BBI Contributing Writer

ORLANDO, Florida – In keeping with the hectic pace of product introductions and vendor consolidations thus far this year, the American Association of Critical Care Nurses (AACN; Aliso Viejo, California) National Teaching Institute held here in late May had a surprising number of significant announcements and product introductions.

Agilent Technologies (Palo Alto, California) reported a 1Q00 earnings shortfall, and some company insiders were saying that the health care group in Andover, Massachusetts, needed to keep up with growth expectations within Agilent. In response, the health care group said it was acquiring Zymed (Camarillo, California), a small supplier of Holter monitoring and telemetry systems that provides Agilent with products in something other than the now-obsolete UHF frequency spectrum.

Agilent wasn't the only major monitoring supplier to be singing the revenue blues. Revenues at Spacelabs (Redmond, Washington), GE Marquette Medical (Milwaukee, Wisconsin), and Siemens (Danvers, Massachusetts) were below expectations in the first quarter, a result of the Y2K buying spree of 1999. Based on data from its Reality patient monitoring survey, Medical Strategic Planning (Lincroft, New Jersey) said this trend will continue throughout the balance of 2000 and into mid-2001 in most monitoring segments. The exceptions will be the ambulatory segment, where real growth, rather than unit replacement, is occurring, and in alternate-site markets such as ambulatory surgical centers. Companies well-positioned in these markets are the second-tier vendors, like Protocol Systems (Beaverton, Oregon), now a division of Welch Allyn (Skaneateles Falls, New York), Datascope (Montvale, New Jersey) and others who have been addressing these markets for some time as a means to ensure growth, but avoid the entrenched, larger companies. Protocol Systems, bucking other vendors' revenue reports, posted gains of more than 25% in Q100. This reinvigorated it as an acquisition target, and Protocol now has been acquired by Welch Allyn, which paid about $145 million, or about $16 a share. This is about double what Invivo Research (Orlando, Florida) offered, and a much better deal, as it was all cash and no stock.

Shown for the first time at the NTI gathering was Protocol's new wireless, patient-worn Micropaq portable monitor, its new wireless network, and its new portable (nurse-carried) central stations. This is more than just another wireless telemetry system. Rather, Protocol was unveiling a new concept in monitoring for the hospital of the future. A lot of new thinking went into these new products. The Micropaq unit, not much bigger than a conventional patient-worn telemetry transmitter, provides multi-vector ECG, SpO2 and optional NiBP parameters. It is capable of displaying up to two waveforms on the patient-worn device, any two of the 12 leads of ECG it monitors, or an ECG and SpO2 pulse waveform. In addition, the transmitter provides bidirectional transmission of both patient vital signs data using the 2.4 GHz ISM band. The embedded radios from Symbol Technologies (Holtsville, New York) use standard IEEE 802.11b frequency-hopping protocols, allowing them to integrate without protocol conflicts with other 2.4 GHz 802.11b-compliant devices, ranging from other PC-based wireless network components to cellular phones. Protocol uses this 2.4 GHz band intentionally and provides nurses with PDA devices that not only display waveforms and vital signs of the patients the nurse is responsible for, but also provide voice communications among caregivers, using Internet Protocol (IP) in the Voice over IP (VoIP) mode. This will allow the caregiver for the first time to carry one device that acts as a remote control, communications/phone, and vital signs/alarms monitor. VoIP products are expected to be commercially available around the end of the year.

Coupled with its new, low-cost (Symbol hand-held) "pod-based" mini-central stations, these components provide the essential core elements needed to implement the hospital of the future" envisioned at last year's "ICU 2010-Hospital of the Future" conference sponsored by the Society of Critical Care Nurses, American Association of Critical Care Nurses, American Institute of Architects, and the Academy of Architecture for Health. At present, Protocol offers the most cost-effective and diverse group of products to implement that vision.

Agilent showed several new products and software enhancements to its systems at the NTI gathering. The M3 and M4 portables now are networked, and also have 2.4 GHz wireless ISM radios from Proxim (Mountain View, California) back to the central station. This leaves the company's patient-worn telemetry and wireless LAN portable monitoring operating in two different frequency bands on the same central station. The fact that Agilent and other major competitors also use the ISM band for their wireless portable monitors makes it difficult to attack Protocol/Welch Allyn's choice of 2.4 GHz for its patient-worn monitoring data.

Agilent's central station now has a second flat-panel display that provides trend and arrhythmia data access without disrupting the vital sign waveform display from the beds (assigned to the first flat-panel display). This second display is driven by a small, Hewlett Packard-designed 80486 "pizza box" that hangs on the wall or can be hidden away somewhere at the central station. The second display is on the hospital network, not the monitoring network, and also acts as a gateway for the monitoring system to the hospital information system network.

Agilent also was showing and shipping its new 608-614 MHz Wireless Medical Telemetry Spectrum (WMTS) digital telemetry, complete with the Zymed EASI 12-lead system. This is a retuned version of its older UHF band telemetry and lacks the on-board, multi-channel waveform display of Protocol's Micropaq. However, Agilent offers a new Telemon bedside display device that the transmitter literally slides into and uses to display all waveforms and vital signs from its new telemetry transmitters. This solution is well-designed, but is it as convenient as just looking on the transmitter itself for the waveforms? The Telemon display is about the size of a small portable monitor, and costs nearly $3,600. It requires someone – probably a nurse, doctor, respiratory therapist or other caregiver – to carry it into the patient's room (or wherever the patient is) and then remove the patient's transmitter from a pouch and slide it into the Telemon so the staff can visualize the waveforms and make control changes. However, it is one more thing nurses will have to carry around with them. The Telemon isn't heavy and runs for several hours on its internal batteries without burdening the internal batteries of the patient-worn transmitter, as in Protocol's Micropaq approach.

Agilent is likely to have a more fundamental issue in the ambulatory telemetry market. After spending years educating its customers to the limitations of VHF telemetry, it now has acquired a company with a new VHF telemetry system. Moreover, its UHF telemetry, which continued to be sold until this year, was made effectively obsolete by Federal Communications Commission (FCC) action in June, when the commission finalized approval of 608 MHz telemetry, but also okayed the "refarming" of the 450-470 MHz PLMR radio band that Agilent and other vendors' current telemetry occupies. FCC spokesmen have made it clear that by approving the new band and refarming the old UHF band into 6.5 KHz channels, it was sending a clear signal to medical device manufacturers that medical telemetry is not welcome in this band in the future, and should be vacated as soon as practical. While "as soon as practical" may be up to five years, it certainly will be short-sighted for a new telemetry customer to take up residence in this band. Yet Agilent continues to offer new units in the UHF, augmenting the nearly 13,000 transmitters it sold in this this band in 1999.

Spacelabs (Redmond, Washington) began shipping its 608 MHz WMTS telemetry to customers at the end of 1999, and has first installations at Duke University Medical Center (Durham, North Carolina) and accounts in Cincinnati, Ohio, up and running. So both of these first-tier vendors have moved into the same 608 MHz band. Many other companies will follow their lead, including OEM supplier Vitalcom (Tustin, California).

All of this migration, coupled with the lack of transmission standards in the WMTS band, could lead to potentially incompatible systems available from each of the major suppliers. Coordinating the potential interference issues will be left to the customer, in this case the hospital. What are hospitals likely do to solve this new problem? They could easily restrict telemetry purchases to a single vendor, so that multiple vendor systems at 608 MHz do not interfere with each other. In this "winner takes all" telemetry scenario, which vendors will thrive? It is likely to be one of the large companies, and that may spell the demise of telemetry systems for smaller suppliers that choose to compete in the crowded arena of 608 MHz (Ch-37) telemetry systems. Of course these suppliers, as Siemens (Danvers, Massachusetts) currently does, can offer systems using TV channels 21 to 46, avoiding the WMTS band. In all of the rest of the channels, medical telemetry is still a secondary user to TV stations, and ultimately will be crowded out in most areas of the country by new low-power TV stations the FCC is now approving.

This confusion about compatibility in the WMTS band makes the 2.4 GHz solution pursued by Protocol Systems, Criticare (Waukesha, Wisconsin) and perhaps some others look like an intelligent decision. By using IEEE 802.11b-compliant telemetry, telemetry will co-exist with computer wireless LANs, cell phones and other IEEE 802.11b devices – not only co-exist, but potentially interoperate. The ease and speed of achieving such interoperability was underscored by Protocol's demonstration of Voice over IP at the NTI. It will be in stark contrast to the major vendors who will fight it out for the conflicting telemetry systems in the new WMTS band they must exclusively share.

Agilent has a formidable marketing machine, as well as the largest market share, so it will win a large share of the WMTS bandwidth standardization fight, at the expense of other competitors. But it may have trouble winning against Protocol Systems, because it can't really attack the use of 2.4 GHz wireless bands for medical use, as its own M3 and M4 portable monitors use exactly these same frequencies.

Of the larger suppliers, Siemens/Shared Management Systems (Malvern, Pennsylvania) has a unique transmitter, which is frequency reprogrammable across all frequencies from Ch-21 to Ch-46, and could also work in the WMTS frequencies. So Siemens will do well against Agilent and the others even if Agilent, GE Marquette and Spacelabs win and occupy the lion's share of the WMTS space.

Vitalcom may be the loser in this equation – not because it doesn't have a good solution, but because it doesn't have the market presence to compete head-on against the power of the Agilent marketing machine. That could be bad news for Vitalcom, which seems to have its future pinned on its new WMTS design. A potential saving grace is that the Vitalcom solution works with ventilators, infusion pumps and other devices in addition to patient monitors. If Agilent leaves these devices out of its Ch-37 solution, providers may balk at selecting Agilent, as they will still have to find an additional solution for these other devices. But that is within Agilent's control, not Vitalcom's. By simply announcing it will interface such devices, Agilent could dry up Vitalcom, and that could mean the company fails in the market, as another round of financing, given its less-than-sparkling economic performance over the last three years, seems unlikely.

Agilent's continued success would also mean the demise of Vitalcom's new OEM customers, companies like Mennen Medical (Clarence, New York) and others that have their new telemetry eggs in the Vitalcom basket. Of course, OEMs could have selected Zymed (and its VHF telemetry) as their OEM supplier of telemetry, but Agilent acquired Zymed, so that isn't a viable choice for new companies, and perhaps a bad choice for existing Zymed OEMs, to the extent that Agilent is their competitor in any segment.

The Medical Strategic Planning survey results show that ambulatory monitoring will be one sweet growth spot of the entire inpatient medical monitoring market for the next few years, and that companies that succeed in this space will have an easier time growing than companies that are not well positioned there. Hospitals will catch on quickly now that the FCC has finalized the new frequency bands, and may already be making some changes in vendor preference. So vendors which are well positioned with mid-acuity, telemetry systems stand to gain market share and grow, even though the rest of the monitoring market has shrunk dramatically. Those companies that are best-positioned include Protocol Systems, Siemens, and to the extent it can monopolize the WMTS space, Agilent. GE Marquette and Spacelabs are potentially the recipients of customers that abandon Agilent, perhaps those disenchanted with the unusually short useful life of the obsolete UHF telemetry system they bought during the last 24 months. GE Marquette and Spacelabs will have to make that a viable issue in the market, and GE is slightly better positioned to do that than Spacelabs, as GE was selling VHF telemetry while Spacelabs, up until December 1999, was still delivering UHF telemetry in the same 460 MHz band as Agilent.

Telemetry systems were not the only new products shown at the NTI. Critikon (Tampa, Florida) was showing a new, portable, configured, IV pole-mounted, vital signs monitor – a next-generation version of its Dinamap Plus monitors. These new units come in four models – Models 100, 200, 300 and 400 – and range in price from around $3,600 to around $6,000. They are designed to return Critikon to a market segment where it has historically been successful. This new direction has shut down development of higher-acuity products and telemetry, although the company is expected to announce by year-end a few additional products that are a bit higher acuity than its current offerings. Critikon is clearly pursuing a niche product strategy, and perhaps boosting its share in that niche to make it a more attractive acquisition prospect for companies seeking a lower-acuity product line. One problem is that the oximetry incorporated in this product line is the old Nellcor (Pleasanton, California) technology rather than either Nellcor's new 404 technology or Masimo's (Irvine, California) SET technology.

Oximetry also was a hot issue on the NTI exhibit floor, as it appears to be everywhere recently. Nellcor announced a remote alarms surveillance capability that allows its clinicians to monitor and respond to alarms its oximeters generate.

Just prior to the NTI, Masimo said it had been awarded a U.S. patent for the use of digital adaptive filters in extracting pulse oximetry and other biological signals from noise. With Nellcor and Siemens both apparently using digital adaptive filtering approaches, it may be that Masimo's patent suit against Nellcor could be expanded.

Another vendor that saw intense interest in its technology was Aspect Medical (Waltham, Massachusetts). Aspect's BiSpectral Index (BIS) monitoring has been adopted by more than 775 U.S. hospitals since commercial introduction in late 1996. Worldwide, hospitals are using more than 6,900 units to monitor more than 1.4 million patient surgeries. Estimates are that 2000 revenues will reach $38 million, and the company is expected to have its first profitable year. Aspect's BIS and its derivatives are becoming of interest for ICU applications, due to the new interest in pain management, and sedation of ventilated patients. While Aspect is not planning to move into the ICU setting until mid-2001, it has begun to establish a presence at ICU-oriented trade shows to increase awareness of their products for ventilated and other patients receiving conscious sedation in the ICU.

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