Siemens group wins major PACS bid to supply Army, Air Force hospitals

October 9, 1991

Siemens and partner Loral Aerospace of San Jose, CA, were awardeda potentially huge contract last month for the supply of picturearchiving and communications systems to U.S. Army and Air Forcemedical treatment facilities. The Siemens/Loral group

Siemens and partner Loral Aerospace of San Jose, CA, were awardeda potentially huge contract last month for the supply of picturearchiving and communications systems to U.S. Army and Air Forcemedical treatment facilities. The Siemens/Loral group substantiallyunderbid a team led by PACS competitor Advanced Video Products.

Both bidding groups invested considerable time and money indeveloping PACS technology to meet the complex requirements ofmedical diagnostic imaging support (MDIS). While one side mayhave ended up with a large source of future PACS revenue, bothSiemens and AVP upgraded their PACS products in the process andwill be well positioned for future commercial competition. Moresignificantly, the PACS field itself has been advanced, said JohnH. Perry, vice president of the computer systems division of SiemensGammasonics in Hoffman Estates, IL.

"The technologies we applied to this program far exceedwhat has ever been applied to PACS before," Perry told SCAN."For instance, with an MDIS-type system, we can now handle2000 x 2000 (-pixel) images with the same speed that we used tohandle 512 x 512 (-pixel) images. That is the step you have totake to make PACS applicable across the spectrum of imaging ina large-scale hospital."

While only about $6.4 million in actual orders have been placedto date as part of the MDIS contract, the total value of the contractcould amount to $350 million, more or less. This figure was developedby military procurement staff as an indication of the possiblesize of the contract and for use in comparing the competing bids.MDIS is what the government refers to as an IDIQ (indefinite delivery,indefinite quantity) contract.

"If every line item on that contract were ordered, itmight get to that ($350 million) level," said Kenneth Crawford,a spokesperson for the Army Corps of Engineers in Huntsville,AL. "It depends on what each of the medical centers needsand will order. That is not to say we expect it to reach thatlevel. It is just a possibility."

AVP worked with Agfa Matrix, U.S. Sprint, Lumisys, and ScienceApplications International (SAIC) of San Diego in putting togetherits MDIS bid. While AVP has successfully underbid other PACS competitors,such as Philips, its MDIS bid valued far higher than Loral/Siemensat about $524 million, said Thomas J. Goliash, AVP president.

The MDIS contract is for four years of equipment supply andup to eight years of maintenance and support services followinginstallation. Although only five Army and Air Force medical installationsare presently identified for phased installation of PAC and teleradiologysystems, 100 or more could conceivably purchase PACS productsfrom Siemens/ Loral during the term of the contract, Perry said.

"It is difficult to quote prices over that time frame,"commented Goliash. "What will a computer cost five yearsfrom now? The cost is going to come down, and they (customers)will see a significant decrease in price from us. We are goingto go heavily after the PACS market. We think we still offer thebest price/performance ratio."

AVP may indeed bounce back from the MDIS loss, said MichaelCannavo, president of Image Management Consultants of Winter Park,FL.

"What this has done for AVP, Siemens and the rest of theworld is to help further evolve the development of a simple, easy-to-usePAC system. AVP has a very good system now that it can offer,which probably wouldn't have been as well developed without MDIS.That stimulates the rest of the market," Cannavo said.

Loral and Siemens also worked with a number of subcontractorsand suppliers to put together their MDIS system, Perry said. Theseincluded Digital Equipment, Apple, Kodak, Fuji, Tektronix, MergeTechnologies and DeJarnette Research Systems, Perry said.

"No single company possessed enough knowledge and resourcesto individually build an MDIS-compliant system," he said.

Additional benefits for Siemens PACS business are alreadysurfacing. Siemens was the lead contractor in the winning bidfor a large PACS installation at the Veterans Affairs MedicalCenter in Baltimore. The German vendor is also bidding on a majorPACS site at Hammersmith Hospital in London, which could be awardedas early as next month, he said.

"Our team of Siemens and Loral structured the joint businessin such a way that we can approach the commercial market withthis product line as well as the government market," Perrysaid.

Other PACS competitors also obtained major contracts last week,according to Cannavo. Kodak and Vortech won PACS contracts atVAs in Boston and Kansas City. Fuji will supply computed radiographytechnology to the VA in Nashville, and AVP will be connectingseven U.S. Public Health Services sites with teleradiology equipment.