Nonlinear approach reduces cost of ASP archiving

February 5, 2004

Application service providers may be making a comeback in the radiology department. The high-flying ASP days were stymied by the dot-com bust, and many observers wondered how long the model could survive in challenging economic conditions. The University

Application service providers may be making a comeback in the radiology department. The high-flying ASP days were stymied by the dot-com bust, and many observers wondered how long the model could survive in challenging economic conditions. The University of California, Los Angeles Medical Center has taken another look at the ASP model, but with a twist: a nonlinear ASP financial model for PACS data storage.

"What we were looking for was a large-scale reduction in capital costs," said Dr. Osman Ratib, vice chair of information systems at UCLA.

In a scientific presentation Wednesday, Ratib compared the total cost of purchasing onsite digital archives with the cost of an offsite ASP storage model.

Onsite digital archives require a large capital outlay for the initial purchase, followed by steady maintenance costs, he said. These regular maintenance levels are punctuated by periodic spikes in capital expenditures for system upgrades.

In the traditional linear ASP financial model, users pay as they grow. This model would not have worked for his institution, Ratib said, because the total cost of ownership would eventually have exceeded that of the onsite financial model.

The nonlinear alternative ASP financial model is an approach that takes into account the fact that storage costs decrease year after year, while storage technology continues to makes significant advances. UCLA paid a single price per study, but the vendor provided a 4% decrease in storage costs per year. This was balanced by the requirement that UCLA increase its study volume by 5% each year. Based on this setup, Ratib calculated a lower total cost of ownership for the nonlinear ASP model.

In addition, the ASP archive is completely scalable, and obsolescence is not a concern because hardware and software updates are the responsibility of the ASP provider. Cost savings arise from reduced personnel costs and limited capital costs at the outset.

But the ASP model is not without its risks and challenges, Ratib said. Hospitals must make a long-term commitment to a single vendor. Additionally, during long, complex contract negotiations at UCLA, it was established that the vendor would have no legal liability for clinical errors or complications resulting from the data storage.

Ratib cautioned those considering an ASP solution to stipulate during contract negotiations that the medical institution is the sole owner of the data and that the ASP provider cannot do anything to or with the data.

Success with the ASP model for storage prompted UCLA to look into other areas where it might be a good fit. These included software, PACS, and even a total diagnostic solution in which UCLA would partner with an ASP vendor to provide diagnostic services to other facilities.