JBRBTR, 2004, 87: 296-299.

REVIEW ARTICLE PICTURE ARCHIVING AND COMMUNICATION SYSTEM PART 2 COST-BENEFIT CONSIDERATIONS FOR PICTURE ARCHIVING AND COMMUNICATION SYSTEM
A.I. De Backer1, K.J. Mortel2, B.L. De Keulenaer3 Picture archiving and communication system (PACS) has become an important component of many radiology departments. PACS is expected to make the departments more efficient, reduce operating costs, and improve the communication between the radiologist and the referring physician. Even if the cost-savings are not substantial because of the capital expense of PACS, cost justification is very important in demonstrating the substantial advantages of PACS at either little or no additional expense. Some cost-benefit considerations for PACS are discussed in relation to a hospital-wide implementation.
Key-words: Picture archiving and communication system (PACS) Economics, medical.

The rate of implementation of PACS in hospitals around the world is growing every year (1). Along with this increasing implementation rate, there is a growing concern about the cost-effectiveness of PACS. Numerous papers have been published attempting to address the cost-effectiveness of PACS and to account for some of the equipment necessary to implement PACS, the costs to purchase and operate the equipment, the time value of money, and possible measures of patient health effects (2-6). Other studies have analysed costs and savings, and some included an impact analysis (3). The results have been widely different, with some showing large savings when compared with film and others showing investments never regained. However, objective signs of success using PACS more effectively are beginning to appear (4-6). Several improvements in report turn-around time, improved access, and faster treatment in emergency room application have been reported. Recent studies have suggested that the greatest cost savings are realized at the hospital or enterprise level rather than within the radiology department itself (6). A strategy for going filmless Modality clusters, teleradiology, mini-PACS and PACS may be seen

as points along a digital medical imaging system continuum, consisting of a number of linked systems designed to acquire, store, display, print, route, and send radiologic images to home or other locations for review (7). This network may span a department, a hospital, several hospitals or clinics or physicians homes. The ultimate goal of a digital medical imaging network is eliminating film. In this context, terms that may reflect the PACS concept include the filmless radiology department and the all-digital radiology department. An evolution of radiology toward electronic and digital management of images is expected to make the departments more efficient, reduce operating costs, and improve the communication between radiologists and the referring physician. However, the major factors limiting PACS implementation and a filmless environment in todays marketplace are cost and rapidly changing technology. The cost of full-fledged PACS is currently high, often in the millions of Euros for a large hospital. Fortunately, advances in computer technology, especially PACS technology, results in decreased costs over time and may favor future costeffective implementation, even in a small hospital. For example, PACS at Baltimore VA Medical Centre, pur-

From: 1. Department of Radiology, Ziekenhuisnetwerk Antwerpen, Stuivenberg, Antwerpen, Belgium; 2. Department of Radiology, Division of Abdominal Imaging and Intervention, Brigham and Womens Hospital, Harvard Medical School, Boston, MA 02115, USA; 3. Intensive Care Unit, Royal Darwin Hospital, Rocklands, 0810, TIWI, Northern Territory, Australia. Address for correspondence: Dr A.I. De Backer, M.D., Department of Radiology, Ziekenhuisnetwerk Antwerpen, Stuivenberg, Lange Beeldekensstraat 267, B-2060 Antwerpen, Belgium.

chased in 1991 for approximately 7 million dollars, has been reported to cost for a comparable PACS considerably less than half this amount nine years later due to decreased costs of computer, network equipment, and short/long-term storage systems (8). Regardless of the financing strategy employed, PACS must be cost justifiable, relative to its film-based counterpart, over a defined return on investment period, which typically is five years. At the same time, legitimate concerns about technology obsolescence must be addressed satisfactorily, before multi-million Euro equipment expenditure may be justified. This may be extremely difficult with rapidly evolving technology, such as PACS, and requires assurance that hardware and software will be upgradable during the expected lifetime of the equipment (8). The level of vendor accountability is decreased when multiple vendors are involved, and no individual vendor will accept responsibility for system dysfunction. This leads to the potential for excessive downtime and diminution in realized productivity and operational efficiency gains. Today, however, it is impractical for most healthcare organizations to go totally filmless, at least all at once. They must develop a strategy to move forward to a filmless environment, to be implemented systematically over time. This lowers the risks of going filmless, spreads the costs out over time, and allows room for new technology as its develops (7). Economics of PACS Although financial models are imperfect for predicting the economic impact of capital invest-

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ments, they represent a best effort at analysing this impact. When the financial impact of a project is assessed, it is important to put operating and capital expenses in a form that may be compared (9). All cash flows that changes as a result of accepting or rejecting the project must be identified. Any change in cash flow that results from the project either directly or indirectly (e.g., increased overhead cost due to the new projects) is relevant to the financial impact of the project. Furthermore, the timing of the cash flows determines their relative values from todays perspective. A Euro is worth more today than it will be 1 year from now. Finally, the risk of the project must be considered. A safe Euro is worth more than a risky Euro. Time value and risk are both expressed in the interest rate, or discount rate, of the project. One approach in conducting a cost-benefit analysis is to amortize capital expenses over the life cycle of equipment and add annual operating expenses to get the expected annual costs of the system, basically treating capital costs like operating costs. Another approach is to compute the present value of a stream of expenses and add this to the capital costs to be incurred, basically treating operating costs like capital costs (17). When the capital costs are to be spread over a period of years, the first approach is usually taken. When the capital is to be purchased outright at the start of the project, the second approach is preferable.

It is important to state that NPV is only a financial tool and only has meaning in the present, when the economic decision must be made. The NPV method makes no assumptions about the amortization period or about how the project will be financed (e.g., cash purchase, lease, or loan). Furthermore, NPV does not fully account for all outcomes of a project (9). Proper project analysis necessitates consideration of patient satisfaction (e.g., better service and outcome, shorter hospital stay), physician satisfaction (e.g., faster access to images, better service, support for other users of images), and hospital utility (e.g., reduction in the number of retakes and lost films, expanded patient base from support of outreach facilities) utility as well as the financial impact (10).

Costs related to PACS acquisition and maintenance

Any kind of economical analysis of PACS will have to start with identification of the direct and indirect costs of implementing and operating PACS. Direct costs of PACS consist of the purchasing costs for PACS hardware and software as well as costs related to daily operation and maintenance (11). PACS hardware costs include appropriate network infrastructure, excess costs for digital image acquisition devices, image archive and image display workstations. Due to the high bandwidth demands of image communication, existing network infrastructure is often insufficient and may have to be replaced or amended. The cost of the laying of fibres is lower if installation takes place when a building is under construction. Whereas most modern CT or MR scanners may be connected to PACS with little additional effort, connection of older units may require substantial costs or may even be impossible. The latter problem may also occur when trying to integrate older fluoroscopy and angiography units, as well as ultrasound equipment, from an existing film-based system to a PACS environment. Unlike with primary digital modalities, such as CT or MR, capital costs in digital projection radiography (storage phosphor radiography or new digital flat-panel receptors) are substantially higher than in film-based radiography (12, 13). Indirect costs are related to the cost of maintenance, for instance air conditioning in the machine room.

The two major contributors to the cost of PACS are the depreciation and the service contract (14). Capital depreciation on computer equipment is usually shorter, often using a 5-year period, compared to medical equipment. The service contract includes all of the personnel required to operate and maintain the system. It also includes software upgrades and replacement of all hardware components that fail or demonstrate suboptimal performance. This includes replacement of any monitors that do not pass the quality control tests. The costs for service contracts and costs for hardware replacement and software updates are often underestimated and may easily add up to 20-30% of the original investment costs per year (11). With PACS, there is also the need for additional (skilled) personnel for system management, archive maintenance and staff training (9).

PACS savings
Savings in the radiology department may generally be achieved in a number of different ways. From the point of view of the radiology department the most important objective is proving the efficacy of filmless or softcopy operation. One of the most significant questions is whether filmless operation could indeed be cost effective with state-of-the-art PACS technology. Recent studies have shown that the softcopy department would be somewhat more expensive to operate than a conventional one and that, in an initial stage, radiologists would be slightly less productive when using this new technology. In the long run, however, reports have shown that PACS can be cost effective and more productive by allowing for significant increase in workload and volume of examinations without significant increase in the number of radiologists or technologists (15, 16). Direct savings from PACS will mainly result from reducing filmrelated costs. In addition to the costs for the film itself, which in a large hospital may easily amount to 5 00,000 or more per year, the costs for film processing, handling and storage, and courier expenses have to be considered (11). Especially the costs for a large film library in terms of personnel and valuable hospital space are substantial (14). Often a hospital will err by assuming they can completely eliminate film. It is

Net present value

Net present value (NPV) accounts for all relevant cash flows (costs and costs savings) of the project, discounted to today by using a discount rate that accounts for the risk and time value of the project (8). The results will vary depending on whether it is a one-time investment or a phased-in investment. The mathematic form of NPV is as follows: NPV = CFt/(1 + r)t, where CFt is the cash flow at time t, r the discount rate and t the number of periods. Costs, or cash outflows, have negative values, whereas cost savings, or cash inflows, have positive values. A positive NPV indicates that the project increases the organizations wealth in todays Euros. A negative NPV indicates that the project decreases the organizations wealth. An NPV of 0 indicates no change in financial impact.

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much more likely that a hospital will reduce the usage of film by 50 tot 85 percent (7). If the hospital has a film budget of 500,000 then it could save at least 250,000 per year from reduced film costs. Film related costs in a PACS environment mainly include the cost to print mammograms, and to print films for patients who are sent to other hospitals and outpatient departments. Radiology departments that maintain a large volume of film use despite PACS implementation are unlikely to experience a positive economic impact from PACS implementation. The transition from use of filmbased to filmless technologies in an imaging department offers tremendous potential for work-flow redesign and, consequently, improvements in operational efficiency of technologists and radiologists in the performance of general radiographic examinations (17). The combination of computed radiography and softcopy interpretation has resulted in a major decrease in the need to retake images thereby reducing not only cost but also improving the quality of service to the patient (18). However, the effect of retakes on film costs has been shown to be minimal (12). A 60% reduction in the time required for a technologist to perform CT with PACS, compared with the time required for performing CT with the traditional film-based mode has been reported (19). As a consequence, significant reductions in personnel costs may be achieved. Studies evaluating comparative CTinterpretation times with hard-copy and soft-copy displays have reported interpretation time with computer workstations to be comparable to conventional-film view-box (20-22), whereas other studies have reported prolongation of CT-interpretation time with computer workstations (23, 24). However, as additional hardware and software further evolve, enhancements in radiologists productivity with soft-copy interpretation should be realized (21). Indirect savings, mainly related to improvements in efficiency, are difficult to quantify. Hospital-wide savings associated with PACS and a filmless operation are even more difficult to quantify. Improved image accessibility associated with PACS will result in significant savings of time achieved by clinicians, referring physicians and other hospital employees searching for medical images (14, 15, 25). This average estimated time-savings

associated with PACS has been reported to vary between 10 and 60 minutes per day. However, the question is whether these time-savings will translate into actual savings for the hospital or merely a shorter and more relaxing day for the clinicians. Other cost benefits include decrease of waiting time for radiology reports, which has the potential to determine the length of stay, increase clinicians efficiency and accuracy in patient care, decrease in medico-legal risks and savings associated with a decreased rate of lost studies. These reductions in costs may become even more effective in institutions that consist of a network of multiple hospitals and clinics (14, 15). Combining multiple imaging departments into one virtual single operation by relying on PACS technology for more efficient use of expertise across the entire enterprise and by allowing for a better workload balancing may lead to significant improvements in productivity and cost savings (14, 15). Furthermore, teleradiology provides a more cost-effective solution than having to rely on specialists on-call to come physically from home to the hospital when called upon for a given procedure (15). The integration of images with the radiologic report constitutes a significant improvement in quality of radiologic services and has a considerable clinical added value. Most present PACS allow images to be linked to the corresponding report. Most important is the capability of identifying key images of a study and addressing these images to referring physicians as supportive evidence for a given clinical finding. The impact of providing a summary of the pictorial findings in addition to the written report has proven to significantly improve the quality of communication between radiologists and referring physicians. It may potentially reduce the number of misunderstandings and errors and thus improve the quality of care (15). Thus, there will be benefits from PACS for the diagnostic radiologist, referring physician, patient and the hospital itself. However, it is also important to separate true effects from PACS itself from an increase in efficiency, which may be achieved by Radiology Information System/ Hospital Information System integration alone (11).

wider dynamic range than film and to be advantageous by reducing the number of images that need to be repeated as a result of selecting incorrect exposure factors. This produces resource savings in terms of staff time and consumables such as the cost of films and chemicals. It also reduces patient and staff radiation exposure (15, 18, 28). Reduction in film usage and film size substantially reduces costs. When CR imaging forms part of PACS, digitally captured films may be transmitted immediately to the reporting radiologist for instant reporting, bypassing the need for the production, processing and delivery of a hardcopy. With PACS implementation, existing CR equipment in a radiology department results in a decreased cost with subsequent positive economic impact. The ability to produce digitised images without an additional investment in equipment will result in substantial cost savings (9). The implementation of large-scale PACS and CR has been reported to provide cost-effective results under the assumption of a long-term horizon (29). However, other have reported a negative economic impact on the radiology department with PACS and CR implementation (9). The latter results from the high initial capital costs, ranging from 150,000 to 600.000, just to get started using CR. Conclusion The implementation of PACS continues to promise significant benefits, including cost-savings, faster access to images, and improved care for patients. Decisions about PACS implementation should not be based solely on economic impact; non-financial benefits must also be considered. With PACS, one must also consider the opportunity to reduce the number of lost images, increase image access speed, increase image access both internally and externally to the hospital, and improve physician job satisfaction. Assumptions have been made that the costs of the film-based radiology system will increase in the future, mostly due to an increase in the costs of personnel. On the other hand, costs of PACS will decrease in the coming years, mainly due to a price drop of PACS hardware (5-25% per year), which offers the potential that PACS may become less expensive than film in the future.

Computed radiography and PACS

Computed radiography (CR) systems have been shown to have a

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