A recent article on the web emphasizes the effect of ARRA funding for EMRs on the market for ancillary systems -- RISs, PACSs, and CVISs (see: ARRA FUNDING TO HAVE A SIGNIFICANT NEGATIVE EFFECT ON THE PACS, RIS, AND CVIS MARKET THROUGH 2013). The article did not include LISs or Pathology PACSs in the list of affected ancillary systems but I will assume this to be true. Below is an excerpt from the it:
According to Millennium Research Group (MRG)..., the 2009 American Recovery and Reinvestment Act (ARRA) will continue to shift the focus of hospital healthcare IT budgets away from picture archiving and communication systems (PACS), radiology information systems (RIS), and cardiovascular information systems (CVIS), and toward Electronic Medical Records (EHR). This will result in a continued dip in sales and market size for PACS, RIS, and CVIS, one that will likely extend to 2013, when these systems are expected to become eligible for ARRA funds as well. While hospitals are eligible for stimulus funds through demonstration of “meaningful use” of their EHR systems, PACS, RIS, and CVIS are currently ineligible for these funds. “We expect intense competition between vendors for a share of a shrinking pie,” says [a market analyst for MRG]. “Significant price discounting of systems as well as a shift in focus toward the less-penetrated small hospital segment is expected over the next few years. It is a very critical moment in time right now, where health care professionals and vendors need to voice their opinions and lobby to get PACS, RIS, and CVIS incorporated into Phase II and Phase III of the ARRA.” In 2010, the US market for radiology and cardiology PACS, RIS, and CVIS was valued at approximately $1.8 billion.
A couple of comments come to mind about this story relating to ancillary system pricing in the market. LISs, as well as other ancillary systems like RISs and PACSs, are the workhorses of HIT. They manage huge amounts of diagnostic information, feeding it to the EMRs to enable one-stop-shopping for hospital clinicians. And yet, the purchase price of these systems pales in comparison with that of EMRs. It's impossible to generalize but I suspect that such systems frequently run only about 5-10% of the cost of an EMR for a medium sized hospital. I have heard LIS and middleware vendors gripe about this situation over the years. Why this major price differential which, we now learn, may actually widen until PACSs, RISs, and CVISs become eligible for federal funds?
A few ideas come to mind to explain this phenomenon. The first is that the market for LISs, RISs, and PACSs is highly competitive, which drives down their price. This, in contrast to the EMR market, which is not very competitive. Epic holds a near-monopoly at the high-end (see: Are You an Enterprise or Best-of-Breed CIO? Access to Cash May Make the Difference; Why Does Epic Keep Hammering Cerner? Mr. HIStalk's Opinion). Secondly, there is the legacy of very expensive HISs (hospital information systems) back in the day when IBM set the prices. It could charge premium prices for its systems and the hospitals would pay the asking price.
Thirdly, LISs, RIS, and PACSs are largely managed by pathology and radiology personnel with little attention from the CIOs except perhaps for hosting the servers. The purchase price for these ancillary systems gets doled out, sometimes grudgingly, by hospital executives and with extreme scrutiny. By comparison, the EMR is managed directly by the CIO and his or her staff. Their fortunes ride or fall on the success of this system. Failure of an EMR deployment often prompts broad dismissals. Hospital execs will throw whatever funding is necessary to ensure EMR success.
Stage 2 of ARRA's HITECH act will likely require transmission of structured data from LISs to EMRs, and the ability to order labs directly from EMRs (CPOE).
Also, my sense (correct me if I'm wrong) is that among LISs, adherence to messenging standards (eg, HL7v3) is spotty.
Do you think that as these issues come to light CIOs will pay more attention to the LIS?
Posted by: Doug Mitchell, MD | February 27, 2011 at 02:28 PM