Lower-end PACS installations leading sales in smaller hospitals

HIPAA concerns dampen enthusiasm

Entry-level and modality-specific PACS are driving a surge in sales and installations of image management systems in the first half of 2000, according to several PACS vendors. At the same time, however, Health Insurance Portability and Accountability Act concerns are already having a negative effect on buying decisions for enterprise PACS, especially among hospitals that are considering investing in this technology for the first time.

"Our PACS sales are going well, but we are seeing some delays in closing deals because of HIPAA--not in the radiology department but with regard to Web distribution and image distribution projects," said Rik Primo, director of the IS/PACS division for Siemens in Iselin, NJ.

Even so, the last month in particular has been a busy one for Siemens' PACS business, especially among "nontraditional" PACS customers such as community hospitals and imaging centers that see PACS as a way to integrate horizontally with their affiliated main campuses, according to Primo. Siemens is also seeing an upswing in PACS purchases from existing customers that already have PACS capabilities in their radiology departments and want to upgrade and expand into other modalities.

"Just over the past month, we have been talking to a lot of PACS customers who are expanding in ways that almost equal the initial investment they made in PACS," Primo said.

Siemens is optimistic about the market for the newest addition to its Sienet line of PACS products, an entry-level miniPACS called Magic Start, that the company is introducing at the upcoming Society for Computer Applications in Radiology (SCAR) meeting in Philadelphia.

Growing interest in smaller, modality-specific PACS is already paying off for Agfa, which introduced Impax Basix, an entry-level version of its enterprise Impax product, earlier this year (SCAN 1/12/00). Targeted for smaller or lower volume hospitals and imaging centers, Impax Basix uses Impax hardware infrastructure but supports fewer modalities and displays, according to the Ridgefield Park, NJ-based company.

Agfa also offers Impax for Cardiology, which is selling well in that niche market, and displayed Impax with built-in RIS capabilities at the recent Health Information and Management Systems Society (HIMSS) meeting. Sales of its computed radiography systems are also better than the company had projected, which in turn is driving PACS sales.

"The market is expanding a lot more rapidly than we thought," said Dean Kaufman, director of strategic marketing for Agfa's Impax Solutions group. "We had our best first quarter ever, with the numbers coming in at 120% to 130% over budget for both PACS and CR. Basically, we did in the first quarter this year what we did in the whole first half of last year."

As of the end of 1999, Agfa claimed to have nearly 400 installed PACS worldwide.

Kaufman attributes the increase this year to the lack of Y2K concerns and a maturing of the marketplace, in addition to the expanding entry-level customer base. Buying cycles have declined from a year to around eight months, and request-for-proposal volumes have remained consistent. The company's participation in the DIN-PACS project has also helped build some momentum in the military market, he said.

"The technology is maturing and people are making quicker buying decisions, which could be part of the overall concept of PACS entering the mainstream," he said.

GE Medical has seen significant growth in both large-scale and entry-level PACS sales in the first five months of this year, according to Bruce Johnson, marketing communications manager. The company recorded a 45% increase in U.S. sales volume for PACS in the first quarter of this year compared to the first quarter of 1999, and expects that number to increase to 65%, year on year, in the second quarter.

"We have seen growth at the high end and currently have some very large ($5 million to $10 million) deals coming in," Johnson said.

The other area of expanded interest for GE is entry-level PACS and modality clusters, which help provide a starting point for customers who have been apprehensive about going filmless all at once or couldn't afford to invest in a large-scale PACS. GE's PACS/RIS integration and Web-based image distribution capabilities are also stimulating interest from customers outside the radiology department, Johnson said.