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Procurement

1 PROCUREMENT

11.5 Hours

Study Resources

 Health Imaging and Informatics Project Administration


PACS Fundamentals

Contents:
1.1 Procurement Readiness
Strategic Plan and Policies
Readiness Factors
Needs Analysis
1.2 Vendor Selection Process
Request for Proposal (RFP)
RFP Analysis
1.3 Vendor Contract Negotiations
Contract Components
Negotiation Strategies

Overview
Procurement is the acquisition of goods and services at the best possible cost, in the right quantity and
quality, at the right time, and in the right place for direct benefit or use. The process for procurement of
healthcare information technology (IT) can be broken down into three general steps: Need; Selection; and
Negotiation.

Once a need has been identified for a particular system, component, or service, an organization will want
to evaluate its capabilities for implementing and integrating the desired acquisition. The selection of a
specific vendor and model is the next step in the process and requires a thorough expression of a
facilitys requirements through a Request for Proposal (RFP). When the RFP has been analyzed, the
institution will create a contract and negotiate its elements with the selected vendor.

1.1 Procurement Readiness

4.5 Hours

Section Learning Objectives


After completing this section, the reader will be able to:
Synthesize the financial aspects of purchasing a PACS.
Identify key stakeholders within and outside the organization and describe their expectations.

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Discuss the objectives and elements of a formal PACS Strategic Plan document.
Identify the functional requirements associated with PACS for factors affecting the organizations
business practices.
Appraise the relevance of existing equipment and systems inventory in purchasing a PACS.
Differentiate among the common needs analysis strategies.
Understand the need for life cycle analysis.
Identify the members needed for a PACS Steering Committee.
List key elements that must be considered (planned for) in site preparation that are not included in
the vendors PACS purchase price.
Learn how to develop a PACS Migration Strategy.
Identify the impact of PACS implementation on current and future workflow.

1.1.1 Strategic Plan and Policies

1 Hours

Learning Objectives
The reader will:
Identify key components of the mission and strategic plan for the healthcare IT project.
Map the mission into a matching strategic plan.

Summary
There is a basic process to follow to formulate the organizations strategy; a key element is to define
the mission of the organizational sub-system, which is dependent on the facilitys overall mission and
philosophy.
Is the organization ready to support the new system, component, or service? It should have a
Mission Statement, Strategic Plan and Policies, and procedures in place that supports the effort.
The Mission Statement should be a reflection of long-term goals (at least 5-10 years). These goals
should be quantifiable; for example:
Increase Patient Satisfaction
Increase Services Scope
Decrease report turn-around time
Eliminate film loss
Increase service to physicians
The Strategic Plan and Policies should be an objective setting process. Formal elements that should
be present include:
Competitive Analysis
Environmental Scanning and Forecasting
Internal Organizational Analysis
Establishing Long- and Short-Term Objectives
Identifying Strategic Alternatives
Strategy Evaluation and Selection
Strategic Control Systems

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Key Terminology

Mission Statement

Strategic plan

Stakeholders

Steering committee

Exercises
1. Find the mission statement of your company/institution. Do you see evidence that your organization
follows its mission?
2. You have been asked to create a steering committee for a new PACS implementation, which will
basically convert the radiology department of your institution from a film to a PACS environment. Who
would you select as the stakeholders in that committee?
3. Would there be a difference with regard to the stakeholders if you considered converting cardiology or
endoscopy?
4. What would be the key components of a strategic plan that describes how to provide physicians with
remote access to patient records?
5. The strategic plan for your institution spans 12 months. Would this be a typical length for a strategic
plan?

NOTES:
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1.1.2 Readiness Factors

1 Hour

Learning Objectives
The reader will:
Identify readiness factors to implement a healthcare IT project.
Gather organizational support to select a project champion.

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Summary
One of the key readiness factors for launching a new system, component, or service project is
organizational support. This support is built by clearing and identifying corresponding operational
and functional needs.
A champion for the project is a critical factor in its eventual success. The champion is an influential
person who will lead the project through to successful completion. This person could be from
administration or a non-physician member of the medical staff. Preferably, they should not be a
stakeholder. In addition, there must be high-level management support.
Some organizations have had success with retaining an outside independent consultant with
specifically assigned tasks to determine readiness factors.
Key readiness factors to consider and prepare for a new IT system, component, or service include:
Network infrastructure: cabling, routers, firewalls, virtual LANs
IT support infrastructure
Outsource or in-house; one could outsource the IT or application (such as RIS or PACS) support
Training: department physicians, technologists, facility physicians, system administrator, file
room, OR/ER nurses, etc.
Personnel: do we have support people, IT, clinical applications, system administrator?
Interface HL7, HIS/RIS, Electronic Medical Record (EMR), Modalities: DICOM worklist
Space for monitors, desks, keyboards, computers
Physical Environment power, A/C, back-up power
Physical Readiness: rooms, reading room
Security VPN, passwords, auto log-offs and screen savers, workstation locations that are
screened from views by passers by

Key Terminology

Project champion

Out- or in-sourcing

Physical readiness

IT readiness

Security readiness

Exercises
1. You are preparing for a new PACS. Sort the following readiness factors in order of preparation:
a. Train radiologists
b. Train technologists
c. Remodeling and construction
d. Network configuration
e. New network drops
f. Heating/ventilation changes
g. Order new desks

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h. Upgrade modalities with worklist capability


i. Populate the archive to have prior comparisons available
j. Hire a PACS administrator
2. Why is a champion a requirement for implementing a new system such as Voice Recognition?
3. Who would be the champion for a new project - a physician, radiologist, technologist, administrator,
clinical director, or would you want to have multiple?
4. Why is a readiness plan more critical for new construction than an existing department?
5. Would you have a fall-back plan in case certain aspects are not ready? If yes, for which components?

NOTES:
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1.1.3 Needs Analysis

2 Hours

Learning Objectives
The reader will:
Identify the needs analysis components.
Participate in the needs analysis activities.

Summary
To determine readiness details for an organization and collect data to support the project, several
processes and tools are available. A Needs Analysis will help identify specific problem areas that
require attention.
It is critical to do a workflow study and to re-engineer the department (for example, replacing a film-
based operation as-is with a PACS does not make sense and can even make things worse). All
paperwork should be re-evaluated: do I still need that paper work, and what is on the paper that is
critical and what is redundant?
A checklist will need to be generated in order to ensure that everything is ready.
Needs Analysis is accomplished by developing assessment questionnaires, establishing procedures
for collecting data (such as a mailing or telephone and personal interviews), and analyzing data to
produce meaningful information.

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The Basic Needs Analysis consists of six activities:


1. Determine the present condition. Identify the root causes of the expressed need.
2. Define the job. What knowledge and skills are required to successfully complete the work?
3. Rank the goals in order of importance. Show how goals are interrelated.
4. Identify discrepancies. How do the expected performance and the actual performance
encountered in meeting a goal differ? List all discrepancies, as well as missing tasks.
5. Determine positive areas. Identify areas related to the business issue in which the company
is doing well, and document their existence.
6. Set priorities for action. Set them against the backdrop of the job goals, desired results, and
other relevant factors.

Key Terminology

Re-engineering

Workflow analysis

Paperless

Root causes for change

Discrepancies

Questionnaires

Exercises
1. You are in charge of doing a needs analysis for the film based out-patient clinic that is going to be
merged with your hospital. The clinic has two Ultrasound units, a conventional X-ray room, and a CT
scanner. What tools would you use?
2. You need to do a workflow study to reduce the exam turn around time in the ER for portable exams.
What tools would you use?
3. Why are skill assessments critical for a needs analysis?
4. How would you prioritize the film to softcopy conversions if the institution is considering to roll it out to
main radiology, Nuclear Medicine, the orthopedic specialists, ER, ICU and OR?
5. A small hospital converts to PACS without doing a workflow analysis. What could be the potential
impact on the implementation?

NOTES:
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1.2 Vendor Selection Process

3.5 Hours

Section Learning Objectives


After completing this section, the reader will be able to:
Discuss the objectives and elements of a formal RFP document.
Compare and contrast vendor response analysis tools.
Interpret, evaluate, and compare vendor proposals.
Develop information collection tools designed to assist with PACS selection, including site visits,
reference checks, etc.
Relate the differences between a Request for Proposal (RFP), a Request for Solutions, and a
Request for Information, and know when to use each.
Identify and address the common standards compliance issues.

1.2.1 Request for Proposal (RFP)

2 Hours

Learning Objectives
The reader will:
Identify the critical components of a RFP and be able to determine any parts that are lacking.
Determine when to use a RFI, RFQ or RFP, depending on the project scope and environment.

Summary
There is a difference between a Request For Proposal (RFP), Request For Information (RFI) and
Request For Quotation (RFQ). The RFI and RFQ are typically less detailed and ask merely for the
vendor to provide a quote based on standard configurations, not necessarily meeting exactly the
institutional requirements.
The development and release of an RFP marks the transition from the beginning phase, the planning
of an IT initiative, to the second phase--implementation. Before release of an RFP, appropriate work
should have been done to ensure:
Secure funding
All stakeholders involved in the planning of the project identified

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Operational and functional reviews completed


Business plan and cost justification prepared
Timeline created
NOTE: In real life, and especially where IT projects are concerned, responses from an RFP will
likely disrupt or invalidate most, if not all, of the above five undertakings. Budget funding may not be
accurate, additional stakeholders may have to be (or should have been) involved, operational
reviews may not have been sufficiently comprehensive, the business plan may need to be
readjusted, and the timeline may need to be extended. Its nobodys fault, so one should plan to deal
with it and manage it accordingly.
When considering purchasing, replacing, or upgrading an IT system, component or service, the RFP
is a critical instrument for an institution to specify its requirements, for vendors to specify their
offerings, and for the user to compare among different vendors so as to make an unbiased decision
of which system would optimally meet their requirements.
The key components of the RFP are:
Mission statement: the mission of the project
Clear objectives: what the project is to accomplish: reduce film loss, increase efficiency, etc.
Hospital characteristics: community type, outpatient clinic, academic setting, teaching hospital,
rural clinic, specialty clinic, private, public, non-profit
Clinical scenarios: ER, OR, ICU, main radiology, in/out patients, on-call provisions
Timeline and phasing: installations, when live, phased or big-bang, i.e. overnight
Potential growth and scaling requirements: expected growth in volume, annually
Component requirement: individual subsystem requirements, e.g. use enterprise archiving,
hospital network infrastructure, security, wireless
Migration of previous results, reports, images, measurements, key images, annotations
Migration of the system if the institution decides to change vendors in the future
Archive storage formats, compressed, uncompressed, native DICOM formats or proprietary
Interfacing with existing systems such as EMR, HIS, RIS, Lab, or PACS
List of modalities to make sure that proper interfacing according to the Integrating the Healthcare
Enterprise (IHE) profiles can be achieved
Standards: required DICOM and HL7 transactions, IHE profiles, and other standards such as
CCOW
Performance: time to perform certain transactions such as time to store, send, or retrieve current
and prior exams
Compression: lossy and lossless compression requirements for storage and transmission
Fault tolerance: high availability, redundancy, and back-up capability
System integration: potential application programming interface (API) or other level of integration
Service level requirements (on-site engineer, reaction time, guaranteed up-time)
An RFP is not a static document and should always reflect current technology and requirements.
Therefore re-using an RFP that is more than, for example, 12 months old is not recommended.

Key Terminology

RFP

RFQ

RFI

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Stake holders

Migration

Interfacing

DICOM, HL7, IHE,


CCOW

Performance
requirements

Fault tolerance

Back-up

High availability

Exercises
1. The future migration requirements are sometimes referred to as pre-nuptial agreements, why?
2. Imagine an RFP of a typical community hospital transitioning from film to PACS. How many pages
would you think a typical RFP would consist of?
3. Imagine a regional hospital system consisting of 7 hospitals and 4 clinics wanting to replace their
existing PACS systems with a new single vendor and single archive/database. What would be key
components of that RFP?
4. Would you rather require IHE compliance or DICOM/HL7? Why?
5. Why is the data storage format (DICOM, proprietary) important and what is the impact on current and
future migration?

NOTES:

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1.2.2 RFP Analysis

1 Hours

Learning Objectives
The reader will:
Analyze and evaluate an RFP using well defined steps.
Evaluate RFP responses using appropriate weigh factors determined by the specific institution
requirements and rank these in order of importance.

Summary
Doing an objective evaluation is difficult, because many users are biased toward particular vendors
based on prior experience. It is therefore critical to list the evaluation criteria, and rank their
importance in a subjective manner using agreed upon weigh factors.
In addition, one also should indicate whether a feature is nice to have, required now, or required
in the near future. The ranking score, track record, and actual performance are then considered
together in selecting a vendor.
There are typically three final candidates, and a selection should be made based on discussions with
other users, site visits, and on the basis of the final negotiations.
Purchasing price should never be the determining factor; other factors, such as the maturity of the
system, workflow support, serviceability, and so on have much more of a long-term impact.
A response analysis should include the following steps:
If appropriate, screen each bid or proposal and eliminate some on the basis of failing to meet the
minimum requirements.
Review all qualifying proposals and apply scoring criteria. If appropriate, ask a peer to cross-
check evaluations. This person should be an experienced buyer of outside services who can help
cut through the puffery typically found in contractor proposals. It would be even more valuable if
this person had direct experience working with one or more of the bidders.
Ask for clarification if a reply is not quite clear.
Decide on the best vendor.
Negotiate a contract with the vendor.
The evaluation criteria should have been established in the planning stages of the project.

Key Terminology

Weigh factors

System maturity

System serviceability

Contract negotiation

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Exercises
1. Why would you establish the evaluation criteria prior to the responses being received?
2. Why would you NOT always select the lowest bidder?
3. Why is it critical to document your selection process, criteria and conclusions in detail?
4. Would you generate an RFP from scratch?
5. To how many, and which vendors would you select to send out an RFP if you were to recommend
this to the steering committee?

NOTES:

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1.3 Vendor Contract Negotiations

3.5 Hours

Section Learning Objectives


After completing this section, the reader will be able to:
List the standard components of a contract, such as pricing, implementation support, training,
service, functionality, acceptance criteria, financing options (ASP, capital, leasing), penalties, etc.
Describe negotiation strategies as they relate to the contract components.
Recognize the need to comply with federal regulations.
Understand how to research federal standards for protected healthcare information.
Describe different data migration strategies and highlight possible pitfalls.

1.3.1 Contract Components

2 Hours

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Learning Objectives
The reader will:
Identify required contract components for a healthcare IT project.
Distinguish negotiable parts of a contract.

Summary
Typical contract components for a PACS, healthcare IT system, component, or service generally
include the following:
Agreement
Purchase order
General Conditions
Specifications
Instructions to Vendors
Architectural Drawings
Interface specifications (DICOM, HL7, IHE)
RFP Addenda
Technological Advancements
Component Deterioration
Dispute Settlement
Acceptance test plan and criteria
Service After Installation
Operator and Service Training
Operating and Maintenance Instructions and Manuals
Guarantee and Warranty
Uptime and availability guarantee: specific requirements such as 99.99% (number of hours that
PACS is down). Assuming 9000 hours/year, a .01% downtime is still almost one hour/year!
Warranty and warranty extensions. Warranty typically starts at acceptance, NOT at installation
complete
It is recommended to have two lists. One list will be of items that are not negotiable, such as the
price and the amount of time necessary for the project to be completed. The second list will contain
the things that are negotiable such as payment options, location of work, and subcontractor options.
Research should be done to know what laws are applicable to a situation; what federal, state, and
local restrictions apply; and any other elements that may influence how the contract is handled.
Knowing this information will help draft a contract that will be legally enforceable and that will comply
with legal restrictions. There are often state, federal, and organizational regulations. For example,
with mammography (MQSA) there are both state and federal compliance needs. In the case of a
Veterans Administration or Department of Defense hospital, there are even stricter security
regulations than federal HIPAA regulations.
Above all, legal review of the contract by council or attorney specializing in healthcare or healthcare
IT is absolutely critical prior to its acceptance by an institution.

Key Terminology

Service agreements

Disputes

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Negotiable and non-


negotiable items

Terms and conditions

Warranty

Federal and State


Regulations (HIPAA,
MQSA)

Exercises
1. Why is the acceptance test plan and corresponding requirements one of the most critical parts of the
contract?
2. How would you schedule the payments - everything upfront, partly, etc.?
3. Would you have a contract reviewed by a lawyer? If yes, why?
4. Would you accept a standard vendor contract without any changes? Why or why not?
5. How would you specify guaranteed uptime?

NOTES:

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1.3.2 Contract Negotiation

1 Hours

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Learning Objectives
The reader will:
Determine which of the different financing options are preferable for the specific environment.
Identify what would constitute a fair contract.

Summary
The negotiation process is perhaps the most complicated step of the contract process.
In some situations the negotiation process isnt necessary as the terms in the contract are non-
negotiable and are standard to everyone who enters into it. This situation is common for warranties
offered and most leases.
In the negotiation phase, phasing and pricing are negotiated. Detailed specifications, test plans and
acceptance criteria are agreed upon.
Creative financing can be part of the deal, such as using credits from other purchases (film-credits
used to be very popular) many vendors do package deals including modality purchases (CT, MR,
Cath Lab). Printers are often given for free or with a substantial discount if a client is willing to sign a
multi-year contract for consumables.
Most vendors offer the capability to charge a fee per study instead of a fixed capital budget expense.
The result of this phase is a detailed contract agreement with substantial technical specifications as
part of the purchase order.
Keep the discussions focused on the issues at hand. Have goals of what items of the contract that
will be accepted by the end of the day, the hour, and so on. Keep the tone of the negotiation positive.
Do not enter the negotiation wanting to cheat the other side out of a fair deal. This will only hinder
attempts to forge a good contract. Listen to what the other side wants and needs from the deal, and
what is wanted and needed from your end.
Try to find a median point that benefits both sides of the agreement.
Use a checklist to help keep the topics focused and on course throughout the negotiation process.

Key Terminology

Financing

Package deals

Fair, unbiased contracts

Exercises
1. Would you want to nickel and dime a vendor? Why?
2. Give some examples of creative pricing?
3. Would you lease, buy a system or pay per study? Why?
4. Where do you think vendors make most of their margins? For example, a film selling a laser printer, a
vendor selling a modality (CT) or a vendor selling a PACS system?
5. Why are most hospitals part of a purchasing group, and what is the advantage?

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ESSAY QUESTIONS:

Pick one from these three assignments to produce a page, double-spaced abstract:

" Generate an abstract of a strategic plan for implementing a PACS system.

" Find an RFP on-line or from other resources and evaluate whether this RFP would be
complete, missing any information, or would be an overkill if used for a typical 100 bed
community hospital performing 100,000 radiology procedures/year.

" Provide a negotiation strategy, such as, who would be part of the negotiation team, how long
would the negotiation take place, what items are critical and non-critical, etc.

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TEST QUESTIONS

1. An RFP is generally less detailed than an RFI or RFQ.


A. True
B. False

2. The RFP should address data migration capabilities.


a. True
b. False

3. Facility training expectations should be clearly outlined in the RFP.


a. True
b. False

4. A PACS uptime guarantee by the vendor of 90% is desirable.


a. True
b. False

5. An RFP for a PACS acquisition includes the definition of what the customer requirements are for the
system.
a. True
b. False

6. Methods for evaluating an investment such as PACS involve analysis of financial benefits only.
a. True
b. False

7. The procurement process will include which of the following:


a. RFP
b. Feasibility study
c. Strategic plan
d. All of the above

8. Which of the following could be considered a possible objective of a PACS investment analysis?
a. Obtaining organizational approval
b. Developing budget estimates
c. Tracking results
d. All of the above

9. Which of the following is not considered a hard cost associated with PACS justification?
a. Improved quality of care
b. Film cost
c. Film printers and processors
d. Film library costs

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10. Which of the following statements is incorrect concerning the RFP?


a. It should be technical as opposed to descriptive.
b. It should define all problems that the PACS should have the ability to solve.
c. It avoids references to specific vendors.
d. It moves the project to the implementation phase.

11. Which of the following would not be included in the RFP?


a. Project plan
b. Procedural volume analysis
c. Current HIS and RIS descriptions
d. Financial analysis chart

12. Which of the following would not be included in the System Description section of the RFP?
a. Installation table
b. DICOM functionality expectations
c. Specification of problems that PACS can solve
d. Outline of existing and proposed network requirements

13. Which of the following would NOT be an advisable course of action when deciding upon a suitable
PACS vendor after all RFP responses have been received?
a. Choosing a primary and secondary vendor based on technical considerations
b. Allowing vendors to come to the facility to demonstrate products
c. Participating in a site visit of a facility currently using the vendor, accompanied by a vendor
representative
d. Talking to existing clients of a vendor

14. The Procurement process includes three general steps. They are:
a. Need, Selection, and Purchase
b. Need, Selection, and Contract
c. Need, Selection, and Negotiation
d. Need, Selection, and Analysis

15. Key readiness factors to consider when preparing for a new IT system do not include which of the
following?
a. Network infrastructure
b. Outsourced IT support for RIS or PACS
c. Physical readiness
d. Implementation policies

16. A Needs Analysis is a tool that is used to determine:


a. Assessment questionnaires
b. Vendor needs
c. The present condition of the institution
d. Film needs

17. The key person leading a PACS implementation process is called:


a. Steering committee
b. PACS Administrator
c. Project Champion
d. Chief Radiologist

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18. Typical contract components do not include which of the following?


a. Acceptance testing plan
b. RFQ
c. Architectural drawings
d. Warranty information

19. When preparing a formal strategic plan, which of the following would be considered?
a. HIS
b. RIS
c. PACS
d. Internal Organizational Analysis

20. The security aspect of a facility readiness is referring to:


a. VPN
b. Reading rooms
c. DICOM worklist
d. Virtual LANs

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