With PACS seen increasingly as the imaging layer of an electronic patient record, it's no surprise that healthcare information systems vendors would want a piece of the action. The bid by HIS firm McKesson Information Solutions to acquire Canadian PACS provider ALI Technologies for $340 million (U.S.) is the latest acquisition/partnership among PACS and HIS vendors.
For McKesson, the decision to reenter the PACS market reflects its desire to offer a complete electronic patient record, including support for digital image management, said Randy Spratt, senior vice president of technology and standards for McKesson Information Solutions of Alpharetta, GA.
If completed, the deal would mark McKesson's second go-round in the PACS market. McKesson Information Solutions' predecessor, HBOC, had acquired PACS developer Imnet Systems in 1998. McKesson later bought HBOC in early 1999, but abandoned the unit's PACS initiative two years ago.
The architecture of the Imnet PACS technology was not sufficient for many reasons, including its lack of adherence to open standards and lack of a practical image distribution method, Spratt said.
"We probably did not fully appreciate the depth of technical expertise that was required for the viewers and workstations of medical images as opposed to document images," he said. "Without a complete product and without the skill set and expertise, we determined that it would take more time and risk to get it to market than it would to close that product down and look for another."
In acquiring ALI, McKesson receives a true PACS success story, an independent that was able to thrive in a market dominated by larger modality and film vendors. Focusing initially on ultrasound miniPACS, ALI became one of the leaders in the niche before electing to expand into radiology PACS.
ALI implemented that expansion in part by purchasing independent PACS firm Olicon Imaging Systems in 1999. Today, ALI has an installed base of over 500 installations worldwide. While ultrasound PACS orders still make up the majority of the vendor's installed base, roughly 66% to 75% of the firm's new system revenues are being generated from radiology PACS orders, said Greg Peet, ALI's president and CEO.
Peet said the McKesson deal is in line with ALI’s fiduciary responsibility to seek value for its shareholders. In addition, the purchase is consistent with ALI's vision for the integration of PACS along with other healthcare information systems, Peet said.
"We think leading IT companies are going to become more involved in digital imaging because it's an important part of the overall clinical suite," he said. "And we think that it makes a lot of sense for ALI to be part of a much broader solution because of that consolidation."
Technology integration activities between McKesson and ALI are already underway, a process that's eased by common architecture and support for DICOM and HL7 among each vendor's product lines, Spratt said. For example, ALI's Java-based image distribution viewer will fit nicely with McKesson's Web-based physician portal, he said. In addition, ALI's use of an Oracle-powered database manager meets McKesson's goal of a single Oracle data model for its software, he said.
Closure of the deal is expected by August. ALI's name will be retired in favor of its new moniker, McKesson's Medical Imaging Group, but the division will still be run out of Vancouver. Peet and other members of ALI's management team will remain on with the firm, as will ALI's sales, development, implementation, and support staff, Spratt said.
The McKesson sales team will be able to market ALI's PACS, focusing primarily on selling the technology to its own installed IS base. And in line with growing involvement of hospital CIOs in PACS purchases, McKesson will seek to leverage existing customer relationships in that channel to generate new enterprise-wide business, Spratt said.
Recognizing that PACS still often represents a standalone sale, ALI will retain its own direct sales force, Spratt said.
"Outside of our customer base, they can continue to compete head-on against the other vendors in PACS-only decisions," he said. "These are two very different sales cycles. Of course, technical and product expertise will be provided by ALI for both sales channels."
By Erik L. Ridley
AuntMinnie.com staff writer
May 28, 2002
McKesson to acquire ALI Technologies, May 2, 2002
ALI turns in strong Q2, April 30, 2002
ALI lands Christus PACS deal, March 20, 2002
ALI adds to customer list, March 5, 2002
ALI reports strong Q1 financials, January 29, 2002
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