Sramana Mitra: Essentially it acts as an intelligent phone that is optimized for a hospital’s work flow and the people in the hospital, right?
Brent Lang: Yes. You could think of it as a wearable, hands-free phone that’s controlled by using voice commands and that has an intelligent workflow engine that directs the call to the right person without having to know the person’s phone number or name.
SM: I see. So, you are also starting to take this out to the mobile phone ecosystem. What’s driving that?
BL: It’s about extending the ecosystem to larger groups of users. Nurses will likely always prefer the hands-free badge, and most of the people who work within the hospital will probably prefer the hands-free badge. But by extending it to these other devices, we’re doing two things. Number one, we’re extending the reach outside the coverage of the Wi-Fi network. For example, a doctor who is not in the hospital and doesn’t have access to the Wi-Fi infrastructure can still be part of the communication flow by having it run over the cellular network onto her phone. The second thing is that many of these folks, particularly doctors, already carry an iPhone, BlackBerry, or an Android phone, and they’re often going in and out of the hospital on a regular basis. They might come see some patients, and then go back to their clinics or offices. Wearing a badge doesn’t really work for them. But because they’re already carrying a smartphone, they don’t have to carry two different devices. They can be reached on their smartphones and still participate in the ecosystem. They can be members of groups. They can place calls by saying the name or function or role as if they were wearing badges. They can even use the screens of their smart phones to pull up a directory and reach a role, function, or person.
We view the smartphone as an incremental piece of our business that will allow us to attach additional groups of users to the Vocera platform.
SM: What’s the business angle? How do you charge?
BL: A typical deal for us would be an enterprise sale to a hospital. It would be, on average, somewhere around $250,000 to $300,000 for the initial purchase. That purchase would be made up of buying devices, which would be badges, batteries, and accessories such as chargers and lanyards. Buying software, which would be enterprise software that runs on a server, is based on the number of user licenses a company wants to enable on the server. We sell traditional software maintenance, which is both technical support and software upgrades and bug fixes. And then we sell professional services, which is a group of both technical and clinical resources that go on site to the hospital during the initial deployment and help them configure their groups and train the end users. There are four different buckets of revenue that are part of the enterprise purchase by the hospital.
SM: But it’s not a software-as-a-service model per se?
BL: It’s not software as a service. It’s sold as a perpetual license, and then we charge software maintenance on an annual basis.
SM: What is going on in the hospital ecosystem today? The penetration of your solution is not very high yet, right?
BL: Right. We’re in about 800 hospitals and health systems. That’s relatively low penetration because there are more than 6,000 hospitals in the U.S. that would be potential targets for us. In many cases, hospitals that are not using Vocera are using overhead paging, pagers or just doing a lot of running around. It leads to tremendous inefficiency. To give you a sense of it, the Joint Commission, which is an independent health care accreditation organization, found that 69% of accidental deaths and serious injuries in hospitals are linked to communication failure. There’s a huge patient safety problem. Furthermore, the University of Maryland found in 2010 that more than $12 billion is wasted in hospitals annually as a result of communication inefficiencies.
The third thing that I would point to is that as a result of some of the health care reform, there are reimbursement issues that are tied to patient satisfaction. The amount of reimbursement that Medicaid and Medicare will give to a hospital is going to be tied to a patient satisfaction survey called HCAPS. Starting in late 2012, they could potentially lose up to 1% of their reimbursement rates based on this patient satisfaction survey. Communication, if you look at the survey, is one of the biggest areas of the patient satisfaction survey. We feel we could have a direct impact on improving those survey scores by improving communication within the hospital.