A number of broad healthcare market dynamics as well as recent high-profile news headlines are driving the increasing importance of surgical instrument tracking solutions.
Surgical instrument tracking solutions, at their core, track the location, usage, and maintenance of surgical instruments while also facilitating adherence to instrument sterilization procedures and surgical tray loading guidelines. While not a new concept for hospitals and other acute-care facilities, more facilities are seeing instrument tracking as a necessity as they look to improve patient safety, contain costs, effectively manage instrument inventory, and maximize revenue from operating rooms (ORs). As a result, the surgical suite, the sterile processing department, and even C-suite executives at acute-care facilities are beginning to take a closer look at this increasingly important function.
- Recent headlines have put a spotlight on patient safety andmultiple high-profile cases of patients being exposed to diseases / infections due to lack of instrument tracking and improper sterilization have made recent news, including a possible exposure to mad cow disease last month:
- “Hospital exposes 18 patients to risk of human form of ‘mad cow’ disease because surgical tools were not sterilized properly” (source)
- “15 patients in 3 states possibly exposed to fatal brain disease” (source)
- “Veterans’ hospital exposes hundreds to HIV and hepatitis” (source)
- “VA hospital may have infected 1,800 veterans with HIV” (source)
- “Hospital Sends Letters to 3,400 Patients About Possible Endoscopic Equipment Contamination” (source)
- Increased Focus on Clinical Outcomes: Through the Hospital Acquired Condition Reduction Program, CMS has identified specific patient-safety and infection measures to evaluate the hospital market. CMS will reduce 1% of all Medicare payments for the worst-performing quartile of hospitals. A robust instrument tracking solution can help prevent hospital acquired infections by ensuring that each surgical instrument in use is sterilized using the requisite procedures and guidelines.
- Clinical Automation and Integration / Interoperability: Health reform is driving the need for hospitals to capture, store, aggregate, and retrieve clinical information via electronic mediums. In addition, the increased demand for technology necessitates the elimination of “information silos” within hospitals and improved communication between clinical and non-clinical systems. While features and functionalities can vary widely from one instrument tracking solution to the next, the market leading solutions interface and integrate with both clinical and non-clinical systems including EMRs, OR scheduling systems, supply chain, ERP software, online sterilization and reprocessing guidelines, washers, sterilizers and others. This integration and interoperability can greatly improve quality and efficiency across the materials management / procurement department, the sterilization department, and the surgical suite of acute-care facilities.
- Hospital Profitability / Need for Cost Savings: Hospitals generally run on razor-thin margins, and with the migration toward fee-for-value reimbursement structures, CMS penalties for hospital readmissions, the shift in payer mix toward Medicare as the U.S. population ages, and rate cuts from CMS, hospitals are feeling the squeeze more than ever. Leading instrument tracking solutions come with features that can enhance and track sterile-processing productivity, greatly reduce the time required for sterilization documentation archival, reduce instrument maintenance costs, optimize instrument inventory levels, and automate employee training – all of which can add up to big cost savings for hospitals.
Given the industry tailwinds listed above, there is a significant opportunity for instrument tracking solution vendors that offer robust, end-to-end instrument tracking capabilities as well as other complementary functions and benefits such as integration / interoperability with clinical and non-clinical systems, benchmarking and analytics, and built-in education and training. Recent market activity relevant to patient safety and instrument tracking demonstrates the growing opportunity in this space:
- Last week, in a move to ensure patient safety and reduce hospital acquired infections, Medline Industries purchased infection prevention solutions from Medtrol.
- In December 2013, Stryker Corporation acquired Patient Safety Technologies for an aggregate purchase price of $120 million. The purchase price amounts to a TEV / Revenue multiple of 5.4x and a TEV / EBITDA multiple of 35.2x. Patient Safety Technologies offers a proprietary sponge tracking system, an adjacent offering to surgical instrument tracking.
- In September 2013, the FDA published its final rule for a system of Unique Device Identification (UDI), which over the next 5 years will require most medical devices to carry a unique identifier. Marking a hospital’s inventory with unique identifiers can be a time-consuming process and can thus be a hurdle to adopting an instrument tracking solution. Therefore, it is our view that the requirement to have all instruments marked by the manufacturer will dramatically increase adoption of instrument tracking solutions.
- In early 2013, The Department of Veterans Affairs awarded a $543 million contract to HP Enterprise Services to deploy real-time tracking system (RTLS) technology in VA medical centers nationwide. A portion of the $543 RTLS contract is dedicated to surgical instrument tracking technology.
We will continue to watch this emerging market closely and expect to see the best-in-class instrument tracking solution vendors distinguish themselves through their ability to ensure patient safety in the OR, drive meaningful ROI to hospitals through cost savings, and increase quality and efficiency across the sterile processing and surgical suites.
Let us know what you think.