PACS savings make the leap from theory to reality

February 4, 2005

After years of citing soft indicators like improved efficiency, some institutions can now present hard numbers to cost-justify installing a PACS.

After years of citing soft indicators like improved efficiency, some institutions can now present hard numbers to cost-justify installing a PACS. Two papers presented at the 2004 RSNA meeting indicate large cost savings and rapid return on investment with PACS.

While radiologists examine the effect of a PACS implementation on efficiency, image distribution, and improved patient care, administrators are typically more interested in cost-justification and hard economic results, said Dr. Matthew Morgan, a radiology informatics fellow at the University of Pennsylvania Medical Center.

"Prior cost analyses tended to be radiology-centric. Because they were dealing with evolving technologies, they were theoretical in nature," he said.

UPMC integrated PACS into the radiology department in mid-1996 and began enterprise-wide implementation in 1999.

To calculate cost savings over a four-year period, the investigators first calculated the cost per study in a film environment and multiplied that by the total volume of studies performed. They then compared that number with the total costs associated with a filmless environment.

For film, total costs comprised those associated with generating film, including dry and wet studies, processing, and purchasing the film, as well as the costs associated with film-related support, including storage and retrieval. Film costs were estimated at $23 million.

The PACS environment calculation covered initial capital costs, including IT and modalities, and operational costs. The total came to $20.6 million.

By calculating yearly savings, the researchers determined that the payback period occurred at 3.5 years after implementation and the return on investment was almost 30% per year.

Simply moving to a filmless environment is one way to save costs. Looking at a different business model for PACS may provide an additional opportunity.

Joining the ranks of large institutions that have gone the application service provider route, M.D. Anderson Cancer Center realized an $18.5 million savings over a capital investment model, according to Dr. Kevin McEnery, associate division head for diagnostic imaging informatics at the center.

Turning to an ASP business model, M.D. Anderson distributed more than 80 workstations within the diagnostic imaging department and three outside the department. The ASP model cost $2 million for the workstations, whereas capital investment would have cost $21 million.

If the facility had chosen the capital investment model, it would have had to purchase 140 additional workstations. The extra workstations weren't necessary for the ASP model because the center was able to use image viewing client software and off-the-shelf monitors rather than expensive setups for users outside the diagnostic imaging department.

The ASP model generated no cost for archiving, compared with $10.6 million for the capital model. On the other hand, the application service cost was $11.6 million for the ASP model and zero for the capital model.

Capital PACS costs have decreased, but installing dedicated PACS workstations is still substantially more expensive than purchasing parts directly from an OEM, as M.D. Anderson did with its ASP model, McEnery said.

"The savings were largely attributed to the much less expensive workstations," he said.