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PACS Market Conundrum

June 25, 2010
by Mark Hagland
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A recent survey finds the PACS market saturated - but with some future potential

Executive summary

A recent Vermont-based CapSite Consulting survey suggests that most hospital and health system leaders are putting their purchasing plans of picture arching and communications systems (PACS) on the back burner, while they turn their attention to meaningful use matters under the federal American Reinvestment and Recovery Act/Health Information Technology for Economic and Clinical Health (ARRA-HITECH) Act.

As if vendors of picture archiving and communications systems (PACS) solutions didn't have enough to worry about, a new survey by the Williston, Vt.-base CapSite Consulting confirms what most in the industry had already guessed - the PACS vendor market is already heavily saturated, with relatively poor prospects for new sales in the next couple of years.

In fact, even the one real silver lining in the CapSite survey, released this spring-the fact that large numbers of hospitals and health systems are entering the replacement market phase, and the accompanying perception of the need to upgrade capabilities to satisfy clinicians-is overshadowed, say CapSite researchers, by the preoccupation of CIOs, other senior executives, and clinician leaders, with issues around meaningful use under the federal American Reinvestment and Recovery Act/Health Information Technology for Economic and Clinical Health (ARRA-HITECH) Act.

The fact that we found that literally 96 percent of the organizations we surveyed had a PACS was a bit surprising. - Brendan FitzGerald

The CapSite study polled over 600 hospital and health system leaders, including CIOs, other IT executives, physician chiefs of clinical departments, department managers, PACS managers, and others, all of whom are stakeholders in decision-making processes around PACS selection and usage. The survey sample, taken during November and December of last year, was relatively evenly distributed among organizations of different bed sizes, ranging the spectrum from under-50-bed organizations to those with over 400 beds.

As for the level of PACS market saturation, “While we certainly understood that we'Re in a saturated replacement market for PACS purchasing, the fact that we found that literally 96 percent of the organizations we surveyed had a PACS was a bit surprising,” says Brendan FitzGerald, CapSite's research director. “Indeed, only hospital organizations with fewer than 50 beds or under 40,000 diagnostic imaging exams per year in volume are without PACS systems now.”

On the other hand, with 60 percent of survey respondents saying that their hospital or health system purchased its current PACS system prior to 2007 (see figure 1), large numbers of patient care organizations could theoretically be in the replacement market right now. However, when asked whether they currently have plans to purchase a PACS system (new or replacement), only 17 percent answered in the affirmative (figure 2).

In addition, says Gino G. Johnson, CapSite's vice president, healthcare technology solutions, “The two factors that are complicating the market dynamics here are, not only is it a saturated market, but everyone is so focused right now on EHR [electronic health record] adoption and meaningful use, so it's the combination of the two factors together that is making the market so difficult for vendors.”

Functionality concerns could help vendors

If there's one real bright spot in all this, it is in the areas around PACS features and functionality. When asked about the “solution strengths” of their current PACS systems, functionality represented only 16 percent of the responses provided by survey respondents; in contrast, asked what the weaknesses of their current solutions were, functionality represented 47 percent of the responses (figures 3 and 4).

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