Small companies shape teleradiology market
Sharyn Rosenbaum
Small companies shape teleradiology market
The concept of transmitting a medical image from one site to another should not be difficult to imagine in this day and age. After all, sending data by way of a fax machine has become commonplace. Communicating information using a standard phone line is simple, convenient and enables people to receive urgent information quickly.
This is the idea behind teleradiology, which enables the user to send a medical image–a computed tomography scan, magnetic resonance image, ultrasound or radiographic image–over a standard phone line. Industry analysts estimate the current size of the teleradiology market is between $20 million and $40 million, with the potential for significant growth to a $50 million market by 1992. Most companies that try to enter this field, however, will not survive and the market will continue to be dominated be a select few.
Teleradiology systems are ideal for the radiologist who wants to view an image at home or at the office, on-call radiologists who need to respond to emergencies and hospitals or clinics in remote locations. Teleradiology systems also are increasingly being used within the hospital to send images between departments, according to industry sources.
Teleradiology defined
The size of the teleradiology market depends to a large extent on how teleradiology is defined as what technology it includes and for which applications it is used, according to John Vanden Brink, president of Technology Marketing Group, Des Plaines, Ill., a high tech marketing, research and development consulting firm. “The issue is what you call teleradiology vs. PACS (Picture Archiving and Communication Systems),” he said. Teleradiology systems are generally not intended to store medical images on a long-term basis, whereas PACS are. There are, however, teleradiology systems networked to optical disc archiving systems. In fact, in this configuration, the systems could be considered as a mini-PACS or PACS subsystem, Vanden Brink said.
Industry consultants estimate the price range of teleradiology systems from $20,000 to more than $100,000, depending on the system’s features, with the majority falling in the $20,000 to $40,000 range, said Michael J. Cannavo, president of Image Management Consultants Inc., Orlando, Fla., a consulting firm specializing in PACS and related component technologies. Basic image capture stations can be obtained for under $25,000. Higher resolution systems range from $25,000 to $40,000 range (for the basic system). Systems that use direct data image, such as those offered by Vortech Data/Kodak, can cost more than $100,000.
Determining the primary people involved in purchasing decisions for teleradiology systems depends on the type and cost of the system. For fairly low cost systems designed to transmit images between the hospital and radiologist’s home, the radiologist would be the key decision maker. For higher-end integrated systems, priced above the $100,000 range, the hospital administrator, chief financial officer and possibly the hospital’s director of information systems also would be involved in the purchasing decision, Vanden Brink said.
Projected growth
In a recent survey conducted by Technology Marketing Group of 250 radiologists, 100 MIS directors and 100 hospital administrators, respondents were asked about teleradiology components they purchased in 1989 and what they were planning to buy in 1990. The responses to the survey, along with data gathered about purchases by more than 1,732 institutions with more than 200 beds, indicates that total teleradiology purchases for 1990 will exceed $30 million, with a growth rate of better than 35%, Vanden Brink said.
Cannavo said sales could reach about $30 million to $35 million within the next two years but noted that it is difficult to make projections because of changing component costs, vendors, physician and market attitudes, reimbursement policies and other factors. Still, he said that by 1992, 10% or more of the 17,000 radiologists in the country will have embraced teleradiology in one form or another.
Philip Drew of Drew Consultants Inc., Concord, Mass., estimates the current size of the teleradiology market, excluding physician consoles, at between $20 million and $30 million and said he is seeing increased interest in the teleradiology field. “People are recognizing the value in transmitting an image–of having someone to make use of the image–a physician in an intensive care unit and in the operating room, for the radiologist on call, small hospitals that are served by traveling radiologists.” Drew, however, does not foresee explosive growth in the teleradiology market in the near term, noting that there are only 7,000 hospitals and they would keep the systems for four or five years.
The areas where the most growth in teleradiology is predicted are in transfering images between sites (from hospital to hospital or hospital to clinic) and transfering images within the hospital between departments, according to Vanden Brink. The radiologist viewing an image at home will remain a small market of about $10 million or less, he said. Cannavo sees the largest growth segment as intra-hospital image transmission systems that fall outside the traditional teleradiology definition. He concurs with Vanden Brink that inter-hospital communications will play a larger role in the teleradiology market than the home-viewing segment.
Market history
Although the forecasts for the purchase of teleradiology systems look quite promising, this market has been volatile. Companies specializing in teleradiology, including Colorado Video Inc. (Boulder, Colo.), Eastman Kodak Co. (Rochester, N.Y.) and numerous others have fallen by the wayside (Kodak is now making its way back into the market with a joint venture with Vortech Data Inc., Reston, Va.).
Cannavo describes this situation as “a hall of shame.”
“Fewer than half of the players exhibiting teleradiology at RSNA ’88 were still in the market by RSNA ’89.”
Santa Clara, Calif.-based Raytel Corp., is rumored that it may be bought out by another teleradiology manufacturer, Cannavo said.
But usually when a teleradiology company falls, there is a new one to take its place, which explains the optimistic forecast predictions. Cannavo said eight or nine new companies specializing in teleradiology were scheduled to exhibit at the Radiological Society of North America trade show held in Chicago. Vanden Brink said he expected to see 25 companies, which was the number of teleradiology companies that were at last year’s RSNA. Most of these companies will not survive, Vanden Brink noted. “There will be room for four or five.”
The reasons for companies’ rapid rise and fall is usually not due to poor product performance, but rather undercapitalization, Cannavo said. “Every vendor believes the ‘better mousetrap’ concept, but when most of the money is spent on R&D and none is left over for marketing and sales support, then you’ve lost the game before you’ve started. I’ve seen some excellent products never get the chance for lack of money.”
Market players
The teleradiology market is dominated by small, specialized teleradiology companies such as Image Data Corp., San Antonio; Advanced Video Products, Littleton, Mass. and DataSpan Inc., Orchard Park, N.Y. Image Data is the undisputed market leader, which has in the range of 60% market share, according to Cannavo. Vanden Brink estimated Image Data’s and AVP’s market share both at 40%, with DataSpan and others controlling 20% of the market. Image Data has the largest installed base.
Larger companies specializing in imaging, such as General Electric, Milwaukee; Elscint, Boston; Philips, Shelton, Conn; and DuPont, Wilmington, Del., have high-end, higher-resolution systems that can be used for teleradiology. Industry consultants have different views on whether the large imaging companies, notably GE, will affect the teleradiology marketplace. Vanden Brink says that GE’s new Images-on-Call system could replace some of the existing systems on the market and may come to be a strong presence because of its large base of existing imaging customers. As a result, the smaller companies will need to search out niche markets.
Cannavo said the larger companies will have an impact on the market, but will not necessarily take away sales from the smaller companies. And in his opinion, GE has not made an impact on the teleradiology market as of yet.
“Larger companies find it difficult to compete on price because of the overhead they carry,” he said. “They do have an advantage on service but teleradiology systems require minimal service.”
He noted that large companies also have trouble cost-justifying teleradiology sales. “The amount of time it takes to close a sale for $30,000 is comparable to the time it takes to close a sale that can provide five times the profit.”
Image Data
The market leader entered the teleradiology field in 1985 when it introduced its PhotoPhone system at the RSNA. The company now has nine different versions of this system.
Image Data’s niche is the portable, take-home teleradiology systems, said Robert Lynch, vice president of medical sales. The company has installed more than 2,000 units, 1/2 at hospitals (200-bed) and 1/2 at alternate sites. The Photophone system and versions of this system are sold in the United States through Image’s data distribution network and 36 sales representatives, Lynch said. The company also sells to hundreds of hospitals worldwide. Advanced Video Products, Image Data’s main competitor, does not have as extensive a dealer network nationally.
To promote its systems, Image Data has embarked on a marketing strategy consisting of product demonstrations, advertising and and attending many national and regional radiology trade shows. Cannavo describes the company’s strategy as customer-oriented.
“Their marketing strategy is excellent,” he said. “They have a simple, easy-to-use product and their dealers can respond quickly to the needs of the physician or radiologist. If a physician calls up or is interested in the system, someone will be there immediately.”
He added that Image Data recently increased its print advertising. The company advertises in Diagnostic Imaging, Radiology Today, Radiology and Applied Radiology.
Image Data’s PhotoPhone system can transfer radiographic, CT, MRI, ultrasound and nuclear medicine images. The phone’s voice line operates as the data sending line. The systems also have a built-in pointer, so the person receiving the image is looking at the same spot on the image as the sender.
The company said it planned to introduce new technology and a new product at the RSNA. The new technology is a type of data compression called lossless compression, which will be used in conjunction with a 1024 line television camera, Lynch said.
The advantage of this technology is that by compressing the medical image, the data can be sent more quickly. Industry sources say it takes on average 30 to 60 seconds to send a single image, which translates into approximately 30 minutes to send a complete CT study.
Image Data’s new product is a smaller, portable, lightweight version of its MultiView Photophone system called PhotoPhone LTE. It weighs only 15 lbs. and is designed to be carried between the radiologist’s home or office and the hospital or imaging center. It is functionally identical to the company’s other MultiView Photophones except that it is a display-only system.
Other players
General Electric is using telemarketing to sell its Images-on-Call system and is targeting referring physicians, according to Cannavo. GE also is working on teleradiology-related systems within their PAC systems with International Business Machines Corp., Atlanta. Philips, through a joint effort with AT&T is offering a full line of teleradiology systems as entry points to developing PACS. Its current system on the market is called CommView. The company also is rumored to be considering bundling teleradiology components in the sales of their CT and MRI units in the near future, Cannavo said.
Toshiba Medical Systems (Tustin, Calif.) recently entered into an Original Equipment Manufacturers relationship with AVP to sell its teleradiology components. Imlogix, St. Louis, and Virtual Imaging, San Francisco, are selling teleradiology components to the OEM market as well.
Siemens Medical Systems Inc., Iselin, N.J., is scheduled to launch an Apple computer-based teleradiology system in early 1991, according to Cannavo.
A new player, Discovery Technologies Inc., Longmont, Colo., has sold its FilmFax system to about 50 sites in the United States, primarily through its distribution network, said Ralph Patitucci, Discovery’s president. Discovery also has a evolving distribution system in Canada, Australia and New Zealand and is looking into distribution opportunities in Asia and Europe.
FilmFax’s primary markets are rural hospitals, within the hospital (and its affiliated clinics) and freestanding or affiliated radiological reading groups. Patitucci said the company will begin to focus more on the latter two markets through new products scheduled to be introduced at the RSNA.
“We started with a product offering that serves the rural environment and are expanding to serve in-hospital and radiology reading groups,” he said.
Discovery promotes FilmFax through product demonstrations, attending trade shows, advertising in radiology journals such as Diagnostic Imaging, using product brochures and direct mail.
The company was scheduled to unveil at the RSNA several “product line enhancements that would provide greater market applications, including the ability to service mobile units,” Patitucci said.
FilmFax transmits copies of X-rays, CT, and MRIs in about a minute and the image appears on film or on a video screen. The unit costs $70,000.
There are numerous other companies offering teleradiology systems.
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