High-Tech Test Struggles With Low Cost of Alternative
Ever since International Remote Imaging Systems went public in 1980, shareholders have invested more than $22 million, convinced that the company’s computerized urinalysis machine would pay off in big profits.
They are still waiting.
On Thursday, shareholders who gather at the company’s Chatsworth office for their annual meeting will listen to President Fred Deindoerfer explain why, for the eighth time in eight years, International Remote will lose more than $1 million a year.
The company’s sole product is a $110,000 automated urinalysis machine that works faster than traditional tests and generally is safer for technologists to use. Some studies also indicate the machine improves the detection of diseases.
But however impressive the technology, International Remote has only sold 108 units of the machine it calls Yellow IRIS since it became available in 1983. Practically every hospital and lab continues to conduct urinalyses the way they have for decades--using a 30-cent test strip that changes colors to indicate disease and a 20-cent microscope slide and accessories for further study.
Expense Cited
“The problem is what IRIS does with a $110,000 piece of equipment, we do with pennies,” said Reg Jones, vice president of Hycor Biomedical in Fountain Valley, Calif. Hycor makes a unique kind of glass slide that prevents a technologist from coming in contact with a urine specimen.
On Monday, International Remote’s stock was down to 69 cents, near its all-time low. “Quite frankly, I’ve given up paying attention to them,” said Jim McCant, editor of the Medical Technology Stock Letter, which is based in Berkeley. “Their promise never materialized.”
International Remote’s sales for the first six months of this year fell 22% to $2.3 million, while its losses soared to $820,000, compared to a loss of $498,000 for the same period a year earlier.
Despite the company’s sobering results, Deindoerfer believes that sooner or later hospitals will realize that his company’s machine is cost-effective and worth the investment.
Founded in 1979
International Remote was founded in 1979 by Deindoerfer and two other California scientists who put up $125,000 to start the company. They wanted to develop a computerized urinalysis machine and after several years of collaboration they came up with their product. The Yellow IRIS weighs 800 pounds and is about the size of a dining room table.
A medical technologist using the Yellow IRIS takes a urine specimen and pours it into an opening at the top of the machine. The specimen drains into a salt solution that surrounds the urine like an envelope. The two solutions flow in front of a microscopic camera that takes 60 pictures of the urine per second.
Pictures of cells found in the urine appear on a television monitor. The technologist studies the images for cells that may indicate the presence of diabetes or some other disease; to isolate a group of cells for a closer look, the technologist simply touches the images on the screen. When the test is finished, the urine specimen is released directly into a sink drain.
Technologists have said they like the Yellow IRIS because they don’t suffer eyestrain from peering into a microscope for hours, and the machine is about four times faster than the traditional method of urinalysis. Furthermore, the technologists don’t have to handle the specimen, which can carry disease. “We don’t have to get our hands into the specimen at all now,” said Phil Tipper, a medical laboratory technologist at the UC Irvine Medical Center, which bought a Yellow IRIS. “And it’s very fast. I can’t say anything negative about it.”
Some studies by academic researchers also indicate the Yellow IRIS enhances an operator’s ability to detect disease. “It’s neat technology,” McCant said.
Deindoerfer, 58, argues that the Yellow IRIS will pay for itself in only 2 1/2 years because its speed saves labor expenses--with the Yellow IRIS, more urinalyses can be performed with fewer technologists.
He bases his pay-back period on a hospital or lab that conducts 100 urinalyses a day. But many hospitals and labs don’t do nearly that many. For instance, Tarzana Regional Medical Center only performs 35 urinalyses a day. Humana Hospital West Hills does 50.
About 200 million urinalyses are conducted annually, according to the College of American Pathology.
But even the largest hospitals are reluctant to buy expensive equipment these days because of changes that have taken place in the way Medicare reimburses them.
Medicare Guidelines
Beginning in 1984, Medicare began paying fixed fees for different ailments. If a hospital’s expenses for a patient with, say, a heart attack, are less than Medicare’s stipulated fee, the hospital pockets the difference. But if the hospital’s expenses are greater than the amount of Medicare’s reimbursement, it almost always loses money.
Naturally, the Medicare program set in motion a wave of cost-cutting at hospitals and labs that were no longer willing to buy expensive equipment like the Yellow IRIS unless it was absolutely critical.
“If it weren’t for the change in Medicare reimbursement and the financial restraints imposed on many hospitals because of it, IRIS would be a very successful company today,” Deindoerfer said. “Hospitals just aren’t buying because they just don’t have the capital money available.”
To try and lessen the company’s dependency on the Yellow IRIS, International Remote is working on two new diagnostic machines. The first is called the Purple IRIS, which is in place at 10 research institutions, and helps a doctor determine how far a disease such as cancer has progressed. And the National Institutes of Health has financed the first stage of research on another machine that differentiates white blood cells. Deindoerfer said the company is considering calling it the White or Crimson IRIS.
Next year, Deindoerfer is hoping to introduce a smaller, cheaper version of the Yellow IRIS that would appeal to small and medium-sized hospitals and labs.
But in the meantime, International Remote is rapidly using up proceeds from its three public and two private offerings. The company has $1.4 million in cash and Deindoerfer estimates the company--which has no long term debt--can last two more years without another offering or a pickup in sales and profit.
And what are the chances International Remote will succeed? “That’s a figure I’m not willing to quote,” Deindoerfer said.
