Developing economic model for picture archiving and communication systems installment decision making

Abstract

A hospital needs cost-benefit evidence to support decision making to invest in high cost Picture Archiving and Communication System (PACS). However, not many hospitals are capable of conduct economic study. The first objective of the study was to develop economic cost models for installment of PACS, partial PACS and film-based system. The secondary objective was to analyze cost saving of installment of three systems by using data that represented large, medium, and small sized hospitals. The last objective was to measure break even point of PACS of three size hospitals. Cost-benefit analysis was used as a study framework for develop economic cost models. Cost items came from work process study, interviewing head of radiology department and radiology technician and literature review. To test the models, utilization rate and cost were gathered from previous studies, reports, price list, and statistics and other available published data. Present value was used to adjust time value of money. Differential cost analysis was applied to interpret result of model testing. Accumulated present value was used to indicate break even point. Sensitivity analysis was also conducted. From literature review and work process study, economic models, developed from provider’s perspective, were composed of direct cost and indirect cost items. The model assumed nine years PACS lifetime, three percent discount rate, five percent wage rate, five years replacement of PACS related hardware, and ten years replacement of other PACS and film-based items, two percent increase in film cost per year, and eight percent increase in service utilization rate. After testing the models, it was found that partial PACS was strongly not recommended in all hospital sizes. PACS showed no break even point for small size hospital, but worth investing for medium and large size hospitals. Implementing PACS would have saved 24.5 and 60.2 million baht for medium and large size hospitals, respectively. Break even point was recognized in 4th year for both medium and large size hospitals. Sensitivity analysis suggested that lowering initial cash flow in small size hospital by 30% would make PACS worth investment. Moreover, if service utilization rate remained unchanged, medium size hospital should not invest in PACS as there was no gain on investment in 10 year period. The economic cost model developed in this study was posted at http://goo.gl/ljubyO. Any hospitals that need cost-benefit evidence to support PACS investment can access and download freely for further use.