GE completes PACS acquisition of Applicare Medical Imaging

Dutch PACS firm will maintain OEM deals, however

GE Medical Systems continues to move aggressively to increase its worldwide presence in the PACS market. The Milwaukee-based modality and PACS vendor last week acquired PACS software developer Applicare Medical Imaging. Terms were not disclosed.

Rumors regarding a potential GE-Applicare deal had been circulating in the market for the last few months (SCAN 5/26/99), and were the talk of the exhibit hall at last month’s Symposium for Computer Applications in Radiology in Houston. GE decided to acquire Applicare for a number of reasons, including the opportunity to broaden its own PathSpeed PACS product line to include support for teleradiology and small-scale or entry-level miniPACS implementations, said Vishal Wanchoo, general manager of GE’s Integrated Imaging Solutions division in Mt. Prospect, IL.

“With PathSpeed, we’re really hitting the midrange to enterprise PACS sectors,” he said. “Now (with Applicare), customers can start with a small-scale system and expand it up from there.”

This new capability will help GE extend its presence in the European and Asian markets, where healthcare institutions are targeting smaller-scale entry points into digital image management. In addition, GE was interested in a number of Applicare’s other technologies, including a quality control workstation developed by the Zeist, Netherlands-based firm as part of its participation in IBM’s PowerPACS team in the U.S. military’s Digital Imaging Network-Picture Archiving and Communications Systems (DIN-PACS) project.

Applicare is also developing a low-cost, Windows NT-based software-only archive, which is scheduled for release in September. Applicare’s RadWorks WebViewer Web-based image and report distribution offering will complement GE’s own Unix-based WebLink product.

“WebLink is a Sun-based product that is integrated into PathSpeed, while Applicare basically has a stand-alone, NT-based, DICOM Web server,” Wanchoo said. “These products address totally different segments of the market.”

As a result of the Applicare deal, GE’s relationship with Lexington, MA-based Access Radiology, for teleradiology software in the U.S., will be discontinued in favor of Applicare’s RadWorks, Wanchoo said. Applicare’s management and software development teams will remain intact, with Applicare CEO Ruud Kroon reporting directly to Wanchoo. Both GE’s and Applicare’s product development efforts will be continued, and Applicare’s R&D team will be expanded by approximately 50% by the end of this year, Wanchoo said. GE plans to begin marketing Applicare technology within 60 to 90 days.

Applicare markets its RadWorks software through distributors and such OEMs as Picker International and Kodak’s Cemax-Icon division. The company will maintain those relationships, said Kroon.

“Our multichannel strategy is extremely valuable for us not just in terms of money, but also in terms of market feedback,” he said. “We have companies like Kodak, Picker, British Telecom, and about 20 independent distributors. They all have different angles in the marketplace, and they provide different feedback for product improvements.”

Eastman Kodak has offered an OEM version of Applicare’s RadWorks software since late 1997 as Kodak’s Digital Science Medical Viewing Station, and proceeds from this arrangement played a big factor in funding Applicare’s growth. Kodak acquired the Cemax-Icon group as part of its acquisition of Imation’s medical imaging business (SCAN 8/19/98), and the companies have settled on Cemax-Icon’s AutoRad offering as their primary workstation. Fremont, CA-based Cemax-Icon will continue to offer the RadWorks workstation as customers wish (SCAN 3/3/99). Linthicum, MD-based Meta Solutions serves as Applicare’s U.S. distributor for RadWorks.

Applicare will retain its name and will maintain its own booth at the RSNA meeting in order to emphasize its commitment to its channel partners, Kroon said. Indeed, the company has been aggressively expanding its already sizeable roster of OEM clients lately. Fellow IBM DIN-PACS team member ADAC Laboratories will be selling RadWorks in combination with its QuadRIS offering. ADAC will initially sell RadWorks within the U.S. and Canada, but also holds an option to extend sales to the rest of the world, Kroon said.

Konica Medical Imaging of Wayne, NJ, has signed on to use RadWorks as a new front-end for its NetStar PACS and teleradiology products in the U.S, while Merge Technologies has signed a letter of intent with Applicare to sell RadWorks.

Merge decided to partner with Applicare in response to customer requests, mostly European, for an integrated image management system that includes workstations, said Bill Mortimore, president of the Milwaukee-based company.

Preserving OEM alliances. While one might think the GE purchase of Applicare would make the Dutch company’s OEM clients nervous about future product supply, in fact the opposite seems to be the case. Picker has received a guarantee from Applicare that it will supply the company with RadWorks for five years. In addition, Picker sees GE’s endorsement of Applicare’s technology as a benefit to its PACS sales efforts, according to Timothy Hansen, president of the Cleveland company’s Picker Medical Systems division.

“It enables us to say to customers, this is the same product you could get from GE or IBM,” he said. “It’s a big endorsement, and we’re expecting an uptick in sales.”

For Applicare’s part, the privately-held company decided to pursue a buyer due to management’s belief that the PACS market will consolidate in the long term into a small number of companies, most likely large multinational firms, Kroon said. Rather than wait for consolidation to be forced on them, the Applicare stockholders in late 1998 decided to pursue an acquisition proactively. A controlled auction was held, and while GE was not on the early list of companies vying for Applicare, they emerged late with a bid that was attractive in both the dollar amount of the bid and in the strategic fit between the two companies, Kroon said.

The deal marks the beginning of a new era for Applicare, a small company that has had a strong impact on the PACS market, particularly in the second half of this decade. Founded in 1987 by Kroon, Applicare was one of the first firms to release NT-based PACS software products, the first of which was a teleradiology offering completed in the summer of 1994. But the company’s big break was its inclusion in 1996 on the U.S. military’s project team led by IBM. At the time, many industry observers believed that the company’s highly regarded NT-based software played a big role in the award to IBM. Applicare’s DIN-PACS contributions will be continued, Wanchoo said.

With the Applicare deal, GE’s IIS organization can now draw on the software development and systems integration resources of several GE companies around the world, including the firm’s Innomed RIS company in Dornstadt, Germany, GE Vepro in India, and GE Yokogawa in Japan.

“Clearly we want to provide a global solution, but in this market you have to have a lot of local activity, especially regarding systems integration initiatives and (product) customization,” Wanchoo said.

The deal is a great move for GE, especially as it seeks to expand its European presence, said Michael Cannavo, president of Image Management Consultants of Winter Springs, FL.

“What remains to be seen, however, is whether the market will choose to buy Applicare products from current partners such as Picker and independents such as Meta Solutions, or go directly through GE,” he said.

© 1999 Miller Freeman, Inc.All rights reserved.

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