Negotiating PACS, from prenuptials to partnership

2001 10 23 09 47 09 706

By Anita Samarth
First Consulting Group

So you’re ready to buy a PACS. The research has been done, the budget is approved. Why are your palms getting sweaty when you look at that contract, and spy the dotted line for your signature? Are you comfortable with the contract the vendor has prepared for you?

A PACS vendor’s "standard terms and conditions" and contract are essentially a prenuptial agreement primarily aimed at protecting the vendor’s interests. For you, the buyer, there are many items to carefully consider when developing a PACS contract to protect your organization’s investment. A happy PACS marriage is one where neither party encounters major surprises during the course of the relationship.

While the contract is being developed, it's important to remember that you and your selected vendor are developing a partnership, and should work to develop a common understanding of how to work together. As you make specific requests to your vendor, it may also make counter-requests of your organization in order to minimize its risk. You want to maintain a good relationship with your vendor throughout this process -- the goal is a contract that protects both parties.

Vendor background

There are three main types of vendors in the PACS market today:

    • Modality/radiology equipment vendors
    • Information technology vendors
    • Film vendors

All three have different philosophies when it comes to contracting. The most important thing to remember is that PACS is an information technology (IT) system as well as a radiology solution. PACS is much more complex than installing a modality or printer. Therefore, you must negotiate an IT contract for PACS to ensure the service levels you need.

Your organization has and will continue to develop its clinical systems and IT vision. During the contract development process, your organization needs to align its visions with the vendor’s product vision. PACS development is at a very dynamic stage today, as products are changing to cross multiple modalities and domains (radiology, cardiology, and so on) and converge on new technologies.

The contract is one of the most crucial components of your PACS marriage. You'll want to protect your organization’s vision while you are partnered with a vendor with a dynamic PACS product vision and architecture.

Although the modality and film vendors are getting better at developing IT-friendly contracts, they still have a long way to go. Vendors have many individuals involved in the contracting process. If your sales team has typically worked with PACS buyers in radiology, the sales team may be unfamiliar with your requests.

The same is true of the vendor’s legal department. Unfortunately, the process of creating a comprehensive contract is potentially a lengthy one, and requires a fair amount of time. This may surprise you, but organizations should plan from 2-3 months for contract development, particularly if your sales team or vendor’s legal counsel is unfamiliar with developing an IT-focused PACS contract.

Determining the missing components in the vendor’s standard contract

If your organization has a strong IT department, obtain a copy of the last major vendor contract that was developed. While reviewing the contract, ask yourself, "Does this portion apply to PACS?" Chances are, the answer will be yes most of the time. However, the standard PACS contract may not include these items.

There are a variety of ways to determine the "missing" portions of your vendor’s contract:

    • Enlist the help of your IT department and organization’s contracting specialist.
    • During your reference checks and site visits, ask other PACS customers to provide feedback on critical items to include in the contract, as well as items the customer wishes it had included in the contract.
    • Dedicate an experienced individual to develop a gap analysis and manage the PACS contract development process.

Contract development begins during vendor selection

An organization should maintain two goals during the PACS vendor selection process:

    • Obtain the information you need from various vendors to select the vendor that’s right for your organization.
    • Obtain the items that you would like to include in the contract while you’re in a competitive process between vendors. From your view, this initial phase is more a "request for contract" than a "request for proposal/quote." If you went through an RFP process, the vendor’s responses should be included as contract exhibits.

During the sales and selection process, the sales team is focused on you as a customer, and is working to win the deal. It will be easier to get the vendor to provide information during a competitive process while all attention is focused on getting you as a customer.

After you’ve selected a vendor, the contract is the only way to hold the vendor’s implementation team and support team accountable to the expectations set during the sales process. For example:

    • We will support you with plenty of training.

Take the time to work with your sales team to cross-reference the amount of training included in the quote with the expectations that are being set. If the allocated training is not sufficient, your organization will need to undertake the unpleasant task of finding additional training funds.

    • We will support you during your go-live.

Ask the vendor how you will be supported during go-live. Will it be via remote or onsite resources? Often there is no line item in the quotation for go-live support, and it is important for you to fully understand the vendor’s support model -- the type of support that is and is not included for go-live.

    • We are committed to ensuring a successful PACS at your organization. We will assist in marketing PACS to your radiology department and external users.

Marketing PACS within an organization requires a variety of resources and tools that are generally available to the sales team -- demo workstations, vendor-led presentations, "wine and cheese" events, local site visits, and so on. These types of tasks are often performed and funded during the sales cycle, but are rarely standard offerings within the vendor’s implementation organization. If you require vendor support in marketing PACS at your organization, work with the vendor to develop a scope of work for marketing and support that will be included in the contract.

    • We will assume all responsibility for leading and managing the PACS installation.

Each vendor has different approaches to installing and implementing PACS. You need a clear understanding of the level of support the vendor will be providing, so that you can plan your own resources and budget accordingly. What is the exact role of the vendor’s project manager and implementation resources? How much on-site coverage will there be from vendor resources? What organizational resources will you need to devote to this project and when? Having a clear understanding up front will help you decide whether you need additional vendor support, additional internal support, or outside support.

    • We have plenty of resources available to support you as a customer.

Priorities for vendor implementation teams are driven by contracts with multiple customers and by the dollar amounts at stake. These days, vendor installation and applications resources are booked weeks and months in advance. A project work plan included in the contract is the best way to manage schedules and expectations. Payment terms should be tied to key milestones in the PACS project work plan. Divide payment into milestones such as: contract signing, equipment delivery, equipment installation and begin testing, acceptance test complete, and clinical acceptance.

The bottom line is that once the PACS deal is inked, the vendor’s sales team is no longer the primary party responsible for your PACS implementation. It is now in the hands of the vendor’s implementation and support organizations. The scope of the implementation and support is defined by the contract. The relationship that you had with your sales team is no longer driving the process.

Ask yourself the following during vendor selection and contract development:

    • Do I have all the information I need if my primary sales representative or PACS sales representative is no longer working for this vendor? What happens if I no longer have the same type of relationship with the next sales representative?

The contract ensures that the rest of the vendor organization is ready to uphold the type of relationship you have with the sales team.

Ensuring the quoted price provides all the needed equipment

Rather than simply contracting for a list of equipment identified by your vendor’s PACS specialist, you want the total quoted amount to provide a solution that meets your requirements. The contract needs to protect you from having to go back to request additional funds, if at all possible.

Since you’re probably not an expert on your vendor’s PACS equipment, configuration, and architecture, you cannot be sure that the list of equipment includes everything you need. Put the onus of quoting a complete solution back on the vendor. That way you can be sure of the amount of money you need for PACS, and you won’t have to pay for equipment such as additional quality control stations, modality connection fees, or archiving after the implementation has begun.

Here are a few examples of items that should precede the quotation and equipment listing in the PACS contract:

    • The quoted solution includes integration of the following modalities to the PACS to view, store, and print images.

This statement should be followed by a list of modalities, film digitizers, printers, and so on, and it will be up to the vendor to assume the correct number of DICOM connections and licenses have been calculated.

    • The quoted solution shall provide
    • X years of long-term archive and Y months of online storage for the following expected imaging volumes and growth rates. Online storage should include Z prior studies for each current study.

This statement should be followed by a list of volumes, an average number of images, and growth rates by modality. If your organization’s volumes exceed the estimates provided in the contract, then the organization will be responsible for any costs associated with increasing the amount of RAID or long-term archiving. On the other hand, if your volume and growth estimates are within the stated requirements and there is insufficient storage, the vendor is responsible for any incurred costs.

    • The quoted PACS solution shall adhere to the following response times …

During the vendor selection process, obtain average response times from the vendor for diagnostic, clinical, and Web images. The vendor will restrict its response to specific networking conditions, but it’s important for your expectations to be set for response times so you know what length of time is appropriate when you call the vendor for service.

Protecting your technology investment over time

When purchasing a PACS, it’s important to think of the process as purchasing a solution, not a system. It’s understandable that newer and better systems are continually being developed and released, but you need to make sure that what you’re buying will continue to be supported and meet your needs after the next enhancement or version is released.

Some points to consider when developing the contract:

    • Review the vendor’s acceptance-testing procedures. If they are not specific to your organization, you may want to develop a few workflow scenarios and acceptance-test procedures of your own that reflect your organization’s PACS-enabled workflow. You want to withhold final payment until the system works the way you need it to.
    • Contractually bind your vendor to provide you with a working solution for the next X years. There may be newer versions of the product that offer additional functionality that you want, but they need to be "optional" rather than "required" for the next X years. Depending upon how long the vendor is willing to commit, you should begin budgeting for PACS reinvestment or expansion after this timeframe.
    • Ask the vendor for their research and development plans and current development efforts. Is there anything in the vendor’s plan that replaces something that you’re currently purchasing? If so, include the replacement/enhancement in the scope of the current contract. You do not want to purchase a component or solution that will be obsolete in six months or a year.
    • Request that the vendor provide you with the latest product available at the time of equipment delivery. With phased implementations and deliveries, the contract is often signed months before certain equipment is delivered. Your quotation may have specifications for the product that was shipping at the time of contract signing, which may be different from the product available four months later. This recommendation is especially applicable to workstation and server processing speeds -- newer, faster processors are available every day.
    • Understand the vendor’s schedule for updates and upgrades. You want to know what’s being offered in the next release, and be able to assess any implications on the PACS installation at your organization. Sometimes it makes sense to delay the implementation by a month or two for added functionality. On the other hand, you may be implementing functionality that hasn’t spent much time in a production environment, and could still have some minor bugs.
    • Understand your vendor’s position on the Health Insurance Portability and Accountability Act (HIPAA). Because the specific implications of HIPAA to PACS are difficult to predict at this time, it’s important that the contract include a HIPAA clause that ensures that the vendor will incorporate required changes in a reasonable amount of time.
    • Although this scenario is becoming rarer, it may be helpful to include a section in the contract relating to remedies for nonperformance. If the system does not pass the acceptance test within a reasonable amount of time, or the performance of the system does not meet expectations after a set timeframe of fixes, you may request that the vendor de-install the system at no cost to you.

For service and support contracts, vendors offer a variety of options, ranging from full-service support contracts with on-site field service engineers to ad-hoc support billed by the hour. The right solution for you depends on your geographic location, vendor resource availability in the region, vendor support structure, product maturity, and system architecture.

Be aware of charges for hourly support, travel time, and so on. and whether there is a charge for telephone support. If there is not a parts depot nearby, or shipping availability within 24 hours, you may want to negotiate storing spare critical parts on-site or within your region.

Successful PACS partnerships

The best case an organization can hope for is to never have to refer to the PACS contract through the life of the implementation and after go-live. Vendors pride themselves on maintaining good relationships with their customers. If all goes well, neither party needs to refer to a document to assign responsibility or blame.

Where to strike the balance between a developing an all-inclusive, comprehensive PACS contract -- and depending on vendor relationships -- is something each organization needs to assess on its own. In today’s ever-changing vendor marketplace, it never hurts to be sure of your investment.

By Anita Samarth contributing writer
February 22, 2002

First Consulting Group is a provider of consulting, integration, and information technology services to healthcare, pharmaceutical, and other life sciences organizations.

Related Reading

ASP pricing and planning strategies for PACS, January 22, 2002

Reinvestment optimizes PACS productivity, November 21, 2001

The state of the enterprise digital imaging market, October 23, 2001

Copyright © 2002 First Consulting Group

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