“Relax Mr. Murdock - It’s Just a Small Iceberg…“

or the first time in over a decade, sales of PACS have not kept pace with the market’s consistent growth. With few exceptions, most companies are finding that PACS sales have slowed considerably. Even the major vendors aren’t immune to the impact the FUD factor (fear, uncertainty and doubt) has had in this marketplace, yet most are doing a terrible job of addressing consumer fears and falling back on that old reliable — price cutting .
PACS vendors give a variety of reasons for lagging sales—- the weakening U.S. economy, facilities’ lack of available capital to purchase systems and the impact of the Deficit Reduction Act (DRA) on facilities ability to generate revenue.
The reality is that PACS sales should be increasing in these trying times, not decreasing. It is Marketing 101 — to make money you need to spend money. Yet so many companies are doing just the opposite — cutting back on sales and support staff, putting travel restrictions on sales reps, and worst of all, selling on price versus service and in the process thinning out already thin net margins. And they wonder why things are rough?
For a market that is 20-plus years old and supposedly mature, the PACS market is still fairly infantile in one respect — knowledge. Although 25 percent of all current PACS sales are second- and even third-generation replacement systems, the lack of knowledge people possess about PACS is appalling. People know what PACS is and how PACS works, but really have no clue how to properly design a PAC system. More importantly, few know how to effectively market the use of PACS in their organization. They trust the vendor to put together a properly designed system, yet vendors who feel they stand to lose a deal because of price more often than not will underdesign a system to show cost savings. Vendors also will tend to leave out components like test servers, CD writers and other components that that they feel might inflate the system cost even though the benefits of these devices may be well proven. This serves neither the end-user nor vendor in the long term. While it does serve to get the costs down short term, in the long term it actually ends up costing the customer and vendor more.
Financing the deal
So how do vendors and end-users protect themselves when market conditions change? Vendors need to focus on the needs of the client, not price alone. Price is a consideration to be certain, but should not be the major consideration. If system A is $50,000 more than system B, but system B does a few more things you would really like to have, but feel you may not truly need, which is the better deal? Logic dictates the system costing less is a better deal, but how much does that extra $50K really cost you? A little over $27 a day based on a five-year return on investment (ROI) — less than the revenue from a single chest X-ray. When you look at it from that perspective it sheds a totally different light on price-based decisions.
Most facilities don’t have the hundreds of thousands of dollars in excess capital lying around to spend on a PACS, yet almost every vendor overcomes this obstacle by providing a plethora of creative financing options. These include APS (application service provider) and FFS (fee-for-service) programs, plus open and closed-end lease programs as well. While there are upsides and downsides to each of these programs, when you have no or limited capital to spend and want to become more competitive, you look closely at every option available and exercise the one that best meets your needs.
Clients need to continually maintain focus on their needs All too many outpatient imaging center quotes of late have eliminated CD writers to save money in a competitive situation. This $25,000 “savings” can actually end up costing the client in the long run when they lose a referring clinician’s business because the competing imaging center provides this service at no cost. In this scenario, the vendor may have looked at the net system cost, but failed to look at the imaging center’s competitive situation, which is much more crucial. That same imaging center might easily spend $0.75 to $1 for a cup of flavored coffee yet that same $1 (or less) can provide the center with a marketing tool that can reinforce the relationship, not just between the patient and the facility, but between the referring and primary care physician as well.
Educate the buyer
It is not my intent to minimize the impact of the weakening U.S. economy, facilities’ lack of available capital to purchase systems or the impact of the Deficit Reduction Act (DRA) on facilities’ ability to generate revenue, but frankly these are just reasons, not the reality, that vendors and end-users alike will cite for not making or postponing a purchasing decision. Education here is key and the sad reality is that neither vendors nor end-users are properly educated in how to buy PACS. This problem is also exacerbated by ever-changing and confusing standards, a lack of standards in yet other areas and a technology that redefines fluid and ever changing. Second- and third-generation buyers often fall back on knowledge they have acquired in years past and have augmented only slightly since then. True, they know more about their operations post-PACS then they did pre-PACS and may have attended a few courses at SIIM, RSNA or other trade shows, but their decisions are still often based on outdated or inadequate knowledge, including how to properly evaluate a vendor quote. They are often a reflection of Albert Einstein’s quote, “Insanity is doing the same thing over and over again and expecting different results.” That needs to stop.
As long as a proper evaluation is conducted, price can be a good starting point, yet it is but one tool in an arsenal that includes warranty, service, standards adherence, expandability and a whole lot more. Price is a small part of the decision-making process, yet in tough market conditions price usually carries 51 percent of the decision-making weight. Price should instead carry a weight factor of about 25 percent with all other factors equally balanced.
Just like the housing market, the market to buy PACS almost never is static, with the purchasing decision not only based on supply and demand, but on a thorough assessment of your wants, needs and budget as well. All are crucial, and by using your head in the decision-making process, you can overcome and actually use what some consider treacherous market conditions to your advantage.