The ultimate purpose of any PACs system is to improve the state of health of individuals and the community. The way one attempts to achieve this goal in our current environment will determine the design and performance specifications of any PACs system. Within the hospital environment, one must determine the functional requirements by understanding that a hospital is intrinsically a place for physicians. It is the referring physician who admits patients, determines their treatment, when the treatment is to be changed, and when the patient is to be discharged. The referring physician is the Chief Executive Officer of patient care. It is a reasonable goal of a diagnostic imaging and PACs systems to furnish timely and accurate information to the Chief Executive Officer of patient care. The role of the referring physician i.e., the C.E.O., is becoming even more critical within the changing economic environment of American medicine. DRG legislation has lead to the greatest change in American medicine since the introduction of Medicare. Previously we have been under a cost reimbursement formula whereby the more one spent the more reimbursement one got. With this cost reimbursement formula, elegant and expensive systems could be justified and actually be profitable. This is now changed. We are now going to be reimbursed by discharge diagnosis at a rate fixed at a national average. The average rate of reimbursement will be that of the 100-bed hospital since this, statistically, is the national average level. In addition, the DRG's impose financial penalties both in cost overruns and in excess length of stay. One of the goals, therefore, of any system would be to help decrease length of patients' stay so that profitability of the hospital can be maintained.