PACS purchasing pitfalls defy conventional wisdom

May 31, 2005

Facilities acquiring PACS often choose pay-as-you-go procurement over capital investment based on the belief that the operating model is less expensive.

Facilities acquiring PACS often choose pay-as-you-go procurement over capital investment based on the belief that the operating model is less expensive.

"This is a misconception," said Deniese Chaney, a senior manager at Capgemini Health.

Chaney said the operating model is actually more expensive, especially on a life-cycle basis.

"There is a risk-cost issue to be considered when you do operating versus capital," she said. "Customers have to decide how much downside risk they are willing to take and what are they willing to pay to eliminate a portion of that risk."

Operating models allow clients to eliminate some of the risk, hence their higher cost. Capital models, on the other hand, force buyers to continue as they have for generations. They accept most of the hardware and some of the software risk, especially as it relates to performance, Chaney said.

"The operating model is always more expensive because the vendor has to accept some risk, and you are then paying a premium for that," she said.

In either case, the key to a satisfying PACS acquisition is the contract, although some institutions still acquire mission-critical systems without a contract.

"Hospitals sometimes merely sign a PACS purchase order with the vendor. Then, six months down the road, they discover they have no performance guarantees or have to make changes - purchase additional workstations or software licenses - and suddenly the prices are higher than before. They have no guarantee because they have no contract," Chaney said.

There are plenty of terms to specify in contract negotiations: warranties, performance, hardware maintenance, software to be included, payment terms, and what your holdbacks are if the system doesn't meet performance specifications, she said.

The roots of neglect can be found in historic business practices in radiology, where departments are used to cutting purchase orders for medical equipment.

"If you let vendors treat PACS like a purchase order, with a quote on one side and terms and conditions on the back, then you have nothing for protection because the customer just accepts the vendor's terms, which are always in the vendor's favor," Chaney said.

This would be unlikely to occur if large purchases like PACS were run out of IT.

"IT would insist on a contract," she said. "They've been burned plenty of times buying multimillion dollar systems without the appropriate protection.