PACS market shows signs of shifting from large to midsize and small hospitals

About 82% of U.S. hospitals with 500 or more beds and 68% of hospitals with 400 to 499 beds are currently operating PACS or will soon install a system, according to the Annual Report of the U.S. Hospital IT Market released May 18 by the Healthcare Information and Management Systems Society and HIMSS Analytics, its market research arm.

The report found that urban hospitals were much more likely than rural ones to have PACS installed: 36% versus 15%. Academic institutions were similarly more likely to do so than nonacademic: 71% to 30%.

The growth leading to this widespread adoption of PACS occurred only recently. Half of all radiology PACS contracts were signed over the past two years, the report said. Specifically, 32% were signed in 2003 and another 18% in 2004.

Widespread use among early adopters typically characterizes the first stage of new technologies. Adoption of PACS is now moving into a second stage, as midsize and small facilities jump on the PACS bandwagon.

The HIMSS report indicates that 54% of hospitals with 300 to 399 beds either have PACS or will soon install it. About 47% of hospitals with 200 to 299 beds fall in this category as well. And the move toward adoption is gaining strength.

The HIMSS report indicates that approximately two-thirds of the facilities planning to purchase PACS expect to do so in the next two years. Most of the planned purchases are in the 100 to 399-bed range.

Consolidated industry numbers verify that PACS vendors have been doing well over the last couple years, though they reflect a dip in demand last year. Sales to U.S. customers in 2004 lagged behind those in the previous year, accounting for about $350 million in new equipment compared with about $410 million in 2003. The total market for PACS, including professional services, servers, and workstations, was nearly $500 million in the U.S. in 2004 compared with $550 million the previous year.

This lag may be the result of a switch from early adopters, characterized by large academic institutions, to the smaller hospitals. The next wave of adopters, hospitals under 400 beds but more than 200, may be building.

PACS fever has not yet gripped the smallest hospitals, but even these are showing interest. Installations are operating or pending at 37% of hospitals with 100 to 199 beds and 25% of those under 100 beds.

Vendors are promoting this interest with products tailored for these hospitals. Early efforts to offer scaled-back versions of PACS designed for large institutions put off many prospective buyers who lacked the budget or technical knowledge to implement them. Vendors have begun crafting much less expensive systems for this burgeoning segment of the marketplace.

GE Healthcare's Centricity SE (small enterprise) is a PACS tailored specifically to community hospitals and imaging centers. This PC-oriented PACS has the same functionality as GE's enterprise edition PACS, but on a lesser scale. The centerpiece of the archival solution is EMC's new low-cost Clariion AX100 networked storage system.

Other large vendors have engineered PACS that can be scaled, functionally and financially, across institutions of varying size. Siemens' Cosmos RIS/PACS is designed for enterprises ranging from multisite campuses to individual hospitals and imaging centers. Multimodality vendors are joined by smaller companies that initially focused on this market segment, such as CoActiv Medical Business Solutions, whose modular Exam-PACS is designed specifically for imaging centers and hospitals with tight budgets.

The increased efficiency possible with PACS is driving the surge, according to the report, which cites "significant operational improvements relative to radiology services." Pundits believe the widespread adoption of multislice CT is feeding this need for efficiency among institutions of all sizes.

The Achilles heel of PACS technology appears to be the integration of PACS and RIS. Putting these two together became a major concern of vendors only in the last few months, as shown by the widespread attention given PACS/RIS integration at the last RSNA meeting. There are other problems, however, particularly archival storage strategies, which the report describes as immature and fragmented. This will become a critical issue as new generations of MRI and PET equipment generate significantly more images, according to the report.