Stryker Corporation’s Tim Scannell’s New Year’s Eve resolution is to stop leaving sponges in patients after surgery. So his division is paying $120 million for a system used at grocery checkout counters and intended to prevent objects being left in patients after surgery.
The company announced it was acquiring Patient Safety Technologies, Inc. (PST) for $2.22 per share on the last day of the year. Happy New Year PST shareholders.
PST’s proprietary Safety-Sponge System and SurgiCount 360 compliance software help prevent retained foreign objects (RFOs) in the operating room. The system includes bar-coded surgical sponges and towels, an integrated barcode scanner, and compliance tracking software. The company reported $14.9 million in revenue for the first three quarters of 2013.
Leaving “stuff” behind in patients is expensive and the most common operating room “Never Event” in the U.S, according to the Stryker announcement. Sponges are the most common retained object, with approximately 2, 300 incidents reported annually at an average cost per incident of over $400, 000.
Leah Binder, a contributing writer to Forbes, wrote that the acquisition represents a significant sign of change ahead for the health care industry and a market breakthrough because the idea of preventing leftovers in patients is profitable.
“It costs a whopping $10 per surgery for [PST] to embed bar codes in surgical sponges…Yet 85% of the hospitals that find the money for robotics, CT scanners, lasers, pianos in the main lobby, valet parking, billboards and other dazzlements just can’t find a few bucks to address one of the most appalling and nauseating problems any of us can imagine happening to us.”
Binder says the market won’t accept that patient safety hasn’t been part of a business model, and Stryker’s move is a major sign. “Business leaders are increasingly demanding transparency and insisting on results—and they are not waiting for Congress to make sure they get what they need from their health benefits investment. They are also moving toward high-deductible health plans, which give employees skin in the game in demanding the best value. Perhaps $10 isn’t such a big investment after all, if you preserve your reputation in a new marketplace, where patients and employers insist their needs should come first.”
Over 300 hospitals have become customers of the system since introduced in 2006. The system will become part of Stryker’s instruments division, run by Scannell, group president, MedSurg and Neurotechnology. “This acquisition aligns with Stryker’s focus on offering products and services that have demonstrated cost effectiveness and clinical outcomes, ” said Scannell.
