As president and CEO of Encision (OTCQB:ECIA), Greg Trudel, who moved into the executive suite in December 2013, has always had a strong interest in energy, dating back to various leadership posts with ConMed Electrosurgery, SilverGlide Surgical Technologies, and Stryker. Most recently, he was global director of marketing for a division within the Surgical Solutions Group at Covidien, as well as working in both the Advanced Energy and Surgical Stapling Divisions at Covidien. He admits to having always kept tabs on Encision during his early career and thinking that its technology should be the standard of care in protecting patients from stray energy burns during laparoscopic surgery. In this interview with BioTuesdays.com, Mr. Trudel discusses Encision’s new technology for improving patient outcomes and how that technology can help hospitals increase reimbursement from the government.
How did you convince the board you were the right person for the CEO job?
My main argument was that we needed a fresh restart to examine all the elements that Encision had going for it. We had clinical validation of the Active Electrode Monitoring (AEM) technology, but what was missing was the economic value proposition. AEM technology alone saves patient lives by eliminating stray energy burns that laparoscopic surgeons never see during a surgical procedure. This is essentially a flaw in monopolar surgical energy. Our economic value proposition had to be that AEM technology alone reduces hospital liability by eliminating a source of surgical complications and malpractice, reduces risk of hospital-acquired conditions (HAC) and accidental puncture and laceration rates (APL), and subsequent reimbursement penalties from the Centers for Medicare & Medicaid Services (CMS), and reduces costly readmissions and associated unreimbursed expenses.
What contributes to HAC and APL rates?
Let me emphasize again that stray energy burns are not caused by surgical technique; they are a fundamental flaw of monopolar surgical energy. And there isn’t a good way to test laparoscopic instruments before a procedure for insulation failure. We have studies, including one at Mayo Clinic, that one-in-five reusables can have a hole in the insulation. There also was a study at the University of Colorado where they found that one-in-33 disposables had a hole. It’s not that manufacturers aren’t checking their instruments; they are. It’s that manufacturers are not passing the same voltage through them that is typically used during a surgical procedure.
How bad is the problem?
There were four million laparoscopic surgical procedures in the U.S. in 2014, and 75% used monopolar energy. Stray energy kills 400-to-600 patients each year in the U.S. and severely injures another 1,800 to 2,000. Patients who survive fecal peritonitis and post-operative sepsis require multiple surgeries to repair the damage, and many never get their lives back to the way they were. We can save those lives, and we can help surgeons save people from severe injuries.
How can your AEM technology solve the problem?
All laparoscopic instruments have a layer of primary insulation to control the energy that goes down the core of the device. Our technology consists of two parts: an additional protective shield around the insulation of our laparoscopic instruments; and a device to monitor current. These two pieces work together to eliminate stray energy burns. If there’s a flaw in the insulation, our device breaks the circuit and stops the flow of energy to safeguard the patient.
What additional benefits does your new AEM EndoShield Burn Protection System provide?
We realized that we had to make our product simpler, take the capital equipment cost out of the equation and develop a product that would give us recurring revenue per procedure. The new disposable EndoShield device is designed to dramatically simplify the set-up in the operating room and should significantly increase the penetration of our technology. EndoShield devices plug into common electrosurgical generators in the operating room, and they replace our monitors that now plug into a generator. They also eliminate multiple connections and replace them with two or three. All of which should eliminate the complexity of the existing platform.
You launched EndoShield in the fall. How has the launch gone?
We introduced EndoShield around Thanksgiving and had an abbreviated December. In January, we began having meetings and demonstrations in hospitals, and we are now seeing the fruits of our sales effort.
How large is your sales force?
When I joined the company, we had a mix of 12 direct and independent sellers of our products. We now have 55 sellers, of which five are direct staff and 50 are independent sellers.
How else did you reposition Encision last year?
Our rebuilding program began with culture building and new leadership, including VPs of operations, and of regulatory affairs and quality assurance. The next step was rebuilding our core message that stray energy burns are not due to surgical technique but, rather, a fundamental flaw in the energy technology of existing laparoscopic instruments. We retrained and added to our U.S. sales channel. That was followed by a move to heighten awareness and demand at important medical conferences, advertising and health care education programs—mostly to nursing teams and also doctors—about HAC and APL. That’s been very positive for us, because it alerts people to the issues they’re having and gives us an entrée into hospitals. And finally, we launched EndoShield.
Is there anything new in the pipeline?
We have several projects that are active, and we are working on other applications for our technology.
Do you have a growth target in mind and how to achieve it?
Our objective is 20% annual growth. There are a number of things that we have going for Encision, starting with our AEM product development. Besides expansion of our U.S. sales channel, we are having discussions with potential partners in Europe, Asia and the Middle East. Increased customer awareness is the name of the game for us, and we are continuing to educate people about the new CMS reimbursement policies.
Let’s conclude with those tailwinds from CMS.
The average hospital generates an average profit of around 4% to 4.5%, so if you knock out 25% of that because of reimbursements penalties, there’s precious left for hospital reinvestment. So hospitals realize they must get HAC under control to get full reimbursements. Of all the facets of government interaction with the healthcare industry, HAC is a huge driver for better patient quality. And we can help hospitals have better patient quality and outcomes.