How to succeed in PACS without really buying

July 13, 2004

PACS implementation can bring about film savings, but can film savings bring about a PACS? One academic medical center claims to have financed its PACS implementation on nothing but film savings, according to a paper presented at the May meeting of the

PACS implementation can bring about film savings, but can film savings bring about a PACS? One academic medical center claims to have financed its PACS implementation on nothing but film savings, according to a paper presented at the May meeting of the Society for Computer Applications in Radiology.

PACS purchasing options include conventional financing models such as outright purchase with hospital cash reserves, capital financing, bundling of systems with service agreements or additional imagining equipment purchases, leasing, and application service providers for those seeking low-cost entry.

While the Hospital of the University of Pennsylvania, the flagship institution of the University of Pennsylvania Health System (UPHS), implemented PACS in 1997, a current PACS migration extends the filmless environment to four other hospitals and six imaging entities under the UPHS umbrella, said Alberto Goldszal, Ph.D., director of medical informatics at the hospital.

The film-savings financing strategy featured an operational lease providing a non-negative cash flow in each year of an eight-year lease. The facility used future savings to be provided by PACS to pay for digital conversion and to offset any initial negative variances in the current and projected film budget, Goldszal said.

The vendor of choice also agreed to take on the risk of continued film use.

"To evoke adequate vendor response, we issued a request for proposal that described not only our technical and workflow requirements, but also our financial goals - the main one being the ability to use film savings to pay for the entire implementation and operation," Goldszal said.

The economic analysis of the proposition yielded a net present value of $10.9M, meaning the entire PACS project plus residual film printing can be financed by film cost savings, he said.

When initial PACS expenses exceeded the annual film expense, the vendor agreed to use future savings provided by the PACS operation to finance any capital shortage in the initial years of the project. An additional optimization step provided elimination of negative film budget variances in the beginning, when PACS costs are higher than film and film-related expenses, according to Goldszal.

One key ingredient to the funding recipe is the ability to harness enough imaging volume to make the project worthwhile.

"In our case, an aggregate volume of 700,000 exams per year provided the critical mass," Goldszal said.