HealthManagement, Volume 7 - Issue 2, 2012 HIT

Is a Zero Capital Eexpenditure, Managed Service Model the Way Forward?

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With decreasing healthcare reimbursement and increasing  economic uncertainty, there is a growing trend for hospitals  to opt for a zero capital expenditure, managed service model  with the purchase of IT systems in healthcare. As the application  of managed service models emerges in the PACS  market, it paves the way for cloud technology to finally have  a significant impact in medical imaging. 

Managed services refer to a model where the vendor owns  the IT infrastructure, with the hospital paying a fixed fee per  month based on projected examination volumes. The vendor  is also fully responsible for maintaining this infrastructure, providing  data storage and software on a subscription basis. The  benefits of managed services include reducing the need for  heavy capital investment in PACS, such as costly in-house IT  support staff and IT infrastructure investment. It also provides  regular access to the latest software upgrades and allows flexible storage capacities to suite end-user's needs.

In any managed service model, the underlying factor is  the pay-per-service and third-party hosting or ownership of  PACS. There are then different forms of managed services  depending on the server location of the two components of  PACS - software and storage (see table 1).

Cloud storage refers to the storage of the client’s data resting  with the vendor or third party. However, PACS incorporates  a viewing component (software), as well as the storage  of images; the viewing system is actually what many consider  as PACS. Hence, the question is, at which point does  one begin to class PACS as being cloud-based? 

  • Is it the moment the software is at a third-party server,  as in SaaS onsite?; 
  • Is it when the storage is remotely available on the thirdparty  server, as in hosted managed services?, or 
  • Is it only when both software and storage components  are hosted by the third party, whereby the software as a  service lies off-site? 

Companies offering cloud-based PACS tend to fall into one  of these three categories. It therefore depends on whether  the system being offered is considered cloud-based from a  software or storage point of view. A pure cloud-based PACS  may be described as a system where both software and  storage components are vendor-hosted. 

More important than defi nitions, of course, is the adoption  of this technology. Both the technology and the business  model have to work for suppliers and end-users. On  the technology side, one might be more confi dent that vendors  will resolve the technical hurdles, such as the quality of  the data when transferred between locations and servers,  as well as the quality of the interfacing. On the business  model side, however, confi dence is much lower and many  questions remain. These include: 

  • Will hospitals be completely comfortable with third-party  hosting of patient data, regardless of regulatory compliance?; 
  • Will patients be comfortable with this arrangement?; and 
  • What about the cost-savings? Is the total cost of ownership  over a product’s lifecycle signifi cantly different from  traditional PACS models?

The major draw for managed service models is their stated cost benefits. Once the return on investment is clearly established, penetration of this remote storage model will increase and there will be strong demand for further technological advances in the field. This phenomenon is already taking place in the UK and the Netherlands, for example, where remote managed service models currently account for most managed service installations being currently provided. However, now that the cost savings from vendor ownership and management of PACS have been realised in these countries, the next wave of demand is for further cost savings, which may be obtained by completely moving storage and/or software to the vendor’s site. Indeed, as the UK renews its national PACS programme in 2013, InMedica forecasts that up to 20 percent of revenues will derive from hosted managed models, where the storage of images is cloud-based.

As such, vendor-hosted PACS and cloud technology in healthcare will emerge strongly by proving an ability to reduce the cost of ownership to the end user. Despite any technological benefi ts that cloud technology may provide in medical imaging, what hospitals need to see, and what suppliers need to work on, is an enhanced return on investment.

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