Picture archiving and communications systems (PACS) have emerged as an important part of digital imaging technology. However, the future of PACS is uncertain because its economic viability is in doubt. Cost-effectiveness analysis is an accepted technique for evaluating the economics of new technologies. This paper addresses the cost-effectiveness of PACS and identifies factors that are important in determining the cost of PACS relative to film-based radiology. These include the impact of PACS on physician productivity, maintenance costs, discount rates, and the time period for amortization of capital goods. The effectiveness of PACS is also explored in terms of improvements in diagnostic accuracy and timely diagnosis. Financial and clinical impacts should be integrated to provide information about how PACS expenditures will affect radiology departments, hospitals, and national research and development objectives.