Executive Summary
Picture Archiving and Communications Systems (PACSs) are increasingly replacing traditional film and other media printing techniques in medical imaging. PACSs benefit patients, physicians, and administrators through improved turnaround times between imaging and result deliveries and ultimately through cost savings to the medical institution. All key stakeholders, namely those listed above as well as investors/operating boards of the medical institution, will ultimately benefit from the adoption of this technology. The objectives of this service are reduced costs and increased efficiencies of medical image creation, transmission, and review, which will also improve the efficacy of care available.
The initial cost of implementing this technology will be considerable, and will also vary depending on the current technological assets and capabilities of the medical institution. Academic literature provides limited concrete information as to the cost of these systems, but estimates of approximately two-and-a-half million dollars appear to be reasonable budgetary targets for the initial adoption of this technology. Ongoing costs will also be incurred through updates to the technology, but these must be measured against the cost savings that the adoption will begin to create immediately. The key risk involved in this proposed technology adoption is the increase of long-term costs, over which the institution will have little control or predictive power, but again the savings will more than offset these costs.
The management of the suggested service will be handled primarily by the IT department/personnel already in existence at the medical institution, along with physicians and other staff that utilize the various medical imaging technologies. These personnel can make recommendations to the proper procurement officials as changes and equipment are needed. The other changes that will need to be made to the institution and its other practices are minimal; the PACS system will essentially replace the existing print technologies by which medical images are currently produced and analysed, but will require few if any changes outside of these procedures. Dedicated equipment and space for this equipment will need to be created, but this can likely be created through the removal or the adjustment/reconfiguration of current image reading rooms at the institution.
Introduction
The purpose of this business case study is to propose the adoption of a picture archiving and communications system, or PACS. These systems, which have become increasingly common and increasingly reliable since they first began development a decade ago, provide methods for the production and analysis of medical images taken through a variety of different technologies and techniques without the use of specialized films or other printing needs. Instead, PACSs allow for the digital creation and transmission of images, with equal and often greater precision, detail, and clarity than traditional films techniques, and with a much lower per-image cost than older technologies, as well.
This paper will provide a detailed assessment of the initial and ongoing costs of the proposed PACS adoption, as well as of the cost savings and other benefits that this technology will provide. The case for change will be clearly laid out, with the improvements to service and increased cost efficiency of using such systems forming the primary basis for the recommendation made here.
An overall analysis of the proposal and the practicalities of actually achieving this adoption in different budget scenarios will also be provided, along with an assessment of the risks that are an inherent part of any significant change in a medical situation, and those risks that are specific to the adoption of a PACS itself. Management techniques for this technology adoption will also be described, and final recommendations for the implementation strategy will be the ultimate provision of this proposal.
The Case for Change
Changes in technology have made it possible to achieve better and cheaper results from medical imaging techniques (Rath 2010; Jackson & Langlois 2005; Hoffman 2008; Slomka & Baum 2009). While there are several possible alternatives to the traditional production of medical images from MRIs, CT scans, X-rays and other similar technologies, the most cost effective method for image generation and transmission as well as the method that provides the greatest clarity and accuracy in the images produced is found through the use of PACSs (Maydell et al 2009; Hoffman 2008; D’Asseler et al 2000). Adopting this technology will produce significant long-term cost savings and improve efficacy and efficiency of treatment (Cannavo 2005; Tan & Lewis 2010).
The cost savings is one of the key benefits that is expected as a result of the proposed adoption of PACS technology, with initial outlays being recovered within four to six years of implementation and cost savings adding up to half a million US dollars or more within a decade of moving from traditional film technologies to a PACS according to current estimates (Hoffman 2008; Rath 2010).
Other benefits include a greatly increased rate of production and transmission of medical images, both of which can occur at a near-instant level with a PACS as opposed to significant delays that often arise with the need to print images, and backlogs that occur in many institutions and processing organizations that deal with high volumes of input and large workloads (D’Asseler et al 2000; Maydell et al 2009; Slomka & Baum 2009). The benefits of implementing the proposed system, then, are both financial and medical in nature.
This proposal has not yet been brought to any of the major stakeholders that would be affected by the implementation of this system, or those whose approval would be required before the adoption and implementation of this technology could be permitted to proceed. There is a great deal of evidence, however, that physicians, administrators, and patients would all sign off on this proposal if given the opportunity to witness the technology in action (Jackson & Langlois 2005; Cannavo 2005; Shakeshaft 2010; Tan & Lewis 2010).
The benefits and simple changes inherent to this system compared to traditional imaging techniques directly affect each of the above-defined groups of stakeholders through cost savings, improved speed, and accuracy of care, and the increased portability of medical images.
Analysis of PACS Adoption
The primary objective of any major change in medical practice is and must always remain the improvement of the care offered to patients. There are many ways to achieve this improvement in care. Better health outcomes, more cost-effective procedures that do not lose any efficacy or may in fact increase it, and increased accuracy and/or speed of diagnosis and care plan determinations all form parts of this larger objective, and all are also brought about by a transition from traditional image production to techniques to a PACS (Rath 2010; Shakeshaft 2010; Jackson & Langlois 2005).
The primary alternative to PACS adoption is remaining with traditional techniques or transition to paper- rather than film-based hard copy image production. The former represents no change in practice and there are no benefits or risks and will lead to a lack of competitiveness. while the latter introduces a less significant cost savings while also producing images of poorer quality, in some cases unacceptable (Maydell et al 2009).
Up-front costs for the adoption of these technologies are considerable, amounting to approximately two-and-a-half million dollars for an average-sized hospital organization (Hoffman 2008). This cost covers only the initial purchase of equipment and integration with existing institutional infrastructure; other ongoing technology costs will also be incurred and training and adaptation costs that cannot be directly measured must also be acknowledged (Cannavo 2005; Kalyanpur et al 2009). Given the cost savings that these systems represent over film-printing techniques, however, the long-term cost savings of these technologies are well worth the substantial up-front fees (Hoffman 2008; Rath 2010).
Most of the major effects of the adoption of a PACS are largely if not entirely quantifiable, with cost savings, improvements in turnaround for image creation and analysis and the making of decisions all measurably different with such systems than in traditional image production techniques.
There will also be an enormous though unquantifiable environmental benefit, however, as there are very little or no physical materials involved in the rendering of each image in such systems, and certain benefits to patients and physicians such as easier transmission and increased portability are also difficult to quantify (D’Asseler et al 2000; Kalyanpur et al 2010; Shakeshaft 2010). However, It is through cost savings and the improved efficiency and efficacy of care that stakeholders will derive the largest benefit from adoption of this technology.
It is difficult to provide concrete numbers as to the costs and savings that will be presented by adoption of a PACS, as technology costs are unstable. They are following a general downward trend, however, and could thus be considerably lower than the estimated two-and-a-half million dollars of the most recent estimates that can be founding the literature (Hoffman 2008). Other ongoing costs are associated with maintaining and updating serves and connected image viewing equipment, as well as with hardware and software upgrades that often take place every five years and annually, respectively (Cannavo 2005).
These maintenance costs will run an estimated four hundred-thousand dollars per year, averaged out over each five year period and following the initial outlay for equipment purchases, which initially seems to present a great deal of excess expense (Cannavo 2005).
Estimates of cost savings from the reduction in film costs as well as through reduced work hours needed for the creation of images and the reading of images by physicians will lead to an average annual cost savings of between five hundred- and seven hundred and fifty-thousand dollars a year, leading to an overall cost benefit of one hundred- to three hundred and fifty-thousand dollars a year compared to traditional film production techniques (Hoffman 2008; Rath 2010).
A ten percent reduction in costs could be achieved through increasing the competitiveness of a the bidding process amongst companies that produce the technologies necessary for a successful PACS, as well as through reducing the time and personnel involved in training programs. This latter is not especially advisable, however, as indirect costs will likely be created though reductions in the efficacy of the adoption and a reduced improvement in treatment efficiencies and speeds (Kalyanpur et al 2010). At these rates, breakeven points typically occur within a decade of adoption, with immediate benefits to cash flow apparent for most institutions (Hoffman 2008).
Risks
Given the degree to which these technologies have been inspected and supported in the literature, the risks of PACS adoption are minimal. There is some possibility of decreased cost benefit and prolonged breakeven periods due to unforeseen costs, and there are risks associated with the safety and reliability of digital storage systems for medical images (Cannavo 2005; Kalyanpur et al 2010). Nevertheless, the management of initial costs and providing the necessary for funds for system maintenance and archival processes will mitigate these risks to a large degree.
Service Management
The governance of this project will fall primarily to the administrative and medical heads of the radiology and/or imaging department(s) at the identified medical institution, as it in is this/these departments that the changes will be implemented. Staff physicians and other personnel that utilize medical imaging equipment will need to be apprised of the changes, though the actual job functions for many individuals will not be impacted.
Appropriate administrative staff under the guidance of lead physicians/medical department head will handle equipment procurement, and IT staff will be brought in to ensure compliance with existing technological standards. These standards are primarily important to ensure compatibility with other institution equipment and with the equipment and software that exists in other offices and institutions to ensure portability and communicability.
However, there are many complexities that will result out of the transition from traditional film-production imaging and reading techniques to the utilization of a PACS, the steps necessary to achieve this transition are actually few and relatively straightforward. Purchasing and installing the equipment, while dismantling and disposing of outdated film-based equipment, is the initial step in this transition process; training is really the only other step that needs to occur prior to completing the transition to this technology. The ease of use of this technology once basic steps are mastered will allow for a very quick increase in the efficiency of use, leading to practical benefits from the transition almost immediately.
Change Management
Despite the relative ease of this transition, there will of course need to be some explicit measures for change management put into place in order to ensure that there is no interruption in the provision of medical services in the medical institution. Personnel training can take place parallel and even prior to the purchasing and acquisition of equipment, limiting the practical difficulties that can arise for physicians and technicians and increasing the positive aspects of the user experience (Kalyanpur et al 2010; Tan & Lewis 2010).
Department heads will manage the transition of operations from the traditional mode of image processing and reading to the use of the new technologies, while administrative staff and IT personnel will handle the practicalities of actually obtaining and installing the necessary equipment and software and ensuring compatibility with other institutional equipment and processes.
Cost and financial analysis
Projected Profit and Loss Statement
Profit and Loss Calculation
In Year we reach the point when we can success to cover our cost. In the fourth year the revenue is $268,000.00 and the cost of goods is $150,000 with the same amount of administrative and marketing cost. The result is expected to be a profit $18,000. In the fourth year, the business can start to generate profit.
Break Even Point Analysis
Break-even point units = fixed cost / contribution margin per unit = 100,000/59 = 1695 units.
In order to calculate break-even point, it is important to consider two kinds of cost variable cost and fixed cost. Unlike projected standard profit and loss statement, this form of income statement is considered to use internally for analysis and evaluation purposes. In the first year, as we assumed that the total number of units have been lent are 1,000 so the potential revenue for the first year is equal $ 134,031.19. Cost of goods hired is equal $ 74,638.59. As the administrative and marketing expenses assumed to be fixed so it is equal to $100,000.00 every year. As a result, in the end of the first year it is expected to be a loss of $ (40,607.41).
In year two, the total number of units hired. Increase by 300 to reach 1,300 units. The business can generate then revenue of $174,200.00. As the number of units increased, the cost of goods must increase to reach $97,500.00. Administrative and marketing expenses are fixed as $100,000. The result is loss of $23,300. Although still the business is losing, the amount of loss has been decreased. In the third year, the revenue is $227,118.64 and cost of goods is $127,118.64 and the same amount of administrative and marketing expenses so the result of the third year is expected to be zero which means no loss or profit.
This is the year of our break-even point when we can success to cover our cost. In the fourth year the revenue is $268,000.00 and the cost of goods is $150,000 with the same amount of administrative and marketing cost. The result is expected to be a profit $18,000.
Conclusion
PACSs require a significant amount of upfront expenditure, though these costs are in no way prohibitive to most medical institutions of medium size or larger. The cost benefits that they provide over the long-term lead to a breakeven point between five and ten years after initial adoption of the technology, however, and continued savings on a significant basis beyond this point. The benefits of added clarity and hugely increased efficiency and portability of the images produced are also major assets of this technology, and represent indirect cost advantages as well.
Reference List
Cannavo, M. (2005). “The new PACS puzzle: Cost and technological change.” Imagining economics. Web.
D’Asseler, Y.; Koole, M.; Van Laere, K.; Vandenberghe, S.; Bouwens, L.; Van de Walle, R.; Van de Wiele, C.; Lemahieu, I. & Cierckx, R. (2000). “PACS and multimodality in medical imaging.” Technology and health care 8(1), pp. 35-52.
Jackson, P. & Langlois, S. (2005). “Introduction of picture archiving and communication system at The Townsville Hospital.” Australasian radiology 49(4), pp. 278-82.
Kalyanpur, A.; Singh, J. & Bedi, R. (2010). “Practical issues in picture archiving and communication system and networking.” The Indian journal of radiology & imaging 20(1), pp. 2-5.
Hoffman, T. (2008). “Beyond Film.” Computerworld 42(19), pp. 32.
Maydell, A.; Andronikou, S.; Ackermann, C. & Beuidenhout, A. (2009). “Comparison of paper print and soft copy reading in plain paediatric radiographs.” Journal of medical imaging and radiation oncology 53(5), pp. 459-66.
Rath, P. (2010). “The cost effectiveness of implementing picture archiving and communication systems (PACS) in the operating room.” Current orthopaedic practice 21(1), pp. 89-93.
Shakeshaft, J. (2010). “Picture Archiving and Communications System in Radiotherapy.” Clinical oncology 22(8), pp. 681-7.
Slomka, P. & Baum, R. (2009). “Multimodality image registration with software: state-of-the-art.” European journal of nuclear medicine and molecular imaging 36, pp. 44-55.
Tan, S. & Lewis, R. (2010). “Picture archiving and communication systems: A multicentre survey of users experience and satisfaction.” European Journal of Radiology 75(3), pp. 406-10.