WaP

Mtaatwmjpldpbt

scipmtgcn

T

S

OmtPsPipissamfast

LEGAL COUNSEL

92

hat You Need to Know Before PurchasingPACS

eter B. Mancino, Esq, Terence A. Russo, Esq

tHotd

erfscgNdwpeprmhcp

A

AitceafiPcgaaasaqmcf

btsn

IP

BPcpdvRcssdftcatrvcwipRhvetim

fstetsf

any radiology practices, hospi-als, and other health care providersre interested in purchasing picturerchiving and communication sys-ems (PACS) but are unsure ofhat to look for in a PACS agree-ent. Purchasing a PACS is a ma-

or financial investment, and im-lementing a PACS will have a

ong-term effect on a provider’saily operations. Therefore, beforeurchasing a PACS, providers shoulde aware of important legal issueshat are at stake.

This article explains the moreignificant issues that providers en-ounter when selecting, purchas-ng, and implementing PACS andoint out some of the more com-on pitfalls to avoid. In addition,

his article offers some practicaluidance on negotiating a PACSontract to best meet a customer’seeds.

HE PLANNING STAGE

electing a PACS

ne mistake providers sometimesake is not devoting sufficient time

o planning before selecting aACS. A provider should considereveral factors when choosing aACS, including the volume of

mages it will require the PACS torocess, its financial resources andnformation technology (IT) infra-tructure, and its in-house technicaltaffing capability. For example, anpplication service provider (ASP)odel for a PACS requires less up-

ront costs than a PACS acquired ascapital purchase and places re-

ponsibility for the hardware main-

enance on the vendor rather than t

he radiology group’s IT staff.owever, an ASP model may pose

ther risks, such as slow image re-rieval, poor security, or excessiveowntime.Weighing the pros and cons of

ach PACS can make selecting theight system a time-consuming ef-ort. Fortunately, online PACS listervers as well as PACS consultantsan help providers prioritize theiroals when making a selection.etworking with colleagues and ra-

iology administrators at facilitiesith similar imaging needs alsorovides valuable assistance whenngaging in the PACS selectionrocess. Colleagues who have al-eady gone through PACS imple-entations will often be more than

appy to complain or brag, as thease may be, about their PACS ex-eriences.

ssembling a PACS Team

ssembling the proper PACS teams crucial to the selection and con-ract process. The team should beomposed of people with the rightxpertise, who will be able to tacklell of the operational, technical, andnancial issues that may arise. AACS team should generally in-lude one or more of the radiolo-ists who will use the PACS as wells IT staff members and financialdvisors. For example, radiologistsre generally the best people to en-ure that technical response timesnd system functionalities are ade-uate, but a provider’s IT staffembers likely will be the most

ompetent people to address inter-aces, modality compatibility, and

echnical implementation responsi- w

0091

ilities. A properly staffed PACSeam will ensure that important is-ues are reviewed by those with theecessary expertise.

ssuing a Request forroposal

efore committing to a particularACS brand, a provider shouldonsider issuing a request for pro-osal (RFP) to several PACS ven-ors. Requiring multiple PACSendors to submit responses to anFP allows a provider to easilyompare the relative merits of eachystem and make an informed deci-ion. More important, PACS ven-ors are naturally more likely to of-er better terms when they knowhat their potential customers areonsidering other PACS vendorsnd have not already committed toheir products. Furthermore, salesepresentatives sometimes tell pro-iders that their PACS productsan perform specific functionsithout fully understanding what

s required. Requiring a vendor torovide a written response to anFP avoids this disconnect andelps a provider understand what aendor really can and cannot do,specially when the vendor is toldhat its response to the RFP will bencorporated into the PACS agree-

ent.A good RFP need not be overly

ormal, complex, or long, but ithould address all significant issueshat a provider is likely to judge rel-vant when making its PACS selec-ion. For example, a PACS RFPhould deal with financial terms,unctionalities, technical and hard-

are requirements, implementa-

© 2007 American College of Radiology-2182/07/$32.00 ● DOI 10.1016/j.jacr.2006.09.007

tmtolnto

M

Avowbailsooibnds

FC

P

Bbpsmtnpmpifovftihrmc

vc

ntvmmet“btPdcristfRastgkwm

B

Tccloatcpetwdsftc

vp

tctnttqcvmcpp

ieptfitovvotarconsapaocew

I

RptsapcPwwi

Legal Counsel 93

ion responsibilities, training, keyaintenance terms, liability limita-

ions, essential warranties, andther key expectations. If a providerater determines that an RFP didot address these important issues,he RFP can be supplemented ortherwise amended.

ake an On-Site Visit

fter narrowing the field of PACSendors, providers should ask forne or more site visits at locationshere particular PACS are alreadyeing used. To the extent possible,provider should seek to conduct

ts site visits at offices that are simi-ar from technical and business per-pectives. Generally, letters of rec-mmendation or phone calls fromther radiology providers describ-ng the benefits of particular PACSrands are not adequate and willot detect problems that may beiscovered during comprehensiveite visits.

INANCIALONSIDERATIONS

ayment Terms

ecause the PACS marketplace hasecome increasingly competitive,roviders may now choose fromeveral different payment arrange-ents. In addition to the tradi-

ional cash purchase and capital fi-ancing options, some PACS arericed on a per study basis, a peregabyte basis, or other form of

er use arrangement. For example,n lieu of charging a large lump sumor equipment, license fees, andther startup costs, some PACSendors simply charge providers aew dollars for every study cap-ured, stored, or viewed. If a PACSs financed on a per study basis,owever, the contract will typicallyequire a provider to commit to ainimum volume of studies over a

ourse of several years so that the a

endor can recapture the upfrontosts.

To the extent that PACS fees areot being paid on a per study basis,he payment obligations of a pro-ider should be tied to the achieve-ent of certain implementationilestones, such as delivery of the

quipment, successful implementa-ion of the system, and the PACSgo-live” date. Final payment shoulde reserved, whenever possible, un-il the provider confirms that theACS is working properly in accor-ance with its documentation. Theonfirmation process is commonlyeferred to as “acceptance testing”n contracts, because the providerhould have an opportunity to testhe PACS and confirm that it is per-orming in an acceptable manner.eserving final payment until thecceptance date gives the vendor atrong financial incentive to finishhe job in a timely manner andives the provider the comfort ofnowing that the system actuallyorks before making final pay-ent.

udgeting

o properly budget for a PACS, allosts associated with it must be in-orporated into the financial calcu-ations. In addition to the amountf time and any lost productivityrising from a PACS implementa-ion, providers need to factor inosts relating to the following: im-lementation, software licenses,quipment, ongoing maintenance,raining, third-party software, soft-are customization, and interfaceevelopment fees. Two of the moreignificant costs that are often notully considered are ongoing main-enance fees and implementationosts.

After a PACS is acquired, a pro-ider has little or no negotiatingower and likely will be forced to

ccept the maintenance fees and w

erms offered by the vendor. Ac-ordingly, a provider should nego-iate the price of ongoing mainte-ance and other key terms relatedo PACS maintenance (eg, responseimes, support hours) before it ac-uires its PACS. In addition, theontract should prohibit the PACSendor from increasing its annualaintenance fees by more than in-

reases in the applicable consumerrice index or some other agreed-onercentage.

The implementation of a PACSs complex and can take longer thanstimated to complete. Therefore,ayment for a PACS implementa-ion should often be made on axed-fee basis rather than on aime-and-materials basis. Payingn a fixed-fee basis protects a pro-ider from additional charges if aendor underestimated the amountf time it would take to completehe implementation. Travel costsnd other out-of-pocket expenseselated to an implementation alsoan add up to significant amountsf money for which a provider didot plan. If possible, a providerhould limit out-of-pocket costsnd travel costs related to the im-lementation to an aggregate dollarmount or should negotiate somether contractual mechanism toontrol such hidden costs (eg, anyxpenses over $500 require priorritten approval).

MPLEMENTATION

egardless of whether a PACS im-lementation is simple or complex,he PACS vendor and the providerhould develop a mutually agree-ble written implementation worklan. Every provider needs to have alear understanding of how its newACS will be implemented andhat each party’s responsibilitiesill be to avoid conflicts during the

mplementation. Furthermore, the

ork plan should include a con-

caTmadseeioamh

ttpidirttitmsdmmm

ptirsMrpn

C

Atmltcac

rta

S

Tgnraccpltotfivac

beenromlamstoscctpstgefoo

IL

I

tcpIdhlttFdcec

aissaiaomadc

W

PdrwaiFaqprDucsuPtoPs

94 Legal Counsel

rete timetable that the parties willdhere to for the implementation.he complexity of PACS imple-entation will vary. For example,

n ASP-based PACS has a veryifferent implementation from atandard PACS, in which thequipment is located at the provid-r’s site. Likewise, a mini-PACSmplementation that involves onlyne modality is less complex thann enterprise-wide PACS imple-entation that includes several

ospitals.Because some PACS implemen-

ations take an unreasonably longime and may even fail after re-eated attempts, a provider shouldnsist on specific contractual reme-ies if the vendor fails to meet the

mplementation timetable (eg, theight to terminate the agreement,he right to a discount). In the eventhat the parties do not agree on anmplementation work plan beforehe execution of the PACS agree-ent, the agreement itself should

et forth some basic timetable un-er which the PACS vendor com-its to successfully complete theore significant implementationilestones.A successful implementation de-

ends on the vendor’s implementa-ion team being appropriately qual-fied. Therefore, a provider shouldeview the qualifications and re-umes of the implementation team.

ore important, a provider shouldeserve the right to remove and re-lace the PACS vendor’s staff whenecessary.

ONTRACTUAL TERMS

lthough the price and paymenterms set forth in a PACS agree-ent are usually negotiated at

ength, there are many other essen-ial contract terms that need to beonsidered before signing a PACSgreement. Although this article

annot explore all of the issues s

aised by a PACS agreement, theerms set forth below arise in virtu-lly all PACS contracts.

cope of License

he term of the license beingranted should always be scruti-ized. For example, a provider willeceive either a perpetual license or“term” license that expires after a

ertain number of years. A term li-ense usually requires a provider toay additional fees to extend the

icense after the end of the initialerm. This distinction can easily beverlooked, but failing to detecthis distinction will have significantnancial consequences to a pro-ider when the initial term expiresnd a new license renewal fee be-omes due.

License restrictions should alsoe reviewed by the PACS team tonsure that the license is broadnough to meet the provider’seeds. To the extent that a licenseestriction will impede a provider’sperations, the provider should de-and that such restriction be de-

eted or modified. Picture archivingnd communication system agree-ents, for instance, commonly

tate that only employees may usehe PACS software, but providersften wish to permit their medicaltaff members and affiliates to ac-ess and use their PACS. In theseases, the restriction on the scope ofhe license (and any adjustment inrice) needs to be addressed beforeigning the PACS agreement. Withhe increasing use of teleradiolo-ists from other countries, provid-rs should also be on the lookoutor licenses that prohibit access to,r the use of, the PACS by personsutside of the United States.

ndemnification andimitations of Liability

ndemnification provisions raise

ignificant liability issues that need v

o be thoroughly reviewed by aompetent lawyer on the basis of arovider’s particular circumstances.n all cases, however, a PACS ven-or should agree to indemnify andold a provider harmless from any

iability that arises from a claim thathe PACS infringes on a third par-y’s intellectual property rights.urthermore, a PACS vendor’suty to indemnify a provider forlaims of infringement should gen-rally be excluded from any liabilityap the parties negotiate.

A PACS agreement proposed byvendor will usually include a lim-

tation of liability provision thattates the vendor cannot be respon-ible for certain kinds of damagesnd limits the vendor’s liabilityn all events to a specific dollarmount. These provisions are oftenne sided, and providers should de-and that the risks be more fairly

llocated, especially with respect toamages arising from breaches ofonfidentiality or patient injuries.

arranties

ACS agreements drafted by ven-ors will often lack important war-anties unless providers are familiarith standard legal protections and

sk for them. For instance, a PACSs a device governed by the USood and Drug Administration,nd a PACS agreement should re-uire that the PACS remain com-liant with all applicable laws andegulations, including Food andrug Administration laws and reg-

lations. Picture archiving andommunication system agreementshould contain uptime warranties,nder which vendors agree that theACS will operate properly most ofhe time (eg, 99% of the time). An-ther warranty to include in aACS agreement is a technical re-ponse time warranty, by which the

endor warrants that the PACS will

pw(ittlrbs

I

AooattacPfpithwolmptvtaitsitviimPao

M

Ao

mtPttmsitabtmnvsyPe

P

PmtyeTsPMurraaettta

D

Eapwiqt

taavbsuar(scasPtnPbt

N

Wdpwmdwpisrtnrmdptp

eiaonszP

Legal Counsel 95

rocess and respond to informationithin a specified amount of time

eg, a radiologist will be able to pullmages to a desktop or move screeno screen within 2 seconds). Unfor-unately, some providers realize tooate that the number of studies theiradiologists can read per day haseen considerably reduced by theluggishness of their PACS.

nterfaces

PACS will often interface withther programs to allow the transferf data across applications. For ex-mple, a PACS may need to be in-erfaced with a radiology informa-ion system or with modalities suchs magnetic resonance imaging oromputed tomographic scanners. AACS contract should describe the

unctionality of the interface, and ifossible, the specifications of thenterface should also be set forth inhe agreement. If a PACS vendoras already developed an interfaceith a particular application forther customers, then it is moreikely that the interface develop-

ent will not run into unforeseenroblems. When preparing an RFP,herefore, it is a good idea to askendors if they have previously in-erfaced with a provider’s existingpplications. To the extent possible,nterfaces should be developed byhe PACS vendor on a fixed-fee ba-is, especially if the interface is be-ng done by a particular vendor forhe first time. In addition, a pro-ider should ask for a vendor’s Dig-tal Imaging and Communicationsn Medicine conformance state-

ent, because this affects how aACS can connect to medical im-ging devices and display images onther computer systems.

aintenance and Support

lthough maintenance services are

ften provided under separate agree- s

ents, providers should view main-enance contracts as part of theACS acquisition and should nego-iate maintenance contracts simul-aneously with acquisition agree-ents. A maintenance contract

hould address important supportssues, such as service responseimes, the installation of updates,nd software fixes. Furthermore,ecause most providers are reluc-ant to use PACS without currentaintenance contracts, the mainte-

ance contract should require theendor to commit to providingupport for a minimum number ofears to assure the provider that theACS will have a useful life of sev-ral years to justify its cost.

osttermination Rights

roviders are responsible by law foraintaining and providing access

o medical records for a number ofears, and this obligation generallyxtends to data residing on a PACS.herefore, a PACS agreement should

tate that the data residing on theACS is owned by the provider.oreover, if a provider’s license to

se the PACS is terminated for anyeason, the PACS images need toemain accessible to the provider inusable format. Some providers, tovoid undue disruption to their op-rations, negotiate the right to con-inue using their PACS for a transi-ion period, during which timehey seek replacement systems andrrange for data migration.

ata Security

very PACS agreement, especiallyny ASP PACS agreement, needs torovide assurances that the PACSill maintain data security and data

ntegrity. Agreements should re-uire the PACS vendor to representhat the PACS will comply with the

ecurity standards established by p

he Health Insurance Portabilitynd Accountability Act of 1996nd its related regulations. If theendor is responsible for dataackup, the contract should alsopecify how PACS data are backedp and what type of redundanciesre in place to ensure that data areecoverable in the event of a disastereg, data are backed up daily andtored at a secondary location). Theontract should specify firewalls,ntivirus protection, and other ba-ic technical safeguards that theACS vendor will provide. Finally,he PACS vendor will likely alsoeed to execute a Health Insuranceortability and Accountability Actusiness associate agreement withhe practice.

egotiating Tips

hen negotiating with PACS ven-ors, providers often have moreower than they realize, especiallyhen they are negotiating withore than one vendor, and the ven-

ors know that they have not yeton the contract. For this reason,roviders should consider negotiat-ng with 2 or more PACS vendorsimultaneously to ensure that theyeceive the best possible contracterms. Similarly, a provider shouldot be fooled when a PACS vendoresponds to a reasonable request toodify the contract by confidently

eclaring that the objectionablerovision is “standard in the indus-ry.” Despite these assurances, suchrovisions are often negotiable.All vendor promises need to be

xpressly set forth in the contract. Its an all too common occurrence for

sales representative to make anral promise that the vendor doesot live up to after the contract isigned. To guard against overlyealous sales representatives, mostACS agreements state that any

romises not expressly set forth in

tAttma

CPgtn

ssPcs

PPp

96 Legal Counsel

he agreements are null and void.ccordingly, if a provider intends

o rely on a vendor’s representa-ion, then that representationust be expressly set forth in the

greement. t

ONCLUSIONroviders need to be savvy when ne-otiating their PACS contracts, orhey can be exposed to significant fi-ancial losses and operational disrup-

ions. Although focusing on the is- t

ues outlined in this article is a goodtart to successfully negotiating aACS agreement, providers shouldonsider hiring competent legal coun-el to assist in the review and negotia-

ion of their PACS agreements.

eter B. Mancino, Esq, and Terence A. Russo, Esq, are from Garfunkel, Wild & Travis, PC, Great Neck, NY.eter B. Mancino, Esq, Garfunkel, Wild & Travis, PC, 111 Great Neck Road, Suite 503, Great Neck, NY 11021; e-mail:mancino@gwtlaw.com.