GE completes long-awaited purchase of Lockheed Martin's PACS business

GE completes long-awaited purchase of Lockheed Martin's PACS business

Multimodality OEMs jockey for position as market gains steam

GE Medical Systems has bought the assets of Lockheed Martin Medical Imaging Systems, putting to rest rumors that had swept the PACS market for months regarding the status of the on-again, off-again courtship. GE plans to merge the Lockheed Martin business with its own Integrated Imaging Solutions PACS unit, a move that should give GE a major boost in penetrating the burgeoning PACS market.

Milwaukee-based GE plans to retain all 130 employees at the Lockheed Martin business, which is based in Hoffman Estates, IL. The unit's facility will be moved to a new location in the Chicago area, according to Anthony Lombardo, general manager of Integrated Imaging Solutions. Michael Baker, formerly head of the Lockheed Martin business, now reports to Lombardo, whom he replaced when Lombardo left Lockheed Martin for GE last year.

The acquisition marks the latest installment in GE's ongoing effort to become a player in the PACS market. A collaboration with IBM to develop a PACS product line called Integrated Diagnostics fell apart in 1992. Two years later, the company formed its Network Products and Services division to spearhead its drive in the segment; it renamed the group Integrated Imaging Solutions last year.

Despite these efforts, GE has fallen short of attaining the dominant position in PACS that it enjoys in imaging modalities. Much of the company's work in medical image management has been limited to modality-cluster miniPACS solutions that are closely tied to GE's modality scanners, like MRI or CT. Lockheed Martin, on the other hand, has gained broader experience in PACS implementation, thanks to its role as primary contractor on the Medical Diagnostic Imaging Support (MDIS) project, a huge effort begun in 1992 by the U.S. military to install PACS networks at its hospitals.

Lockheed Martin's main PACS product line, called Vantage, was developed using MDIS technology. Vantage employs servers based on Sun Microsystems workstations, while diagnostic workstations run on Apple Macintosh Power PC computers. Lockheed Martin has about 30 installations worldwide.

Lockheed Martin's origins in PACS stem from the MDIS project, which began as a collaboration between Siemens Medical Systems and Loral Western Development Labs. Loral bought out the Siemens share of the collaboration in 1994, and was acquired in turn by Lockheed Martin last year. Ironically, Lockheed Martin Medical Imaging Systems still shares building space in Hoffman Estates with the nuclear medicine unit of GE's arch-rival Siemens, adding impetus to GE's desire to move the business to new digs.

Like GE, Lockheed Martin has been faced with difficulties of its own in the PACS market. Along with Agfa and Siemens, the company is one of the few vendors to find success in selling large-scale PACS implementations. Most of those contracts have gone to hospitals operated by the U.S. military and Department of Veterans Affairs, however, resulting in the perception that Lockheed Martin systems are more suited to government hospitals than to civilian facilities.

Lombardo believes that that misconception will fade as Lockheed Martin comes under GE's wing. One of the company's primary motivations in buying Lockheed Martin was to acquire the unit's experience in PACS implementation and offer it to the private-sector hospitals that GE's massive sales force calls on, according to Lombardo. GE will also enjoy service revenue from Lockheed Martin's existing PACS sites, although that was not the primary reason for the purchase.

A renewed commitment?

The attention GE has been paying to digital image management is evident in another deal the company has in the works. GE in March signed a letter of intent to buy 19.9% of ultrasound miniPACS developer ALI Technologies of Burnaby, British Columbia. The timing of that agreement and the Lockheed Martin purchase is no coincidence, according to Lombardo.

"You could assume with a lot of confidence that (the deals) are a sign of GE's commitment to the marketplace," he said. "We recognize that this market and the healthcare information market in general are vibrant and growing."

GE's recent moves highlight an important reality in today's PACS market: Companies can no longer afford to spend years developing PACS software. If vendors want to ride the growing wave of hospital spending on information technology, they must have products that are deliverable now, according to Lombardo.

"If you look back to 1989 or 1991, you probably had the luxury of taking several years to (develop) what you wanted," he said. "What we decided was that there were some core elements that we could accelerate faster with an acquisition."

The major multimodality vendors that did not have deliverable PACS products as recently as last summer have realized the urgency involved. GE is the fourth of the Big Five multimodality OEMs to make a major move in PACS in the last six months (with the exception of Siemens, which has its own home-grown PACS). The others involve:

• Picker's signing in March of an OEM agreement with software developer Cemax-Icon;
• An OEM deal inked last year between Philips and Swedish PACS company Sectra-Imtec; and
• Toshiba's alliance with Agfa for sales of Agfa's Impax PACS line to Toshiba accounts.

Indeed, Lombardo foresees a major shift in PACS, from smaller companies that have developed image management software to larger vendors that have the size healthcare providers require before they will make a major investment in such an expensive technology.

"There will be further consolidation and shakeout," Lombardo said. "You will see a couple of core dominant players that have the global distribution, global service, and global infrastructure that is going to be required to produce end-user confidence, sustain the technology investment, and leverage other resources."