Demand for small RIS/PACS feeds growth for Merge Healthcare

PACS has snapped forward after years of languishing, propelling vendors to integrate first RIS, then 3D. But these are only the outward signs of a much deeper transformation.

"The definition of radiology is changing as imaging moves into new clinical specialties," said Richard Linden, president and CEO of PACS provider Merge Healthcare of Milwaukee. "Radiology will not survive reading an x-ray, CT, MR, or mammo. That kind of blocking and tackling is not a model for long-term growth."

Radiology is extending its reach into the turf of other specialties. The company's acquisition in June 2005 of Cedara Software, a Canadian developer of postprocessing technologies, exemplifies Linden's plans to stay abreast of this evolution.

At the 2005 RSNA meeting, Cedara introduced a work-in-progress suite of software solutions for oncology diagnosis and treatment. OncologyWorks is designed to assist with therapy planning and patient response assessment using PET/CT fusion, MR diffusion mapping that visualizes changes in the tumor resulting from cellular mechanisms, and quantitative measurement of the tumor over time. The applications in OncologyWorks can be easily integrated into existing OEM products, according to the company.

"Wherever imaging goes, we will go there as well," Linden said. "We want to be able to take our core competencies around the imaging community and enhance the tools and the information that goes with them so the solutions are tailored to clinical specialties."

Of Merge's 250 software engineers, 180 work at Cedara. They have developed several vendor-neutral workstations. Cedara I-ReadMammo processes and displays breast imaging files from multiple modalities, including digital mammography. Cedara B-CAD, a computer-assisted diagnostic tool designed specifically for breast ultrasound, assists radiologists in the analysis of solid breast nodules. Cedara OrthoWorks offers a digital library of orthopedic templates and 3D visualization tools that can be integrated into PACS.

Clinical imaging tools percolating from the newly acquired company will help keep Merge PACS offerings state-of-the-art, Linden said. Merge Healthcare focuses on providing RIS/PACS and workstations to outpatient centers, specialty clinics, and community hospitals, where an IT infrastructure is either limited or nonexistent. This approach contrasts starkly with the IT and multimodality vendors, which focus on large hospitals.

"This is a limited business model, because it is not like we are building 500 new hospitals each year," Linden said. "They need to expand into the clinical specialties areas: laboratories, pharmacy. That is why all the IT players have made a business of getting into RIS/PACS, but this has been in the medium to large hospital space."

Large vendors are beginning to court smaller hospitals. GE Healthcare, for example, offers Centricity SE, a RIS/PACS developed specifically for the community hospital. But Linden dismisses such efforts.

"There are a number of cultural, product, pricing, and distribution hurdles that make it difficult for the larger players to come into my space," he said.

This market segment holds enormous potential. Wall Street pundits estimate that only about one in five imaging centers and small to medium-sized hospitals has gone digital. This segment, composed of some 3500 centers and nearly 5000 hospitals with fewer than 300 beds, represents about $5 billion in RIS/PACS equipment sales, aside from what might be earned through maintenance contracts.

Linden's approach has worked so far, turning a company on the brink of financial collapse five years ago into one solidly in the black. The company went public in 1998 at $6 per share but took a nosedive by the turn of the century, with its stock falling below $1. Joining the firm in 2000 as president and CEO, Linden sought first to stem the hemorrhage of red ink. He broadened the company's portfolio, a process begun in 2002 with the acquisition of eFilm Medical, a privately held company in Toronto specializing in imaging and information workflow.

At the time, Linden described the acquisition as launching the next phase of the company's strategic development. In 2003, Merge acquired RIS Logic, a developer of radiology information systems. The year after that, Merge picked up AccuImage, which specialized in 3D and 4D software. It then bought Cedara Software in June 2005, which less than a year earlier had acquired PACS provider eMed Technologies. Merge today offers an updated version of the eMed PACS, called Fusion Matrix PACS, alongside its own Fusion product line.

At the 2005 RSNA meeting, Merge boosted the power of Fusion Matrix with 64-bit processing that enables users to work more effectively with large files, such as those coming from multislice CT exams. It also updated its homegrown Fusion platform, which provides the framework for RIS, as well as application modules that provide specific clinical applications. This latest version of Fusion includes improvements in scheduling, dictation, exam routing, and a new RIS/PACS hanging protocol.

The company's RIS/PACS offerings will evolve further through the integration of clinical tools, particularly those developed by its subsidiary Cedara. The OEM orientation of Cedara has led that firm to develop software designed for new clinical capabilities. One such platform, Open Eyes, provides a structured framework for integrating plug-ins intended either for enhanced workflow or the expansion of clinical capabilities. Another, its BluePrint platform, extends the structure and features of the Open Eyes development environment.

This kind of flexibility could help Merge and its OEM partners make the quick course corrections needed to stay on track with radiology as it changes to capitalize on new opportunities. These include applications in cardiovascular imaging, such as those emerging in CT and MR, as well as other advanced visualization services such as virtual colonoscopy.

"We want to be in a position to rapidly change RIS/PACS to include the tools needed to provide a competitive advantage and keep referring physicians sending patients to radiologists," Linden said.