Private financing benefits public PACS

October 28, 2002

PACS has not been implemented as widely in the U.K. as it has in the U.S., due largely to unique funding arrangements peculiar to the U.K.'s National Health Service (NHS). "Capital purchase of a PACS is relatively unattractive in the U.K. because of

PACS has not been implemented as widely in the U.K. as it has in the U.S., due largely to unique funding arrangements peculiar to the U.K.'s National Health Service (NHS).

"Capital purchase of a PACS is relatively unattractive in the U.K. because of the vast sums involved, which would consume several times the normal annual capital allocation of even a large Trust (hospital)," said Dr. John Pilling, a consultant radiologist at Norfolk and Norwich University Hospital in Norwich, U.K.

An alternative method of financing has emerged in the U.K. and elsewhere called the Private Finance Initiative (PFI), a procurement method aimed at encouraging private investment in major public building projects. Under a PACS/PFI agreement, a private sector consortium pays for the PACS, while the local NHS Trust pays a regular fee for its use to a service representing the consortium.

Siemens Healthcare Services, for instance, signed such an agreement early this year with the Airedale NHS Trust in West Yorkshire to provide a Managed Equipment Service for all imaging equipment within the Trust.

A number of PFI agreements involving a Managed Equipment Service as part of a new hospital project have been signed. But this Siemens contract, worth more than £12 million over 15 years, is the first of its kind in which a private sector partner takes responsibility for managing all the Trust's diagnostic imaging equipment.

The Managed Equipment Service will install, manage, maintain, and replace all the imaging equipment, including the provision of a departmental PACS system for the duration of the contract. Siemens operates four other Managed Equipment Services in the U.K.

Negotiating with the service provider can be tricky and time-consuming. Pilling reviewed the process of contracting for a PACS using PFI in a recent paper (Clin Radiol 2002;57:178-183).

"During our contract negotiations, a process that took about nine months, many controversial issues had to be dealt with," he said.

One issue in PFI contracts is the value added tax exemption (VAT).

"It's important that a radiologist involved in a PACS contract has some input into the discussions on this issue," Pilling said.

The Trust's auditors will construct the case for VAT, and the tax authority will need to be convinced that PACS service is not just a lease agreement under a different name, he said.

In detailing the specific problems encountered in the course of negotiations, Pilling intended that other Trusts entering on this course will be better equipped to finalize satisfactory contracts.

"Several initiatives have focused attention on the need to modernize the NHS by increasing the use of information technology," Pilling said. "In the near future, many more Trusts will be considering the implementation of PACS, some of them using the PFI route."