A product that aims to stop a common medical error and a relationship with a big distributor is paying off for Irvine-based Patient Safety Technologies Inc.
Patient Safety had $13.2 million in sales for the 12 months through June, a 257.9% jump from two years earlier that landed it the No. 2 spot on the Business Journal’s list of fastest-growing public companies based here (see Special Report, page 27; list, page 32).
The company’s wholly owned subsidiary, SurgiCount Medical, makes the Surgi-Count, a medical device and system designed to reduce incidents of sponges left in patients after surgery.
“When a sponge gets left behind, it’s bad for everybody—it’s bad for the patients, the family, the hospital, the surgeons,” said Brian Stewart, Patient Safety’s chief executive.
More Accuracy
SurgiCount increases the accuracy of sponge counts in hospitals. It’s made up of three components—the surgical sponges themselves, a scanning device and networked database software.
The sponges are made in a way that allows them to be readily indentified by the scanning device. The database tracks the number used during surgery, allowing medical personnel a way to cross-check and ensure nothing is left behind.
“Acceptance of the product by some very well-known hospitals” has helped fuel Patient Safety’s growth, Stewart said.
SurgiCount is being sold to hospitals that “are known for setting the standards of care,” Stewart said. He noted that the company’s products are used in six entries on the U.S. News & World Report’s list of best hospitals.
More growth is likely next year: Patient Safety said it signed a deal to put Surgi-Count systems into the 130 hospitals affiliated with a company whose identity is being kept under wraps for now.
Recognition
Stewart said Patient Safety also got valuable recognition from an independent clinical study published recently in the Joint Commission Journal on Quality and Patient Safety. The Joint Commission is a Wash-ington, D.C.-based accrediting body for healthcare facilities.
The company is also targeting hospitals that have admitted they had a problem with sponges being left inside patients after surgery. Such cases often attract unfavorable media attention and other scrutiny.
Patient Safety gets a leg up on marketing thanks to a deal with Cardinal Health Inc., a Dublin, Ohio-based healthcare product distributor.
Cardinal distributes SurgiCount “all across the United States, and we do a lot of joint sales and marketing with Cardinal Health,” Stewart said. Patient Safety also gets benefits from Cardinal’s hospital relationships and logistics systems, he said.
In a federal filing, Patient Safety said it got $8.9 million of its $14.8 million in 2010 revenue from its Cardinal contract. That helped lead to a swing to $1.8 million in profit from a net loss of $17.6 million the prior year.
Besides Cardinal, Patient Safety also has a direct sales effort and is going after hospital group purchasing organizations, Stew-art said.
When buying groups come around, it “legitimizes the maturity” of a certain medical device segment, he said.
Shake-up
Patient Safety has had to overcome a bit of front-office turbulence.
Last year, Stewart—who originally sold SurgiCount Medical Inc. to Patient Safety in 2005 to create the current company— joined with other large shareholders to force out a majority of the board and its chief executive.
“Though I was excited about seeing the product take off, I was concerned about some of the management issues I saw at the company,” said Stewart, who returned as chief executive after the shake-up.
The company is planning to get into international sales and is hopeful that it will be selling to its first hospital outside the U.S. later this year, according to Stewart.
“Exploring”
Patient Safety’s shares currently trade on the low-profile over-the-counter Bulletin Board exchange, with a market value of about $42 million. It wants to “be traded on a more liquid, reputable exchange, and we’re exploring those different options right now,” Stewart said.
No analysts follow it.
Stewart said he wasn’t aware of any company that was doing exactly what Patient Safety is doing and that its competition are hospitals that are manually counting their surgical sponges by hand.
“Changing clinical practice in a hospital is not an easy task,” he said.
SurgiCount is made by A Plus Inter-national Inc., a Chino-based contract manufacturer.
Patient Safety has 21 workers, with 15 in Orange County.
