Deal Radar 2009: ClearCount Medical Solutions

Retained sponges, or gossypiboma, is one of the oldest documented surgical complications, and can result in significant patient morbidity, infection, and even death. Today, Deal Radar focuses on one company that seeks to reduce the number of such cases, ClearCount Medical Solutions. ClearCount Medical Solutions develops surgical sponges tagged with patented radiofrequency identification (RFID)-enabled technology, providing clinicians with an automated system to reconcile sponge counts that complements that standard manual counting procedures, and immediate detection capability in the case of an un-reconciled count.

Founders Steven Fleck and Gautam Gandhi used the insight of a traveling O.R. nurse who often had the experience of close calls from potential retained sponges and, many times, the unpleasant experience of going through O.R. trash and on her hands and knees, searching for a missing surgical sponge while the entire O.R. team was “locked down.” She felt that there had to be a better way. So, she along with her husband, evaluated alternative technologies, and determined that RFID provided the ease–of-use and durability requirements needed in the hectic O.R. environment. Pittsburgh-based ClearCount, which had a patent assigned to them for the technology, put together an engineering and commercial team to finance, develop, and market the RFID-enabled sponge counting and detection system. However, at the time of the company’s founding, it was unclear if the RFID technology was cost-effective or whether it could be packaged to provide the ease-of-use required to meet the high performance goals of an O.R. setting.

Using the SmartSponge system increases the cost of an operation by about $30, but the stakes can be far higher: the market demand for the SmartSponge System increased in October 2008, when the Centers for Medicaid and Medicare (CMS) altered their policy such that they will not reimburse for retained surgical objects during surgery — identifying this as one of several “never events.” Many private insurers are following suit. Liability settlements can cost US healthcare institutions $750 million to $1 billion annually.

Clear Count’s SmartSponge System is comprehensive system in that the RFID technology both counts and detects surgical sponges, providing reconciliation of ‘counts in’ and ‘counts out’, and the ability to scan the patient with a SmartWand to find a sponge in the case of a “non-reconciliation.” The system, which costs $15,000, consists of the tagged sponges, which a nurse will scan before an operation; a waste receptacle with a built-in sensor that reconciles the number of sponges thrown in the receptacle with the original number, and the SmartWand, used to scan the patient for sponges. In March 2009, the company introduced the Never Event Warranty™ (N.E.W.), which provides hospitals with up to $100,000 for unreimbursed surgical costs should a sponge be retained when the SmartSponge System is used.

The company estimates that the total market size of the in-patient surgical market for hardware and surgical sponge disposable is roughly $1 billion in the US alone, with additional opportunities in international markets, since retained objects in surgery is a global issue. The company’s main targets are hospitals with the leadership, reputation, and high-risk procedures that make them more likely to require patient safety technology such as the SmartSponge System.

The company faces two competitors in the field of preventing retained sponges. SurgiCount Medical uses sponges with unique barcodes that are scanned and recorded during final and initial sponge counts. RF Surgical Systems uses a hybrid platform with passive tag that is not scanned prior to an operation but rather detected if it is still in a patient, and a disposable wand.

The company, which is entering the commercialization stage, has secured its initial customer, Memorial Sloan-Kettering Cancer Center in New York City. Additionally, the company claims that several hospitals have conducted evaluations and are at various stages of the buying process while some customers have provided verbal indications that they will move forward with purchase.

ClearCount has raised a total of $8.3 million in financing: a $4.2 million round of angel funding and a $4.1 million Series A led by Draper Triangle Ventures in December 2008. The company is looking to raise a Series A-2 round with a target of $3 million which they expect will be closed by this fall. The company is planning its next major development, which in all likelihood, will be in providing RFID-enabled surgical instruments.

Suggested Reading:

*Deal Radar 2009: RadarFind
*Deal Radar 2009: Awarepoint
*Deal Radar 2009: WaveMark

This segment is a part in the series : Deal Radar 2009