Advanced Wound Technologies-MidAtlantic, Inc.
Advanced Wound Technologies-MidAtlantic, Inc. “AWT” the “Company” has been created to take advantage of the thriving Durable Medical Equipment ( “DME” ) market.
Mission Statement
“Secure marketing, distribution and supply rights to patented medical technology, create treatment protocols using additional related products and market those protocols to healthcare providers as solutions to regulatory requirements or to increase efficiency and/or help the provider earn “Quality of Care” incentive bonuses from reimbursement sources.”
Overview
National health care spending for 2001 topped $1.42 trillion; in 2005 it hit $1.7 trillion and health threats continued to rise. By the end of 2006, spending reportedly topped-out at just under $2.1 trillion, a number that was originally projected for the close of 2007. With an ever increasing and aging population (15,000 people turn 65 every day as of January 1, 2005) the United States cannot effectively address escalating health care costs without investing in public health programs that reduce these costs through prevention, control and treatment of disease and injury. (2005 Healthcare Overview (multiple articles), CMS, HHS)
Original analysis (2001 Healthcare overview (multiple articles), CMS, HHS) said that by 2024, $.38 of every dollar would be used for healthcare costs. Most financial analysts and economists would consider these numbers from a bankrupt position if looking at it as a corporation. From 2001, when most analysis was compiled through CMS and private corporations, this represents a growth rate in healthcare costs of approximately 12% year over increase. As of 2002, expenditure growth rate has averaged 16% year over increases and with an ever increasing and aging population. These excited cost increases are expected to continue for the foreseeable future. (Center for Medicare & Medicaid)
Aside from the common increases in public health investment, one area that has shown dramatic results not only in better quality healthcare but the potential to dramatically decrease overall costs is the proper implementation of the most advanced, state-of-the-art medical device and medical capital equipment for healthcare.
Bringing together well rounded, properly implemented technology that can be associated with more than one “incident” in healthcare, will decrease the cost of treatment, especially if it is put into practice as preventative measure.
The Market
Wound care concerns
The ability to clinically prevent, and of course cure, specific “incidents” from occurring in healthcare means an immediate cost savings for that specific event. An “incident” such as the appearance of decubitus ulcers on a patient during an acute care stay-a nosocomial event, could save as much as $50,000 for the facility of out of pocket expense to cure what was to never have occurred. With 1.7 million patients in 2006 treated with severe decubiti events, up from 1.1 million in 2004 (an increase of 54.5%), it is easy to say one of the core issues involved here is an ever increasing “incident rate”.
Unfortunately we cannot stop with the “incident rate”; we must accept the cross incident rates now being documented between diseases and realize our issues are compounding. Bariatric, Pulmonary, Diabetic, Ostomy, Spinal Cord Injury, Burn victims, these are all issues now being directly confronted in wound care. Proper handling of these diseases, injuries and “incidents” with specific treatment protocols, and with state-of-the-art medical device and equipment, will bring down the overall cost of treatment, if handled properly.
Spinal Cord Injury
Bedridden patients are typically in long-term care facilities, home care settings, and in certain instances acute care settings. Spinal cord injured individuals are essentially wheelchair bound. The prolonged immobilization of these individuals causes constant interface pressure on the areas of skin overlying what are called the bony prominences. More specifically, these areas include the sacrum (upper buttock area), ischial tuberosities (hamstring and lower buttock area), trochanters (hip/pelvic area), heels and latter malleoli (shoulder blade/scapula area). Studies have shown that 95% of all pressure ulcers develop in the lower portion of the body. Relieving these interface pressures while an individual is in a seated position has always posed a technological challenge. It is a challenge that AWT believes the technology it offers has met.
The numbers of people in the U.S. alive today who have spinal cord injury (SCI) has been estimated to be 247,000 with a range between 222,000 and 285,000 individuals. Every year, approximately 11,000 people sustain new spinal cord injuries – that’s thirty new injuries every day. Most of these people are injured in auto and sports accidents, falls, and industrial mishaps. An estimated 60 percent of these individuals are 30 years old or younger, and the majority of them are men (The National Spinal Cord Injury Association, 2005). Pressure sore development is the #2 cause for unplanned re-hospitalization among SCI patients. 89% of SCI patients are cared for in a home health care setting in the first year following injury and this percent increases as years pass. Continuity of care is essential to the treatment and prevention of pressure sores in this environment to minimize re-hospitalization. Allowing pressure ulcers to heal while a patient is sitting has always been a challenge to healthcare professionals.
Part of our product offering will allow for continuity of care between a bed and seating position. This level of care should decrease the occurrence and severity of pressure ulcers for SCI patients and should alleviate the added burden of cost associated with reoccurrence of decubiti.
Decubitus Ulcer/Pressure sore/Bed sore
Conservatively, the cost of healing decubitus ulcers (pressure ulcers or bed sores) surpassed $55 billion annually (Decubitus Foundation-2004). Additionally, the cost of litigation associated with decubitus ulcers annually, the number one source of malpractice and negligence litigation in the long term care market has additionally surpassed $165 billion (American Health Lawyers Association-2005). This problem is magnified to the healthcare facility because in many cases a pressure ulcer that appears after admission, is blamed on the healthcare provider by the reimbursement groups who the refuse to pay for the treatment and cure of the decubitus ulcer. The cost to a healthcare facility to cure one single class 3 or class 4 pressures sore can exceed $50,000. Pressure ulcers typically form from within and can begin after a minimal amount of time (as little as four hours) spent immobilized, or in bed, but will not appear on the surface for as long as 7 to 14 days. This long development cycle is why many long-term health care facilities are blamed for their occurrence and are forced to cover the cost of treatment and cure of pressure sores without the aid of reimbursement. This is also the basis for recent changes in the protocols and guidelines concerning the screening of patients for their susceptibility to pressure ulcers.
Diabetes
Diabetes mellitus, commonly referred to as diabetes, is a disorder in which the levels of sugar (also called glucose) in the blood are elevated because of problems related to insulin. Insulin is a hormone produced by the pancreas that helps the body maintain appropriate blood sugar levels. Insulin enables blood sugar to be transferred into cells. Once inside the cells, sugar is converted to energy, which is either used immediately or is stored until needed. In patients with diabetes mellitus, the levels of sugar in the blood are too high because not enough insulin is produced (type 1 diabetes) or the body becomes resistant to insulin (type 2 diabetes). With both types of diabetes, blood sugar is unable to enter the cells to provide the fuel needed to function properly, leading to problems with basic metabolism of the cells and the body as a whole.
Diabetes is a chronic disease that has no cure. There are an estimated 20.8 million children and adults in the United States, or 7% of the population, who have diabetes. While an estimated 14.6 million have been diagnosed, unfortunately, 6.2 million people are not aware that they have the disease. 54 million people have pre-diabetes.
Many people with diabetes eventually become inert because of pain, dysfunction or simply the inability to handle the serious and sometimes painful associated comorbid complications. The most prevalent and serious of these complications being Diabetic (Neuropathic) Ulcers, Heart Disease and Stroke, High Blood Pressure, Kidney Disease, Nervous System Damage, and Amputations. Because of the high comorbid rates associated with diabetes a more focused division may be formed and capitalized to handle the disease. Diabetes is the fifth-deadliest disease in the United States. Since 1987 the death rate due to diabetes has increased by 45 percent, while the death rates due to heart disease, stroke, and cancer have declined.
Based on death certificate data, diabetes contributed to 224,092 deaths in 2002. Studies indicate that diabetes is generally under-reported on death certificates, particularly in the cases of older persons with multiples chronic conditions such as heart disease and hypertension. Because of this, the toll of diabetes is believed to be much higher than officially reported. (American Diabetes Association, HHS, CMS)
Advanced Wound Technologies is continually investigating and researching additional medical devices and equipment for the treatment and prevention of decubitus ulcers (bedsores) and the treatment of post surgical wounds and burn victims. Additional treatment protocols for Bariatric patients, pulmonary patients as well as “cross incident occurrence” associated with these issues will be researched and if monetarily viable, will be produced. These products will be added to the companies’ product offerings so as to create an overall “wound care protocol” that is, more efficient and cost effective, and, potentially lowers the risk of regulatory and legal liability of, the healthcare provider. These protocols and patented products will be supplied to Hospitals, Long-term care facilities, Rehabilitation facilities, Nursing Homes, Extended Care Facilities, Hospices, and individually to home patients that require special care.
AWT will produce research and industry white papers associated with the expansion of clinical applications for the AWT family of products and protocols.
Target Markets
The AWT marketing strategy enhances, promotes and supports the fact that the state-of-the-art technologies it supplies are more versatile, therapeutic and price competitive than lesser or similar existing products. The Company's present overall marketing plan targets the following health care providers:
Number of Facilities
Skilled Nursing Facilities 17,768
General & Medical Hospitals 10,337
Home Health Care Providers 19,212
HMO’s and Managed Care Networks 275
Specialized medical equipment is typically ordered and reimbursed with a doctors prescription and a certification of need for the patient.
Although the ultimate end users of specialty support surfaces are bedridden and wheelchair bound patients these patients are not ordinarily or necessarily considered the customers. Medicare and private insurance reimbursement are the primary reimbursement and funding sources, for these types of support surfaces and treatments, in health care facilities and home care settings. With Medicare’s Home Health Prospective Payment System (PPS), health care cost containment and optimal clinical outcomes are directly related. Offering the low cost and best surface solution for bedsore treatment and avoidance is one of the opportunities at hand.
In clinical settings, PPS fixes a per diem payment for patient care that ranges from $154 to $320. The reality of having to manage all of the patient care, including ancillaries such as our support surfaces, within these financial parameters is significant. These facilities can no longer afford the exposure to the significant costs of secondary complications such as pressure sores and have begun to view specialty beds as assets with which they can better administer patient care and mitigate secondary liability. This is significant in light of the recent CMS Regulations and Guidance.
Skilled Nursing Facilities are long term care facilities primarily engaged in providing inpatient nursing and rehabilitative services to patients who require continuous health care, but not hospital services. Care must be ordered by and under the direction of a physician. The staff must include a licensed nurse on duty continuously with a minimum of one full-time registered nurse on duty during each day shift.
Estimated Number of U.S. Facilities 17,768
Number of people employed in this segment 1,650,884
Annual Revenues in this Segment $196.9 billion
Average Employees per Facility 106
Average Revenues per Facility $11.0 million
General Medical and Surgical Hospitals are establishments primarily engaged in providing general acute medical and surgical services and other hospital services.
Estimated number of U.S. facilities 10,337
Number of people employed in this segment 4,293,465
Annual revenue in this segment $385.6 billion
Average employees per facility 522
Average revenue per facility $738.7 million
Home Health Care Services include firms primarily engaged in providing skilled nursing or medical care in the home, under supervision of a physician.
Estimated Number of U.S. Firms 19,212
Number of people employed in this segment 709,375
Annual Revenues in this segment $188.6 billion
Average Employees per Firm 48
Average Revenues per Firm $9.8 million
Medicare Part “B” reimburses for specialty beds in home-health-care settings for what is considered curative care. Accessing the various providers of clinical services in these settings, such as HMO's and Primary Care Physician groups, affords us an opportunity to provide the low cost/best solution preventative measure for bedsore avoidance.
Hospital and Medical Service Plans and Medicare HMO's are firms engaged in providing hospital, medical, and other health services to subscribers or members in accordance with prearranged agreements or service plans, generally in return for specified subscription charges. The plans may be through a contract with a participating hospital or physician. There are 275 Medicare HMO's Throughout the United States. These plans are continuously seeking the best care at the best price and are expanding their practice of signing fixed rate reimbursement contracts for healthcare products to better predict their expenses and exposure to identifiable healthcare problems. This trend is accelerating in connection with medical treatments and products that can prevent costly clinical conditions, such as pressure ulcers, from occurring. This trend compliments greatly our “cross incident occurrence” initiative that will bring together multiple “incidents” under individual device or equipment. As there are no known treatment protocols to exist presently for wound care device and equipment, much research, studies and trials will be necessary for their creation. We are presently speaking with specialists in healthcare for the first phase of research.
The health services industry is a diverse array of facilities and personnel primarily engaged in furnishing medical, surgical and other health services to people. The specific market segments and their size are highlighted below to provide a better understanding of the size of the market and, because it is primarily in these settings that the support surface products are utilized.
DISTRIBUTION & MARKETING
New opportunities for the distribution of innovative medical equipment technologies are contained in recent government regulatory changes that require Medicare participants to provide a higher standard of care.
Contained within the CMS Manual System (Department of Health and Human Services-Centers for Medicare and Medicaid Services (CMS), Pub 100-07 State Operations Provider Certification, November 12, 2004, Guidance to Surveyors for Long Term Care Facilities (Full Text attached in Appendix B)), are specific requirements stating:
• §483.25 Quality of Care.
“Each resident must receive and the facility must provide the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, in accordance with the comprehensive assessment and plan of care”
• §483.25(c) Pressure Sores
“Based on the Comprehensive Assessment of a resident, the facility must ensure that-
(1) A resident who enters the facility without pressure sores does not develop pressure sores unless the individual’s clinical condition demonstrates that they were unavoidable;
Intent: (F314) 42 CFR 483.25(c)
The intent of this requirement is that the resident does not develop pressure ulcers unless clinically unavoidable and that the facility provides care and services to:
• Promote the prevention of pressure ulcer development;
• Promote the healing of pressure ulcers that are present (including prevention of
infection to the extent possible); and
• Prevent development of additional pressure ulcers.
NOTE: Although the regulatory language refers to pressure sores, the nomenclature widely accepted presently refers to pressure ulcers, and the guidance provided in this document will refer to pressure ulcers.’
Potential performance incentives as defined in Medicare’s “Pay for Performance (P4P) Initiatives (January 31, 2005, CMS, HHS).” further support the introduction of technologies based solutions for “Quality of Care” requirements by offering Medicare providers with end of year bonus incentives for the efficient adoption of sponsored guidelines and regulations.
In addition to supplying the Company’s products directly to Healthcare Facilities, it will utilize healthcare industry Conventions, Trade Shows, Journals, and Seminars in conjunction with Direct Marketing to Wound Care and Operating Room Nurses, Visiting Nursing Associations, Podiatrists, Spinal Cord and Orthopedic Physicians, Wound Care Physicians, Cardiac and Plastic Surgeon Specialists, Burn units (specialties or hospitals) and Anesthesiologists, to name a few specialty fields, to generate interest and understanding of the patients benefits through the use of specialized products and protocols. This strategy will produce qualified sales leads for both our internal and independent sales associates. Direct contact strategies will be employed with National and Regional Institutional sales targets that will be assigned to our national and regional sales associates.
AWT is positioning itself to leverage this convergence of regulation and incentive with the most advanced technologies available in medical equipment for wound care. This should help a provider comply with regulations which can have a positive effect upon the facility’s ability to earn incentives from Medicaid or other reimbursement sources.
Distribution Channels;
National & Regional
Through a combination of in-house sales representatives, independent sales representatives, strategic authorized distributors, and a national wholesaler, AWT will secure solid market penetration on a regional basis, initially throughout the states of California, New York, Pennsylvania, Massachusetts, Delaware, New Jersey, Maryland, Virginia, District of Columbus, Connecticut, and Illinois. Additional strategic locations will be placed after careful analysis to promote products and services in states renown for; use of progressive technology in health care, high reimbursement rates, and a large and growing elderly population. States such as Texas, Nevada, New Mexico, and Arizona to name a few are certainly candidates.
National Wholesaler
AWT intends to expand its direct marketing efforts with the addition of regional sales directors to interface with the existing supply chain and create strategic alliances offering revenue sharing programs and co-marketing support.
The national wholesales managers will be employees of AWT with incentive compensation commensurate with performance. The regional sales directors will be engaged as employees with compensation and bonus based upon performance.
Additionally, the company will engage LVNA, (Local Visiting Nurses Association) to provide experienced nurses for follow-up, training and monitoring of the installed specialty equipment. AWT is exploring the development of Continuing Education Units (CEU) (for nurses), and Continuing Medical Education (CME) (for doctors), to create additional opportunities to educate the medical community about, as an example - the use of a equipment protocol for the treatment and prevention of decubitus ulcers. The practice of marketing products through education is a time proven method of marketing in the pharmaceutical market.
AWT believes its strategy of offering educational credit will allow it to attract larger audiences at its group presentations at targeted tradeshows.
Strategic authorized distributors
Advanced Wound Technologies will concentrate its sales and marketing efforts on national accounts and large regional healthcare providers and cooperatives, while seeking strategic partners in lower density and rural markets. Advanced Wound Technologies is offering generous revenue sharing arrangements and financed equipment to existing medical supply companies alleviating them the burden of financing, and offering a steady stream of income. The level of revenue share will be dependent upon the level of participation in the delivery, set up and follow-up by the local medical supply company. Acquisition offers may be extended to distributors if the Company feels the sales production and mix of business meets certain specific criteria for AWT.
Independent sales representatives
Advanced Wound Technologies will establish a network of independent sales representatives authorized to sell and distribute all products, associated products and equipment and newly created treatment protocols. Independent sales representatives typically carry other lines of competing and non-competing products. This will extend sales into their existing client bases. The sales reps will provide the necessary staff development and training support to their clients, which will be directed by Advanced Wound Technologies training guidelines. All reps will receive compensation from revenue generated within their respective region and have opportunities for bonus participation for gross production and large account development. Permanent employment or acquisition offers may be extended to as Independent Sales Representative if the Company feels the sales production meets certain criteria for AWT.
International Distribution
Advanced Wound Technologies will establish in 2007, an International Division to sell and distribute all products, associated products and newly created treatment protocols. International sales representatives will carry our line of products as well as other lines of competing and non-competing products for the equipment, appliance, and supply markets. This will maximize sales into the existing client bases with both high and low end cost equipment. Certain of the executive staff of AWT or qualified trainers will provide the necessary staff development and training support to their representatives and clients, which will be directed by Advanced Wound Technologies training guidelines. All International representatives will have opportunities for bonus participation for gross production and large account development. Permanent employment or acquisition offers may be extended to an International Independent Sales Representative or outside Distributor/dealer, if the Company feels the product line and sales production meets certain specific criteria set by and for AWT.
EXPANSION STRATEGY
ACQUISITION STRATEGIES
Business and Operational Characteristics
AWT products add value for customers by improving efficiency, reducing down-time of personnel, bringing new methodologies of treatment, improving quality and performance, reducing costs and helping customers to bring a new level of patient care and healing to healthcare.
The operating companies/divisions of AWT will share the same strategic business characteristics:
focus on specific methodologies and niche applications with direct impact on process performance for end use customers
small, high value added,
process critical equipment standard products built on technology platforms which are customized through high added value applications,
engineering ability to grow the market and capitalize on growth markets
operating culture based on autonomous business units with performance-focused management and high caliber employees.
The way AWT operates creates value for the businesses, creates value for AWT, and creates value for shareholders. A decentralized structure means the management teams in the businesses have real ownership and responsibility and can focus on the priorities. The optimal operational characteristics of the businesses include:
holding leading positions or building positions in niche markets globally
strong, well managed brands and/or products and services internally
multinational customer base, proprietary (if possible) technology with patent portfolio
high gross margins, low capital intensity, and highly cash generative
Acquisition Objectives
AWT is constantly searching for opportunities to add to its portfolio of businesses. Two types of opportunity are given equal priority in this program:
Private or public stand-alone businesses which share the characteristics listed above, and which would operate as autonomous operations within AWT
Opportunities often referred to as bolt-ons, which would be merged with one of our existing businesses to create a stronger and more broadly based growth platform. Such opportunities could be the acquisition of a company, or alternatively a line of business or simply a product line.
We are potentially interested in opportunities that range from early stage businesses which have developed proprietary technology but lack production capabilities and sales and support infrastructure around the world, to divisions of businesses or product groupings which are no longer core to corporate owners and could be merged with one of our existing businesses.
A core focus of the acquisition strategy is a strategic rationale for in-market consolidation for AWT to create, a market leader. The ideal here is to create a Company that can realize benefits within the market by improving pricing and marketing, rationalizing operations and leveraging assets such as technology and skills. We will increase our overall market penetration through capturing scale benefits throughout operations in products and services.
Another area of focus is in licensing proprietary technology which may have been developed for different applications, but could be used in the markets focused on by our operating companies. In this case we either purchase or license intellectual property for use by one of our companies.
Closing Overview
As explained in this document, along with and accompanied by supporting documents, the segment of the health-care field handling wound care/decubitus ulcers is a growing concern for everyone. The ability to bring product that has beneficial results in the healing of serious illness, that reduces costs associated with these illnesses, is a benefit that each and every patient should demand, every healthcare facility should provide, and is a requirement for full payment and Medicare P4P Initiatives.
Advanced Wound Technologies, Inc., intends to deliver a continuous line of innovative and patented medical devises to the healthcare facilities industry, that both maximizes care and provides an opportunity for financial benefit to the provider (either through full reimbursement or incentive payor programs).
AWT began this process by entering the market place as a supplier of a patented wound treatment technology. The Company is currently seeking additional products domestic and internationally, that will strengthen its position and increase its earnings potential. Continuing research and analysis on the newest products available to the industry or through private companies is of our main focus. We expect to bring many unique and highly functional products to the market in the years to come.
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