Siemens ACUSON S2000

DOTmed Industry Sector Report: Ultrasound

May 27, 2009

by Regina Tan, DOTmed News Writer

This report originally appeared in the May 2009 issue of DOTmed Business News

Ultrasound has come a long way from the foundation it built up in the field of medicine. No longer is it strictly tied to prenatal care. Today, it can be used in conjunction with other medical modalities to provide a more thorough overview of a patient's health. However, that doesn't mean there aren't challenges ahead.

Competition from other newer imaging procedures - CT, MRI, and PET - takes the spotlight from ultrasound's relatively low-cost, non-invasive, and easy-to-use appeal. The decreased reimbursement from Medicare and other insurance providers and the increased competition for patient revenues are also factors in ultrasound's future survival and growth.

In hospitals, an accredited diagnostic medical sonographer handles the equipment. Through 2016, the diagnostic medical sonographer field is expected to increase by 19%, as per the Bureau of Labor Statistics (BLS) web site. Although the high costs of certain diagnostic medical equipment and lengthy approval procedures for the adoption of new diagnostic techniques may delay the growth of the field, the BLS forecasts a "faster-than-average" employment growth for sonographers -- perhaps a marker of the future health of ultrasound equipment, as more people staff a field that is slated for growth.

GE LOGIQ E9 system

"The ultrasound market is valued at $1.3 billion, excluding service revenues," states Dr. Harvey Klein, President of Klein Biomedical Consultants, Inc., (KBC) in New York. KBC is a strategic marketing consulting firm specializing in the medical diagnostic ultrasound industry. Dr. Klein issues tailored forecasts on the ultrasound industry, using skills garnered from academia, lobbying, and Wall Street work.

"The overall market leaders in ultrasound are Philips and GE," says Dr. Klein. "In the handheld and laptop ultrasound market, the leaders are Sonosite and GE," notes Dr. Klein.

In terms of equipment upkeep, standard service agreements or warranties are generally granted for one year on parts and labor. These can be renewed on an annual basis. Replacement parts and service can be provided by the original equipment manufacturer (OEM), such as Philips, GE, Siemens, or Toshiba, or by an independent service organization (ISO). ISOs sell new or refurbished parts and equipment, in addition to service contracts for out-of-warranty ultrasound scanners.

"Currently, the [overall] ultrasound market is hitting a plateau," remarks Dr. Klein.

"Last year would have been a decent year, if not for the fourth quarter (particularly December). This seems to be carrying forward in 2009. The question would be whether this is a fast or a slow rebound. This will probably be a slow rebound - because of a lot of pent-up demand and [the need] for replacing older systems. Once people start spending again, hospitals and private practices will begin to invest," continues Dr. Klein.

"Another issue would be the [future of] the healthcare system and whether or not it will be nationalized. The reimbursement rates for ultrasound, in most cases, have kept declining. This may cause an increase in lobbying by physician groups for better reimbursement rates," Dr. Klein concludes.

Others from within the ultrasound equipment industry agree with this assessment, but take it with a grain of salt.

"Most likely, the ultrasound market will follow the current economic trends, which would indicate a flat market over the course of the next year," writes David Fortney, General Imaging Marketing Manager (USA) at Siemens Healthcare.

"Of course, no one truly knows the answer to this and we are optimistic. I believe that ultrasound has a greater likelihood for a quicker upturn when compared to other modalities based on price point and portability," Mr. Fortney observes.

Ultrasound - Live 3D Transesophageal
Echocardiogram (TEE) Probe
(Image courtesy of Philips)

The downturn in the economy is also favoring the low-end of the cart-based ultrasound equipment market with the greatest growth found in the mid-range segment, and higher-than-usual growth forecast for the low-end segment, according to InMedica's report on the global ultrasound market. InMedica is the medical research division of IMS Research, a market research and consulting firm for global electronics markets. The company's headquarters are located in Wellingborough, UK.

InMedica's report predicts that worldwide ultrasound revenues will continue to experience robust growth and exceed $6 billion by 2012. It also states that the improving quality and functionality of lower-end systems is helping to stabilize prices in an otherwise price-competitive market.

Some Big Trends Emerging

Portability , e.g., hand-carried units (HCU's), is one of the continuing trends in ultrasound.

"Machines are getting smaller and more robust," writes Keith Rubenstein, Senior Vice President of Sales and Marketing of MedPro Imaging, Inc..

"[A company that is] able to offer most of the compact technology in the marketplace - either new or refurbished - is a wonderful value proposition to the end user," he notes. " A new premium system from a year ago that may have sold for well over $100K, may now be acquired for less than $80K, thus providing a significant cost savings for keeping a department outfitted with state-of-the-art equipment," he explains.

Philips has three new ultrasound systems on the market: the HD9 with 3D/4D applications for women's health, the CX50 CompactXtreme for echocardiography, and the HD15 for multi-disciplinary applications. All units feature PureWave technology - high-quality crystals embedded within the transducers that relay sharp images. The high-end units are priced at $130,000 to $210,000, with lower-end units priced from $30,000 to $70,000.

Philips iE33 system

The notable aspect of the CX50 CompactXtreme is its portability - it is mobile and can be housed on a cart, carried by hand, or packed in a travel case for use in remote destinations. This portability mirrors the larger trend of the ultrasound equipment industry - and, as observed by market insiders, the demand for such HCUs is up and projected to keep growing in spite of the contracting economy.

Ultrasound equipment manufacturers are responding to this "one-size-fits-all" demand.

"We feel that the big trend will be in products that have features with 'clinical diagnosis' benefits, e.g., advanced applications for cardiology (3-D wall motion-tracking), where you can see the heart and make the diagnosis quickly and efficiently," says Bill Kenny, U.S. Product Manager of Toshiba America Medical Systems, Inc., in Tustin, CA. Mr. Kenny has been in the ultrasound industry for 22 years and has seen his share of trends.

"Instead of purchasing two pieces of equipment, [customers] are purchasing a premium product to get all of the advantages," according to Mr. Kenny.

Toshiba's current offerings include the Aplio and Artida, with a price of $220,000 to $280,000. The Aplio has visualization technology that provides enhanced imaging of calcifications, which can be used for ultrasound-guided breast biopsies. The Artida offers "3D Wall Motion Tracking," which assesses cardiac functioning to aid in physician diagnosis.

Toshiba Aplio Artida system

"Productivity and efficiency -- being able to do more and in less time -- [are key issues]," says Tom Seiler, General Manager of Ambassador Medical. Ambassador Medical specializes in selling refurbished and remanufactured diagnostic ultrasound equipment, transducers, and parts.

"Depending on the procedure, you may find ultrasound is being used as the second modality for diagnosis," Mr. Seiler writes. "For example, the new LOGIQ E9 by GE can be used in conjunction with pre-uploaded MRI and/or CT images to provide real-time diagnostic capabilities," he explains.

Thus, the appeal of multi-use ultrasound scanners, such as the Philips HD15 and the GE LOGIQ E9, is that they help reduce capital expenditures. With more versatile ultrasound scanners, many specialties can use the same ultrasound equipment for a variety of functions: from abdominal scans to breast imaging, from pediatric imaging to vascular scanning, and from emergency medicine to anesthesia.

Also of note are two multi-use units from Siemens, the ACUSON S2000 Ultrasound System and the ACUSON SC2000 Volume Imaging System - high-end units priced from $130,000 to $170,000. The S2000 features an elasticity imaging function that calculates and displays relative tissue stiffness: highlighting one of the "in-demand" ultrasound system applications. The SC2000 offers volume imaging, 2D M-mode, spectral Doppler, and color Doppler.

Sales executives of refurbished ultrasound equipment ISO's like Echoserve in Golden, CO, echo Mr. Kenny's statement.

"In used equipment sales, there is a wider utilization of high-end systems in private offices and clinics," note Lyle Mussman, Vice-President of Sales, and John Baird, Vice-President of Marketing and Business Development at Echoserve. "Ultrasound is gaining ground in emergency medicine but losing ground to CT for certain ABD and cardiac exams," they observe.

"Also, late model portables and late model high-end used ultrasound equipment are 'hot,'" writes Jonathan Ames, Director of Marketing for CardioVascular Sales, an ISO selling reconditioned ultrasound systems. "The reconditioned market segment has grown by 50% in the past few months. MSK and endocrinology procedures are also growing," he observes.

"Additionally, 3D/4D scanners are a big trend in the OB/MFM [obstetrics/maternal fetal medicine] setting," notes Keith Rubenstein of MedPro Imaging, Inc.

"Fusion imaging is becoming more acceptable, combining CT/MR imaging with ultrasound," he observes.

Lamar Gale, the president of Gale Medical, a reseller of ultrasound equipment, also forecasts a mass migration from analog to DICOM ultrasound equipment.

"A much higher percentage of prospects are demanding digital output," says Mr. Gale.

"As the U.S. population ages, they will have a greater need for this type of technology," Mr. Gale notes. "The only problem is with 'pricing pressure': people don't have as much to spend . . . what we're seeing is that people with older machines are trying to extend the life without resorting to the warranties."

Overall, the used equipment ultrasound market offers equipment and parts at 30% to 50% of the original cost, bringing the price range from $2,000 to $100,000 for equipment and $100 to $20,000 for parts. Service plans are usually offered on a one to five year basis. Parts under a 30-day warranty may be extended to one year.

In a shrinking economy, hospitals and private physician practices are seeking ways to prolong the life of existing equipment by purchasing new or refurbished parts or extended service plans to avoid making huge capital investments. Adaptations, such as hand-held units and multi-use scanners, are additional cost-cutting measures.
Such "evolutionary" response to the economy seems necessary to survive in the current buyer's market in ultrasound.

Suggestions from ISOs and OEMs on
ultrasound purchases
- Use ISO 9901 certified ultrasound service and
suppliers.
-Evaluate the cost-effectiveness of service plans.
-Keep in mind that IT connectivity will become increasingly
important to comply with future federal
industry standards.
-Check the post-sale support of the equipment.
-Ask questions about the company's quality management
system.
-Be cautious about making decisions solely based
on price.
-When buying online, meet face-to-face with sales
representatives to be sure that they can deliver
what they promise -- refer to DOTmed.com as a
resource.
-Ask whether the used equipment dealer is an authorized
third party vendor for the manufacturer.