The transition from conventional film-based to filmless operation at the Baltimore Veterans Affairs (VA) Medical Center has resulted in a large number of clinical and economic benefits. The integration of the Department of VA hospitals in Maryland into the VA Maryland Health Care System has resulted in the opportunity to establish a “virtual” radiology and nuclear medicine department. This integrated department is based on a wide area network in which outlying medical centers use a central hospital information system/radiology information system (HIS/RIS) and a central commercial picture archiving and communication system (PACS), as well as a VA-developed image management and communication system. The creation of this virtual radiology/nuclear medicine department has resulted in additional savings and improvements in clinical care. The benefits of the PACS are made possible, to a large extent, by the high level of integration of the PACS and medical modalities with the hospital information and transcription systems. Our experience suggests that it is absolutely essential to integrate the PACS into the patient’s electronic medical record to maximize efficiency and clinical effectiveness of the system.