PACS and TM vendors vie for military's DIN-PACS bids

PACS and TM vendors vie for military's DIN-PACS bids

'Son of MDIS' could be windfall for a handful of competitors

A small number of well-connected PACS and telemedicine vendors are participating in an exhaustive bid process launched by the U.S. government to determine which companies will be able to compete for the next round of PACS and telemedicine purchases by U.S. military installations. The companies that make the final cut will either find themselves the beneficiaries of a windfall in government spending or learn that they have sent thousands of dollars down a bureaucratic black hole.

The government's initiative, known as the Defense Imaging Network-Picture Archiving and Communications Systems (DIN-PACS) project, is the successor to the military's Medical Diagnostic Imaging Support (MDIS) initiative. Under MDIS, PACS networks were installed at Army and Air Force medical centers by Loral Medical Systems, later Lockheed Martin Medical Imaging Systems and now part of GE Medical Systems of Milwaukee. The military is now looking for a next-generation PACS to install at additional sites, including hospitals operated by the Navy, which did not participate in MDIS.

To that end, the Department of Defense's Defense Personnel Support Center (DPSC) issued a request for proposal (RFP) available for DIN-PACS. The voluminous document runs over 350 pages and goes into minute detail as to the technical specifications the government requires for the DIN-PACS installations, which are also intended to include support for telemedicine applications. The government wants DIN-PACS sites to be based on open computer standards, with equipment that can be upgraded as computer hardware changes. A radiology information system (RIS) must be included in the bid, as well as provisions for on-site project management support.

Only three military projects are specifically mentioned in the RFP: Naval Medical Center Portsmouth in Portsmouth, VA, Elmendorf Air Force Base Hospital in Anchorage, AK, and the Pentagon Triservice Health Clinic at the Pentagon. The payoff, however, comes down the road, as other military hospitals convert to digital image management. Theoretically, these facilities would be able to acquire PACS and telemedicine systems only from those vendors that have been validated by the DIN-PACS process. Estimates of the potential value of DIN-PACS contracts range from $300 million to $1.25 billion.

The RFP's requirements are so complex that no single company could ever meet them, so vendors have combined into consortia to bid on the project, according to Vishal Wanchoo, vice president of marketing at Agfa Medical of Ridgefield Park, NJ. The government most likely will validate two or three consortia, creating competition for DIN-PACS bids, unlike the sole-vendor approach used in MDIS, Wanchoo said.

A number of PACS and telemedicine companies expressed interest in the RFP, but in the end only a handful were able to assemble into viable teams to submit bids in time for the RFP's deadline at the end of April. Some vendors have been reticent about confirming their participation in the process, but the field has apparently narrowed to five teams:

• Agfa as a prime contractor, with Cerner supplying the RIS and Cabletron the networking components;
• Telecommunications giant GTE as a prime, with Cemax-Icon subcontracted to provide a PACS component;
• Defense systems integration firm BTG as a prime, with Siemens supplying PACS;
• IBM's Worldwide Government Industry division as a prime, with Brit Systems supplying PACS software and Eastman Kodak participating as well; and
• GE Medical Systems, through its recently acquired Lockheed Martin Medical Imaging Systems unit.

Some of the companies are familiar faces to PACS industry observers, but others are more obscure. GTE, for example, has concentrated on providing telemedicine products to military facilities, according to Terry Ross, president and CEO of Cemax-Icon of Fremont, CA. Ross believes his corporate partner's ability to provide worldwide secure ATM networks is a major selling point, while Imation's pending acquisition of Cemax-Icon can only help, he said.

With the RFPs submitted, the next stage of the DIN-PACS awards process will be a series of benchmark tests to be conducted at Johns Hopkins Hospital in Baltimore in July, where vendors will be required to bring in their systems to conduct demonstrations. Following that will be a series of site visits, after which the DIN-PACS winners will be announced later this year. The announcement will include the winner of the Portsmouth contract, which Agfa estimates to be worth $11 million to $14 million, according to Wanchoo.

But will winning DIN-PACS be a Pyrrhic victory? Except for Portsmouth and the two other sites, the government has made no specific commitment to buying anything. At the same time, it has required the DIN-PACS consortia to spend considerable resources preparing their responses to the RFP. Cemax-Icon, for example, assigned five employees to work full-time on the company's bid, while GTE assigned some 24 employees, Ross said. Agfa also found the process exhausting.

"Just responding to the RFP was a monumental task," Wanchoo said. "It's the most complex RFP that's ever been issued by anyone."

If the government does make a major commitment to PACS, however, the DIN-PACS winners could find themselves with a near-monopoly on military PACS work, with only one or two other competitors. Wanchoo estimates that there are 123 hospitals in the Department of Defense's network, many of which will be looking to upgrade their operations with digital image management.

Those numbers are also attractive to Cemax-Icon's Ross.

"These are huge numbers, and I believe that the military is going to spend the money," Ross said. "Our goal is to just be one of the survivors. Whether ultimately it is us and GE and Siemens or us and Agfa and GE, we don't care, because we know that we'll get our share of that huge piece of pie and that every single other company is locked out."