of outsourcing, expand the level of services. Outsourcing storage management does not have to be forever-you can always terminate the service and have your stored data returned to you.

Dr. Smith is a professor of imaging sciences in the department of imaging sciences at the University of Rochester Medical Center in New York. He provides consulting service for both healthcare and industrial organizations (InSiteOne, Iron Mountain) in the areas of PACS, RIS, and storage management, and serves on the advisory board of Bycast.

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