Picture archiving and communications systems are becoming part of hospital and healthcare facility infrastructure, as vital to enterprise operations as facilities management or accounting. But to justify what is often a large purchase, a return on investment analysis is often necessary to motivate the financial powers that be to invest in PACS. Over the next dozen pages, you will meet hospitals large and small, rural and urban, that have made the PACS investment - and proved the ROI.

After making a $7 million PACS purchase, Bethesda Healthcare System saved about $157,000 per annum. In the first 12 months of PACS operations, film savings of $396,000 were achieved. Year one total savings in the imaging department amounted to over $1 million.

Likewise, Christus Health System in Houston recognized $415,000 in film cost savings, a 14 percent reduction in lost films, 14 percent increase in imaging department volume, reduced the cost per radiology exam by $5.06 and sped services wait time by almost 33 percent.

The results are real, too, at Mercy Medical Center in Des Moines, Iowa, that saw a 40 percent increase in revenue per FTE to $70,508. Over the first two years of the PACS implementation, the facility will save about $2.1 million.

These are just three of the seven facilities who have shared their PACS ROI stories, so please read on.


By Fran Lutz, Administrative Director, Center for Advanced Imaging, Bethesda Memorial Hospital & Bethesda Outpatient Imaging Center at Bethesda Health City, Bethesda, MD

Bethesda Healthcare System made a strategic decision to invest in PACS technology when its executive management team conceded that traditional x-ray film management would never achieve the information access expectations of its physicians, patients and medical staff. In 2001, Bethesda Healthcare System was typical of many U.S. hospitals - a not-for-profit community hospital with 362 licensed beds, with an annual volume of165,000 diagnostic procedures interpreted by a team of 10 radiologists.

In 2001, the imaging department had problems managing films - problems associated with retrieval, storage space for filing, and delivery of films where they were needed in a timely manner. Efforts to improve film file room functionality had been made without much impact on performance. Staff was added. Procedures were changed. Complaints continued. CEO Robert Hill decided to personally investigate. The experience of working a one-day 8-hour shift was enough to convince Bethesda's technology oriented chairman that hospital-wide conversion to digital image management was necessary.

The imaging department needed more than a PACS. It also needed a major upgrade of its existing radiology information system. The timing happened to coincide with a search by Siemens Medical Solutions for a partner to launch its new SIENET Integrated Radiology Suite, a fully integrated brokerless RIS/PACS solution. Bethesda agreed to become a major beta site for Siemens new NOVIUS RIS. And as one of the first hospitals in North America to implement a fully integrated RIS/PACS, Bethesda Healthcare's executives decided that the hospital would openly share its experiences over the five-year life of the product - including financial information - with the healthcare industry.

The new RIS was installed in October 2001. The go-live date for the PACS was May 2002. From the outset, the performance of the integrated system more than exceeded expectations. The impact on providing better service to ER patients was profound. ER physicians had immediate, unprecedented access to images. With the new system, turnaround times from exam order to completion of procedure dropped from of an average of 54 minutes to an average of 42 minutes for all modalities, with an average of 32 minutes turnaround time for diagnostic radiology. For emergency patients, every minute counts. The increase in imaging department efficiency positively impacted patient treatment. Patient care decisions were expedited. Emergency department efficiency overall improved. While not as dramatic, workflow efficiencies generated by the integrated RIS/PACS impacted every single hospital department within months of implementation.

The Financial Case for PACS

Hospitals without PACS know that they must make this expensive investment sometime in this decade. PACS has become an infrastructure issue, a component of a hospital information system and electronic patient record strategy. Hands-on film management is becoming obsolete.

Yet, is there a positive financial case for a PACS, in this case, an integrated RIS/PACS?

For Bethesda Healthcare System, the answer is yes. Bethesda did receive financial incentives to be a luminary site for Siemens. (The imaging department hosts site visits by prospective customers several times a month.) Yet, the cost of the system over a five-year period for capital and operational expenses was still substantial at $6,298,000. Based on realistic estimates, direct and indirect cost reductions would be $7,080,768. This would yield a positive net present value of $132,083, with an actual averaged cost savings of $156,553 per annum. Either way - an affordable decision for the hospital.

But were these estimates realistic? Only time would tell.

Bethesda assumed that it would reduce film production in Year 1 by approximately 50 percent, and that the equivalent of up to 4 FTEs could be eliminated from the file room staff during the course of the year. Within one week of the PACS implementation, films were being printed only for surgeons and the OR within the hospital. Films also were printed for referring physicians who specifically requested them, rather than the CD that the department routinely provided.

In the first 12 months of PACS operation, film savings of $396,514 was achieved, 3.5 percent greater than anticipated. This estimate was right on target. Other estimates were way off track - in a most positive way. Savings from elimination of forms and labels for film and patient jackets was underestimated by 49 percent, or $32,807. Similarly, the FTE reduction in film library staff was also significantly underestimated. It was possible to entirely eliminate file room staff for the night shift and during weekends, as well as reduce the number of individuals during the 1st and 2nd shifts. This represented a reduction of 7.2 FTEs. Instead of $97,587, a cost savings of $189,658 was achieved, or 94 percent more than had been forecast!

For repeat exams, a $9,000 cost-savings was estimated. This represents the cost of procedures performed in FY 2001 that had to be retaken due to misplaced films.

Space reduction expenses, as well as repairs and maintenance contracts for film processors that could be eliminated had not been included in the original estimate. The savings of $56,250 for space reduction is a combination of not having to transfer 12 months of films to Bethesda's off-site commercial storage warehouse and actual space reduction within the hospital's file room. Three film processors were retired, reducing annual maintenance contracts and chemistry costs by $97,522.

Transcription cost-savings was underestimated by 146 percent. The new RIS incorporates site-customizable report templates. When the RIS was first launched, these originated as a library of normal reports for the most common exams, but have expanded dramatically. When a radiologist is preparing a report, he/she can select a report template with a single mouseclick, fill in some fields, and electronically sign. Once electronically signed, the system autofaxes the report wherever it is needed. The impact on report turnaround time has been significant; the domino effect savings to other hospital departments has not been calculated, but may in fact be even greater than the total of $136,852 in 2002. Bethesda changed its transcription services company in 2003, obtaining a more favorable contract, so the cost savings of the report template feature in 2003-2004 is less.

The $91,000 savings for Web image retrieval represents on-call time-savings for the radiologists themselves. It represents the minutes wasted by an on-call radiologist waiting for images to arrive at his home using the pre-PACS teleradiology system versus use of the Web server to access PACS. One may argue that this is not a hospital savings, but it translates into more rapid diagnosis for acute care emergency patients.

Year One cost savings for the imaging department was originally estimated at $702,403. It actually totaled $1,075,916. The cost-savings projection for Year Two ending April 30, 2004, is $1,036,599.


By George Conklin, senior vice president, Information Management & Alana Higgins, manager, Clinical Applications, CHRISTUS Health System Support Center, Houston, TX

Three years ago, the CEO of CHRISTUS Health, Dr. Thomas Royer, convened "The Futures Task Force" - a special team of board members, senior executives and physicians representing various medical specialties. Our assignment: Identify emerging trends in healthcare and plan for the future.

Taking into consideration that the CHRISTUS Health system includes 40 hospitals and 380 physical facilities located in 70 cities across five states and Mexico, our assignment was a huge undertaking. Over 18 months, we examined the factors driving change in healthcare including technology, science, the environment, politics, demographics, employee shortages, quality, increasing demand for information 24/7, and government regulations. In addition to these issues, we discussed dozens of the little things that could add up to challenge the CHRISTUS system in the future.

Image management is crucial

The Task Force quickly realized, in order to meet future demands, we needed to do what many in the healthcare industry have called a "leap of faith." And so we made the decision to transition our radiology departments from analog to digital. Guided by the belief that image management will play a crucial role in the future of healthcare, and recognizing that PACS offered an opportunity to leverage the system's purchasing power and make gains in several areas, we conducted an extensive search to identify a vendor and partner to help us take our first step into implementing PACS.

McKesson's Horizon Medical Imaging was unanimously selected to be CHRISTUS' enterprise PACS solution. The solution from McKesson gives our users the advanced tools that they need to do their jobs today, and at the same time, we are assured in knowing that the application McKesson provided serves as a launch pad well-suited for expansion.

Putting PACS to the test

We knew that success would come if we had a strategy that was defined, yet flexible, with measurable objectives and a realistic timeline. We decided to use one of our hospitals as a test for PACS - CHRISTUS St. Frances Cabrini Hospital, a 265-bed healthcare facility with 1,400 associates and 350 physicians, located in Alexandria, Louisiana, With this installation, we were looking for outcomes that could be realized across the system, including:

  • Improve physician satisfaction with the radiology services to 80 percent and radiologists to 90 percent
  • Ensure patient data integrity and decrease lost film rate to the national average of 7 percent
  • Reduce annual cost of film and supplies by at least $400,000 within three years
  • Decrease file room FTEs by at least five
  • Increase radiology volume throughput by at least 3 percent per year
  • Serve a greater patient load from the surrounding area with a population of 350,000

The PACS installation started on May 14, 2002, and by late summer, the system was operational. Radiologists quickly embraced the new digital technology, as they were able to speak with physicians about patient files in real-time. Prior to PACS, it would have taken up to 30 minutes to complete the same request. Consequently, patient flow improved in the ER and Minor Care Departments.

There were small challenges along the way, but one of the largest came after the implementation team set its target kick-off date. The initial plan called for PACS to be rolled out in phases. However, as we moved forward, it made sense to take a different position. The hospital would stop using film on the same day we went "digital." It was a bold decision, and it meant that we had to delay the go-live date by six months allowing time to purchase more workstations and conduct more training.

PACS goes live

On Nov. 18, 2002, PACS went live throughout the hospital. Physicians noticed immediate benefits with patient flow. Frustration with getting film from the file room was all but eliminated. Lost film was no longer a problem. Radiologists decreased their time consulting with referring physicians by an average of 28 minutes per call because images were immediately available through PACS.

A survey of physicians revealed 100 percent of the group strongly agreed that the PACS increased accessibility, was a positive change for the hospital and had a positive impact on their practice. An associate satisfaction survey also found that 100 percent agreed the system had made the radiology department more efficient. Ninety-eight percent said the system had improved their ability to provide quality service to physicians and patients.

Measuring ROI

We believe ROI should be based on objective data, that is a financial return, but at the same time, should not overlook other data (satisfaction, for instance) and other, less substantive information (anecdotal statements made about the value of an application). That said, by January 2004, film costs were reduced by $500,000, a 90 percent reduction which exceeded our expectations by more than $100,000. We also reduced our film room staff by 30 percent - reducing the staff by nine - four more than we had anticipated. The efficiencies achieved with PACS were the big surprise. We had set a goal of achieving a three percent increase in volume, but actually reached a 21 percent gain. While all of these benchmarks demonstrate ROI in numbers, we also valued "intangible" improvements. For example, patients now appreciate the reduced wait times afforded by the new PACS solution.

Christus Health plans for PACS

Having established standards for technology and shared infrastructure acquisitions, the St. Frances Cabrini Hospital success story created a path for CHRISTUS Health to save $1.5 million in up front capital costs and $1.7 million in operational expenses associated with four additional PAC systems that are concurrently being implemented with the assistance of McKesson's Medical Imaging Group in four different facilities.

Looking to the future, CHRISTUS Health is well positioned for the ongoing changes in radiology. With 28,000 associates and 9,000 physicians, we count on each individual to contribute to our commitment to providing the best care possible. With PACS now rolling out, our organization will have yet another tool to help us live up to that goal.


By Lisa Gonsalves, PACS Administrator, Little Company of Mary Hospital, San Pedro, CA

Little Company of Mary Hospital (LCMH), a non-profit hospital with 317 acute care beds and a full range of primary care and medical-surgical services to a community base of 800,000 people. A member of Providence Health Systems, the hospital provides its physician and patient base with leading advances in cardiac care, as well at imaging services. LCMH is renowned for advanced imaging services including a positron emission tomography (PET) unit and MRI, as well as comprehensive oncology services.

The growing demand for customer service with quality outcomes in imaging services, as well as more physicians needing greater access to images at disparate locations has lead to a major paradigm shift for Little Company of Mary. Partnering with Philips Medical Systems, LCMH is leading an imaging shift via implementation of PACS. PACS provides clinicians with easier access to their patients' images and medical records on their office computers. All images are electronically transferred to a central storage unit for easy retrieval, facilitating comparison to prior exams for evaluation and treatment plans.

The challenge

Hospital administrators have long grappled with how to measure the return on technology investments intended to improve patient outcomes and build efficiencies across a healthcare facility. What is the cost of innovation? How does it compare to operating costs at the present rate? At what point does the status quo cost more than the next-generation solution?

Often, by the time these questions are answered, a critical decision path is already underway. ROI remains an elusive calculation, muddying purchase decisions and long-term vision for healthcare professionals. Nowhere is this more prevalent than in PACS implementations, in which there is no lack of anecdotal material concerning project mishaps.

At LCMH, our administration came to the realization that PACS was essential to slingshot our facility to the next level of service for our patients and physician community. We had to get beyond the plateau which many radiology departments experience that have the best technology, have hired the right physicians, specialists and technologists and are scheduling to maximize usage. PACS has proven to be the force of the future that has allowed us to reach that next level of excellence for patients and physicians.

The solution

Little Company of Mary Hospital hired an independent consultant to assess the need for a PAC system, then chose Philips Medical Systems as its partner for the PACS implementation - because of the depth of the company's imaging equipment and because Philips understands the business side of the healthcare industry and was able to benchmark operational costs and efficiency indicators. Furthermore, Philips brought a level of service and partnership - including an on-site PACS administrator for one year - that made the implementation trouble-free, allowing me time to focus on end-user acceptance among the physician community and PACS training, while the PACS administrator focused on customizing the PACS to our needs.

Philips helped LCMH navigate the labyrinth of analysis and calculations along the way to benchmark the outcomes of the PACS implementation. The team established baseline operational costs, methodologies and quality/efficiency indicators for PACS. The Strategic and Enterprise Business group led the benchmarking project, communicating with the staff at LCMH to arrange all activities, including pre-visit data collections and on-site schedules. Philips analysts spent time onsite collecting detailed reports, compiling results (including implementation data and operational assessments) and reviewing key aspects of the PACS implementation. All benchmarking was designed for easy repetition at intervals defined by Little Company of Mary Hospital.

A key component of the solution for the Little Company of Mary Hospital was the EasyAccess Enterprise. This is a unique modular PAC system based on a logically centralized database with physically distributed storage capabilities. This allows relevant information and images to be made available close to the users, giving them quick and transparent access to data on any workstation. LCMH can easily expand the system when more capacity is required.

Another major component to the PAC system was the EasyVision DX; this is the advanced workstation for diagnostic viewing and reporting. It is highly functional, easy to use and optimized for the radiologist's way of working. This product worked very well for this hospital's environment.

The result

The six-month PACS ROI monitor helped Little Company of Mary Hospital demonstrate significant improvements related to the PACS implementation, including a $511,000 reduction in expenses and an increase in contribution margin of $724,000 related to a 10 percent increase in outpatient volume. Increased volume and expansion of operating hours also was achieved without adding FTEs. The net impact of PACS as demonstrated by the PACS improvement program was $1.2 million for the first year.

Additionally, Philips helped to continue a study on ER throughput that has been very important to the hospital. In light of the shortage of technologists and radiologists, the PAC system has allowed the hospital to keep up with throughput without having to increase FTEs. This is an example of a departmental efficiency that has been extended to the whole hospital. Another thing we're able to show is a decrease in dollar-per-unit-of-service. Anecdotally, our nurses and case managers are telling us that radiology has seen boosts in productivity of 50 minutes per patient. That translates into quicker discharges, more information available per patient, faster patient movement throughout the system and better workflow all around the facility - and happier patients and care-givers, according to the nurses. We've also seen great acceptance from our physician community, who use PACS regularly within the facility as well as at their offices and in their homes. This physician's utilization of time and resources has been greatly enhanced with the implementation of PACS.

Beyond the quantitative benefits, we've been very impressed the partnership we have created with Philips. We feel that it is truly the open communication, regular feedback and practical insight and knowledge gained from that partnership that has jump-started our PACS implementation and allowed us to reach a high level of accomplishment so quickly.


By Chris Christensen, MS, CNMT, Administrator of Imaging Services & Susan Johnson (RT), PACS Administrator/Operations Director of Imaging Services, Mercy Medical Center, Des Moines, IA

Can it actually be more efficient and less expensive to operate a digital imaging system?

Mercy Medical Center is well on the way to proving that PACS delivers both greater productivity and long-term cost savings. Less than two years after installing PACS, Mercy has achieved impressive gains in staff productivity. Today a staff with 15 fewer FTEs performs a workload that has already increased 17 percent since PACS was installed and is expected to grow an additional 3 percent this year.

But our most impressive achievement to date is the dramatic gains in revenue per radiology FTE. In August of 2002 when we went live with PACS, our revenue per FTE was $50,770. By March of 2004, revenue per FTE had increased to $70,508 - a 40 percent increase.

This increased efficiency reflects all the workflow changes inherent in converting to a digital imaging environment. Most of our staff is now devoted to billable, patient-related duties. Since we only print film for mammography studies and a few referring physicians, we have been able to reduce the size of our clerical staff by 10 FTEs. In order to accomplish this, however, we had to bring our Web-based distribution system online and implement soft copy reading in the operating room. Prior to these additions, we still required a sizeable staff and 24 x 7 support in the file room to handle OR cases.

Prior to installing PACS, an outside consultant analyzed the financial results of our investment in PACS and digital imaging equipment. We anticipate an ROI of just three years - a significant improvement to Mercy's bottom line.

We are on track to achieve our ambitious goals with more than $2.1 million in savings during the first two years. During the first year, we posted savings of $470,000 in film and film-related equipment, $286,000 in labor and $118,000 due to the elimination of lost reimbursements. We achieved second year savings of $600,000 in film and film-related equipment, labor savings of $481,000 and more than $150,000 due to the elimination of lost reimbursements.

According to the consultant's projections (which we are actually exceeding at this point) we expect to reap an additional $1.45 million in savings during the third year of operation; $1.6 million during the fourth year and $1.7 million in the fifth year.

More than numbers: the rest of the story

These numbers tell part-but not all-of the story. Achieving maximum utility from PACS requires the full support of all PACS users-including technologists, radiologists and all clinicians who work beyond the walls of the radiology department. Kodak, Mercy's PACS vendor, developed a comprehensive implementation plan and supplied excellent training for our employees so that they felt comfortable with their new roles.

In addition, Kodak integrated its PACS with our existing IDX RIS, which provided a tightly integrated desktop that is much faster and easier for our employees and radiologists to use. The success of the integration between our PACS and RIS vendors built tremendous support for this project.

And finally, we have an in-house trainer who trains and supports referring physicians so that they feel comfortable with web-based delivery to their office. Mercy also established a hot line (the last four digits are PACS) that any clinician can call and get immediate support from one of our employees. We did not add staff to do this, since these calls are forwarded to the cell phone of the person on call.

Training, support key to reducing film usage

We believe that training and access to immediate support are critical to fully realizing the benefits of PACS. Members of the radiology staff at other facilities have told us that they have not been able to reduce film usage as much as anticipated because of continued demand by clinicians, surgeons and referring physicians. If clinicians or referring physicians have any type of problem accessing imaging studies online - whether at the hospital or at their offices - they are going to begin ordering film. Providing superior training and support has enabled Mercy to be 85 percent filmless.

In looking back, we are extremely pleased with the performance of the PACS and digital imaging equipment and the acceptance of this new workflow by our staff and referring physicians. We also owe a huge thanks to Mercy's administrative board that strongly supported our decision to go digital and approved several new positions (including the in-house trainer) that have helped made this conversion such a success.

Our experience indicates that you have to convert virtually everyone who reads or requests radiology studies to a digital imaging process in order to reap the rewards. If you don't have an effective Web-distribution system or digital image display in the surgical suite, you will need to support both film and digital environments because clinicians will continue to demand film. This will greatly compromise the efficiency and savings that can be afforded by implementing a digital imaging system.


By James Roetman, CEO, Pocahontas Community Hospital, Pocahontas, Iowa

Located in rural, northwest Iowa, Pocahontas Community Hospital is a city-owned critical access facility that serves a community of 2,000 people along with additional populations in six small surrounding communities. At less than 20 beds, the hospital not only provides general radiography, but also CT, MRI, ultrasound, bone densitometry, mammography and nuclear medicine imaging.

Initially, Pocahontas Community Hospital was interested in teleradiology services, but soon discovered that for just a slightly higher investment the hospital could instead have a complete PACS including an on-site 7-year archive, 3D imaging, full-feature viewer, brokerless integration and all-inclusive support.

NovaRad Corporation's NovaPACS product offers a complete system at an affordable price point that makes PACS a reality for small hospitals like Pocahontas.

NovaPACS has been operational at Pocahontas Community Hospital for one year. Pocahontas is on the leading edge of technology for the area - ahead of many of the hospitals in the larger cities within the state - and is realizing a consistent return on investment.

Measuring return

It was apparent after running the numbers that there would be a significant return on the investment with PACS. There were no large up front hardware costs that would need to be recouped from the installation of the PACS as NovaRad manages ownership, servicing and costs of maintaining the hardware for NovaPACS, making the ability to start realizing a return immediate.

NovaPACS is leased for a monthly fee of $1,200. More than half of this fee is coming back to the hospital by the average $700 a month that is saved on film costs alone. Pocahontas Community Hospital saves an additional $150 to $200 per month as the cost of running the film processor and required inventory of processing supplies have been significantly reduced.

An additional cost justification for the PACS is the savings being generated by the increased productivity of the technologists. An average of $200 to $300 per month in technologists' time once spent on film processing and delivering is being saved as images can be copied on CD in seconds rather than having to spend hours in the darkroom running and making copies of film. The increased productivity was