Analysis of the North American Radiology Image and Information Management Systems Market Assessing Growth Trends in Radiology PACS, RIS-PACS, and Informatics Markets June 2012
Contents Section Slide Numbers Executive Summary 4 Market Overview: Radiology Image and Information Management Systems 11 Total Radiology PACS and Integrated RIS/PACS Market - External Challenges: Drivers and Restraints 17 Forecasts and Trends 31 Revenue Forecasts by Revenue Stream 48 Revenue Forecasts by Solution Component 53 Forecasts and Trends by Annual Procedure Volume 61 Demand Analysis 67 Market Share and Competitive Analysis 73 Over 200,000 APV Segment Breakdown 88 Between 100,000 and 200,000 APV Segment Breakdown 97 Between 50,000 and 100,000 APV Segment Breakdown 105 Between 25,000 and 50,000 APV Segment Breakdown 114 Under 25,000 APV Segment Breakdown 123 Imaging Center Segment Breakdown 132 The Last Word (Conclusions and Implications) 139 Appendix 142 3
Executive Summary Historically the leading clinical department with regard to information technology (IT) adoption, radiology has invested heavily in radiology information systems and picture archiving and communications systems (RIS, PACS) throughout the past two decades. Following the wide adoption of RIS by U.S. hospitals, the first wave of wide-scale adoption of radiology PACS in the late 1990s was driven mainly by its appealing return on investment (ROI) model, as it allows for immediate cost reductions associated with replacing analog film printing and distribution with digital image viewing and communication. The first wave of PACS adoption has reached its trailing end, and the market has entered its second generation as PACS technology has diffused top-down from larger-scale to smaller-scale provider market segments. With the vast majority of North American radiology providers already using RIS, PACS, or a combination of these two systems, the RIS/PACS market is mature and driven largely by system replacements. Many providers have already replaced one or two PACS and are using or seeking a third-generation solution. Unlike with first-generation PACS systems, the ROI model for system replacements is based on incremental workflow efficiency and productivity gains, and on their remote distribution capabilities. 5
Executive Summary (continued) Radiology PACS have been evolving in recent years into enterprise-wide systems, making them the core platform for multidepartmental integrated image management platforms and for distributed medical image access across multisite environments. Radiology PACS have also evolved from first-generation systems to integrate higher levels of functionality, including traditionally stand-alone functions such as RIS and advanced (3D/4D) visualization, as well as traditionally RIS-based functions such as reporting. Despite the growing role and scope of PACS, the North American PACS market slowed dramatically starting in 2008, declining in revenue for three consecutive years. This recessionary trend was triggered by economic pressures on hospital finances, but was accelerated by the high degree of saturation and lengthening replacement cycles in the large-scale PACS market, combined with pricing pressures and provider consolidation in smaller segments. While the three-year revenue decline appears to be a permanent readjustment of the market opportunity, the outlook for the North American market remains positive for the period 2012-2017, with radiology PACS recovering their role as a productivity workhorse for the imaging enterprise and with medical imaging finding its place as part of the U.S. healthcare IT reform. 6
Market Overview Definitions Radiology PACS refers to a combination of software, hardware, and services used to manage digital radiology images, related information, and workflow processes throughout the image lifecycle including image acquisition, analysis, interpretation, distribution, archiving, and retrieval. RIS refers to an information system consisting of several modules used to manage data related to patients and radiology operations, such as scheduling and clinical and financial reporting. Integrated RIS-PACS System refers to a single vendor solution combining the management of radiology image data and related information. Enterprise PACS can refer to one of two concepts depending on context: o A common multidepartmental IT platform integrating radiology PACS with other departmental PACS, such as cardiology. o A common IT platform spanning multiple affiliated and geographically distributed radiology imaging facilities. This study pertains to the North American radiology image and information management systems market including the United States and Canada. 12
Market Overview Definitions (continued) A radiology PACS unit contract is defined as an annual software license for a vendor s system possibly combined with the required hardware with related professional services and with an associated maintenance and support (M&S) contract. Pricing of a radiology PACS unit contract is defined as the first year s expenditure for a new system, which may or may not include a one-year maintenance and support contract. In the case of a pay-per-procedure payment model, the unit contract pricing used in this study is the one-year equivalent pricing under a capital model, calculated over five years. Radiology PACS revenue is defined as revenue captured directly by PACS vendors, but excludes revenue from hardware purchases or support contracts made directly via third-party hardware or service vendors. 13
Market Overview Key Questions This Study Will Answer After a phase of declining market revenue starting in late 2008 and continuing into 2011, when will the North American radiology PACS market recover healthy growth rates? Where are the pockets of growth in radiology and enterprise image and information management systems markets, and what are the key growth opportunities to leverage going forward? What characterizes the different customer segments of the market, and what revenue opportunity is each segment expected to represent through net new and replacement contracts? How is the nature of the radiology PACS business changing, while its service component continues to increase and the operational financing model for PACS continues to gain traction? How is each radiology PACS vendor faring through the recent market decline, and positioned in the face of rising market saturation and degree of competition? What is the long-term outlook on the imaging informatics market, as new technology paradigms challenge the traditional PACS model? 14
Market Overview Segmentation Total Radiology Image and Information Management Systems Market: Market Segmentation, North America, 2011 Total Radiology Image and Information Management Systems Market Stand-alone Radiology PACS Singlevendor Integrated RIS-PACS Solutions Stand-alone RIS Third-party Vendor Neutral Archive and Image Exchange Solutions Third-party Speech Recognition and Reporting Solutions Third-party Advanced (3-D/4-D) Visualization and Clinical Applications Long-term Image Archiving Services and IT Middleware Solutions Scope of Present Study Market Segmentation The total market for radiology image and information management systems can be divided into several components based on the function they carry in the radiology workflow and the management of images and related information. Stand-alone radiology PACS and integrated RIS-PACS solutions represent the two major components of the radiology informatics ecosystem and may incorporate other components, such as an enterprise archive or an integrated 3D function, as well. For the purpose of the quantitative analysis in this study, only single-vendor solutions including PACS and possibly RIS and/or other integrated solutions are taken into consideration. 15