RIS/PACS market growing, but very slowly

By Mike Miliard
11:03 AM

New analysis from Frost & Sullivan on the North American market for radiology image and information management systems finds revenues of $1.1 billion in 2011, set to increase to just $1.4 billion by 2018.

The current dynamics in the radiology IT marketplace suggest that revenues will revert to a steady but sluggish growth path as the field moves slowly toward a new wave of system replacements, say Frost & Sullivan officials.

The historically sustained growth in the radiology informatics market, continued thanks to solid annual growth in picture archiving and communication systems (PACSs), reversed to negative territory for three consecutive years, from 2009 to 2011, researchers point out. Factors such as market saturation, lengthening replacement cycles and a new focus of IT departments on electronic health records all contributed to a drag on the market.

But the need for medical imaging providers to adopt new system capabilities that reinforce clinical IT needs is warranting the replacement of legacy systems and the adoption of next generation image and information management platforms, the report finds.

"As vendors in the consolidated PACS industry strive to revive past growth synergies in the radiology informatics market, imaging providers are only slowly buying into the value proposition of new generation systems," said Frost & Sullivan principal analyst Nadim Daher. "In a market where PACS penetration is expected to cross the 90 percent mark across all imaging providers in 2014, replacement cycles stabilizing below the current seven year cycle could maintain sustainable – even if slow – revenue growth."

[See also: PACS adoption has reached 'mature stage,' study says.]

Lackluster growth continues in the radiology informatics market, thanks to a slow-down in imaging procedure volume growth and declining reimbursement levels in the past few years, the research shows. In this context, radiology informatics vendors must readjust their business operations to their customer’s reality of narrower profit margins and less capital-intensive revenue streams, according to Frost & Sullivan. As the industry continues to consolidate around a few key successful vendors catering to the large-scale end of the market, industry fragmentation is still intensifying in the smaller-scale segments.
Small-scale imaging providers finally embarking on PACS technology as well as the nascent replacement market in the mid-scale segments of the provider landscape make it possible to offset the slow replacement patterns in the more lucrative large-scale segments of the market, according to the study. The proven benefits of new generation PACS as well as integrated radiology information system (RIS) and PACS to the physician community and internal IT department will spur a wave of technology upgrades in the North American market, even if these follow longer than traditional replacement cycles.

[See also: Radiologists need MU education.]
"As providers’ meaningful use efforts are getting increasingly closer to the realm of imaging informatics, positioning new PACS and integrated RIS/PACS systems as engines of growth for the enterprise will be key for radiology informatics vendors to push forward currently pending PACS replacement decisions," said Daher. "While new generation platforms are capable of aligning the incentives of the various imaging stakeholders scattered across the enterprise, this makes up for long, yet promising sales cycles for complex, yet beneficial system implementations."