Monitoring firms quicken pace of new product introductions - patient monitoring equipment makers

All the concern about the year 2000 problems in computing has some counterparts in the medical equipment field as well. Between now and then, hundreds of companies in medical information and monitoring technology will cease to exist or have their market shares dramatically changed, as the consolidation of the U.S. medical equipment industry continues unabated. And yet, the pace of new product introductions has actually accelerated, which was apparent at recent medical conferences like the American College of Emergency Physicians (Dallas, Texas) and the American Society of Anesthesiologists (ASA; Park Ridge, Illinois), both held in New Orleans, Louisiana.

There were more new product introductions and works in progress at ASA, which attracted nearly 15,000 persons, than we have seen recently. Even more were planned by suppliers at the American Heart Association and Medica gatherings. Given the millions invested by the biomedical industry in bringing these new products to market, and the shrinking capital funds for hospital acquisition of such products, there is likely to be a serious settling out of weaker or higher-priced competitors over the next few years.

Changes in battery-operated monitors

More and more vendors are focusing on battery-operated monitors, but they universally add wireless networks and other enhancements to the traditional transport products. The ASA show featured some interesting new products for the U.S. market (which were FDA approved), and there were many products already released in Europe, but shown as works-in-progress in the U.S. pending their FDA approval.

The latest portable monitors were somewhat more sophisticated than their first-generation predecessors, which primarily were battery-operated bedside monitors, designed to replace stationary, line-operated monitors. Some of these new products employ PC cards for software updates and memory, built-in arrhythmia and ST-segment processing, and a range of parameters and prices designed to replace all bedside monitors. Most units are designed for low weight, meaning less than 10 pounds, with the best weighing in at slightly over 6 pounds. They interface to network "docking" stations, which provide not only networking, but documentation support and augmented battery operating time.

Works-in-progress confirm the trend

Two of the newest portable monitors include the Siemens Medical Systems (Danvers, Massachusetts) SC6000 and SC9000, but they have been joined by the Marquette Medical Systems (Milwaukee, Wisconsin) Solar 1000 and Solar 1500, the Datex (Tewksbury, Massachusetts) Light portable, Criticare Systems' (Waukesha, Wisconsin) new Voyager, and the Fukuda Denshi (Redmond, Washington) Dynascope 5100 and Dynascope 5300 portables, all works-in-progress products shown at ASA. These join the venerable Protocol Systems (Beaverton, Oregon) Propaq series, the MDE/Thermo (Areta, California) Escort series, Spacelabs' (Redmond, Washington) PC Ranger, Nihon Kohden's (Irvine, California) Lifepak L, Ivy Biomedical's (Branford, Connecticut) Model 405T portable and Datascope's (Paramus, New Jersey) Passport and Point-of-View systems. This makes things a tad crowded in this segment, and will create a fierce price competition for business. Certainly the monitoring market is shaping up as a buyer's market.

One of the more interesting new portables was Marquette's Solar 1000. This low-acuity portable was developed in less than a year, a remarkable feat today, and it offers a nice mix of capabilities in a portable, with a 2.5 hour battery life using conventional (lead-acid) batteries. The Solar has a fixed key user interface and shallow menus, yet offers ECG, Sp[O.sub.2], niBP, temperature, and two invasive blood pressures. In spite of the capabilities, this portable weighs in around 7 1/2 pounds. The Solar has been selling in Europe since March, but is still awaiting FDA approval for U.S. sale. With its two-trace display, this unit is directly competitive to Siemens' SC6000 and Nikon Kohden's Lifepak L, among others, but is priced much more aggressively.

For those who need a portable monitor for more acute patients, there will be a Solar 1500 as well. It adds invasive blood pressure and capnography to the basic Model 1000, and provides a larger and enhanced EL display. Both of these monitors sport serial data outputs and recorder options. The serial outputs work with a new, companion low-end Solar central station which will be PC based and handle up to 16 patients.

It is interesting to compare the Solar products to the new Fukuda Denshi Dynascope 5100 and 5300 series portables, also shown as works-in-progress at ASA. The Model 5100 is similar to the Solar 1000, but offers up to four traces on an active matrix color LCD and is a pound lighter than the Marquette unit. It has WLAN connectivity to central stations using a 470 MHz UHF unidirectional transmitter but is priced at around $10,000 in the U.S., almost 40% higher than the competing Marquette model.

Fukuda has followed Siemens (whose products it also sells in Japan) by adding a higher acuity modular design in the Dynascope 5300, which offers a 6-trace, active matrix color LCD display. Both of these products cover the full spectrum of patients, offering neonatal, pediatric, and adult operating modes, and both have the same three-year, on-site warranty. Both offer PC card slots for fast software updates, product reconfigurations, and data extraction. The 5300 has ECG, respiration, dual temperatures, dual invasive blood pressures, non-invasive BP, and pulse oximetry, but can be expanded to 32 parameters using up to 18 separate modules.

In many of the new portable monitors, there is a wireless local area network capability to send parameter information to central stations, often integrated in the design rather than added on, as with existing transport and bedside monitors. This new group uses spread spectrum 900 MHz and 2.4 GHz transceivers (devices which are inherently bi-directional, sending and receiving data), rather than VHF transmitters which are mated to the back of bedside monitors providing one-way data flow from bedside to central stations.

Multi-parameter monitoring in portables

Criticare Systems brings multi-parameter monitoring to a portable telemetry product, its MPT patient worn transmitter. This is one of the two most interesting telemetry products (the other being the enhanced telemetry systems which come out of recent Marquette alliances, announced in late October). The MPT provides ECG, SP[O.sub.2], and niBP (non-invasive blood pressure), yet still delivers two days of operation on its batteries. If niBP measurements are less frequent, the batteries will stretch up to four days. Moreover, the unit is a transceiver, not a transmitter, allowing bi-directional signaling between the patient worn device and the central monitors. This allows nurses at a central station or other remote site to initiate niBP measurements, for example, without actually going to the patient's bedside. Criticare went outside to Xetron (Cincinnati, Ohio) for its frequency-hopping, 900 MHz spread spectrum transceivers. This advanced design requires only dipole antennas spaced every 100 feet to support up to 264 channels. That makes it suitable for all but the largest installations (some sites are seeking quotes for up to 300 beds of telemetry).

Criticare's MPT expands telemetry well beyond the traditional cardiac patient, and even beyond the walls of the hospital. The unit is useful in surgical recovery, rehab and respiratory units, as well as being sent home with patients discharged early. The patient-worn unit has a telephone relay package allowing the patient's telephone line to be used to send data back to a hospital or home nursing agency which provides patient surveillance. That provides income to the agency or hospital, as it is being billed under ECG and Holter CPT codes by some providers.

Criticare also showed the Scholar Model 2200, its new high-acuity portable with EL display. This unit is big and heavy (weighing in at 12 pounds), but provides ECG, pulse oximetry, niBP, respiration, dual temperature and up to four invasive pressure channels. All this capability reduces battery operating time to a meager one hour, suggesting that the unit probably needs to be reconnected to power at destination sites, and used on battery operation only during stretcher or short-haul transports within the hospital itself.

Scholar is the first to provide two separate serial outputs, one for connection to remote CIS or other systems (with vitals presented as labeled ASCII data strings), and a second which acts as a flexport host. It has an RF wireless LAN (WLAN) option so it can remain connected to centrals during transports or when disconnected from a cabled LAN, and a PC card slot for software updates, unit reconfiguration, and data logging. The Scholar 2200 unit is aggressively priced at around $8,000, well below the Siemens SC9000 and most other competitors' units with four invasive pressure channel configurations.

Because these new portables are intended to replace all line-operated bedside monitors, not just those used for low-acuity patients which require primarily non-invasive monitoring, these new portables offer both configured and modular versions, with parameters as sophisticated as pulsed thermal dilution cardiac output and mixed venous saturation, and support for up to four or more invasive blood pressures. They also include anesthetic agent and gas monitoring parameters, making it clear that the perioperative monitoring market is being entered by all mainstream competitors.

J&J's Select - the son of HP's Merlin?

Johnson & Johnson Medical's (Tampa, Florida) Select modular monitoring system - dubbed by some as the son of Hewlett-Packard's (Andover, Massachusetts) Merlin - was shown for the first time at ASA, fresh from receiving FDA approval.

With Select, Johnson & Johnson Medical has provided a line-operated monitoring system, including bedside and central stations, which augments the company's Dinamap portables with some higher-acuity modular artillery. J&J Medical borrowed from HP the idea of a horizontal module housing, but went the Merlin one better in making its vertical modules multi-parameter. That allows MPS to achieve ECG, Sp[O.sub.2], temperature, etC[O.sub.2], niBP, four invasive pressures, and strip chart recording in only seven modules which fit into one nine-module housing, a feat which requires more than 12 cartridges and two eight-module racks in the HP design.

J&J wisely left behind the Merlin's complex, multi-level menus and user interface, substituting a slick Navigator (trim) Knob design, perhaps borrowed from Marquette, which works in conjunction with some dedicated function keys to provide a straight-forward and powerful, yet simple operating monitor. Rather than Dinamap MPS, J&J might have called it Merlin Light.

The monitor and module box, with cartridges weighing in at less than 40 pounds, is substantially lighter then the HP design it emulates. Display placement and attachment is to the module housing, a nice improvement, allowing the staff to easily optimize viewing angle and screen visibility even when the monitor is sitting on a bedside table and not using an ICU wall mount. J&J Medical, like Fukuda Denshi, has also gone to a three-year basic warranty, not one year, like so many of its competitors. The new MPS is a nice design, well executed, smartly styled, and reasonably capable, with many excellent features, but one which will have to paddle upstream against a tide of new modular, high-acuity portable designs which cost substantially less.

J&J Medical has opened up a variety of new markets with the MPS, including: emergency department, neonatal ICU, and other intensive care units, in addition to buttressing its offerings for the higher acuity perioperative setting. When it adds arrhythmia and ST segment capabilities in a future software release, Select will be a nice choice for coronary care units. Meanwhile, it has plenty of capabilities for most surgical and respiratory patients, and has the algorithms for neonatal monitoring.

Integrating procedures, codes and costs

Several of these new portable devices also are departures from traditional thinking in monitors in another way: They integrate point-of-care, clinical information system capabilities (including ICD-9 codes), cost of resources used, and CPT code summaries related to clinical protocols of care in the basic monitor. This represents a fundamental melding of what previously were two separate product segments - bedside vital signs monitors and point-of-care clinical information workstations - a solution particularly fitting for perioperative-related applications where up to 50% of hospital dollars are consumed. Each traditional monitoring company has recognized the need to be effective in these markets, and has integrated some type of OR management and automated charting product for the perioperative segments. As a result, many new perioperative information systems were shown at ASA.

Datex-Engstrom (Tewksbury, Massachusetts), with its AS/3 anesthesia products, Marquette Medical, and HP with Ohmeda (Liberty Corner, New Jersey) all were selling or showing works-in-progress with automated anesthesia charting and operating room management capabilities. Several other perioperative information system vendors like Criticare and even Fukuda Denshi were showing anesthesia charting and information system products, sensing that this market is poised for rapid growth - and not wishing to miss out. The best of these products are bottom up new designs, and reflect the price/performance in their product positioning.

The recent acquisition of Andros (Berkeley, California) by Novametrix (Wallingford, Connecticut) raises questions about IR bench supply channels for OEM customers like Datascope, who depended upon Andros for their gas agent benches, but now face the prospects of selling in the market against their own OEM supplier. This is not unlike the situation created by the acquisition of Pyron (Menominee Falls, Wisconsin; an OEM supplier of capnography technology) by Protocol Systems earlier this year. This may create an opening for some non-U.S. bench suppliers to gain a foothold in the U.S. market. Novametrix may have felt it was acceptable to lose some OEM revenues (from Andros' customers) in order to strengthen its core technologies and market position in the perioperative monitoring segment. While this latest move certainly does that, it still leaves Novametrix without a viable anesthetic gas machine capability which may be necessary given the realignment of this segment overall.

The acquisition of Engstrom by Datex, and the merger of North American Drager (Telford, Pennsylvania) into Dragerwerk (Lubeck, Germany) dramatically realigns the U.S. gas machine market. Engstrom can definitely be expected to attempt to enter the U.S. market now split almost evenly by Drager and Ohmeda. Dragerwerk will use its NAD acquisition to introduce some products already successful in the European market into the U.S. over the next 12 to 15 months. These products include integrated patient monitoring, and Drager is working on an anesthesiology information system product to round out this product offering.

What this means for small monitoring suppliers, seeking to sell vital signs monitors in the perioperative setting, or even in the surgical ICU or step-down areas, is that they are likely to be excluded from these markets because they are not able to offer a complete solution. Because this segment represents such a large portion of the dollars spent by hospitals, exclusion from it seriously limits the market potential of companies seeking to grow in patient monitoring.

Monitor prices move down dramatically

The most aggressive of these new products establish fundamentally new price/performance levels for portable vital signs monitors of less than $6,500 for the now-common ECG, pulse oximetry, non-invasive blood pressure, dual temperature, and respiration models - low-acute, non-invasive configured products. At less than $8,000 for the configured versions with two additional invasive BP, a new price and performance level is established for a higher acuity portable monitor.

This industry will see personal monitors, including ECG, Sp[O.sub.2], and non-invasive blood pressure with EL displays priced around $2,200 in 1997. At these price points, unit sales of many existing and new competitive units will be 30% to 50% higher than the price leader in this hot segment. Given the essential parity of such products, managed care organizations or integrated delivery systems, squeezed by a capitated income, may select the lower-cost models, and reject higher-priced alternatives.

In spite of the price pressures, new companies continue to enter. Watch for the newly merged IVAC/IMED/Advanced Medical (San Diego, California) to expand beyond its traditional IV pump business and enter patient monitoring markets in 1997, as soon as it sorts out which of its current employees will survive the merger and downsizing. BBI previously expected to see low-end, integrated infusion and monitoring products in from IVAC in 1997, supplied as OEM components by existing monitoring companies. The broadening of monitoring to include integrated infusion is logical, and may be effective in changing the rules of the game and creating new markets for IVAC (if it catches on).

IVAC, considered an inpatient infusion company, moved strongly into the alternate-site infusion business dominated by Deltec (the largest market share), Abbott (Abbott Park, Illinois), and Block Medical (Carlsbad, California) with the introduction at ASA of its new Microstar alternate site, rotary para-staltic pump. This unit offers all four infusion modes: continuous, intermittent, TPN (nutrition), and PCA (pain) infusion modes in one pump. It is small, lightweight, and offers infusion sets with anti-siphon (set protection). The unit uses camcorder (NiH) batteries, which are rechargeable and integrated into the product, giving it 10 hours of battery operation, rather than separate, add-on rechargeable packs.

This unit is aggressively positioned and will sell for about $2,500, compared to Deltec's (St. Paul, Minnesota) CADD Prism product, which lists at $4,395. The infusion sets, which represent the real cost of infusion, cost $6 to $8 per set in quantity, compared to $11 to $20 per set for the Deltec sets. Deltec did not seemed concerned about the new IVAC product and its aggressive positioning, but may have to make some painful pricing adjustments to remain competitive and protect market share.

The home infusion market is really sales to durable medical equipment (DME) companies which rent the pumps to patients and home care agencies. More and more, DME suppliers are being cut out of the business, as the pumps can be started in the hospital setting and move into the home setting with the patient. The installed base of pumps is somewhere around 70,000 units in the U.S. alone, and the replacement cycle for these pumps has been around three years historically, translating into unit sales of 23,500 units per year for the home care market alone.

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