If you have ever felt that your doctors and nurses at a hospital were not communicating with each other effectively, you are not alone.
It's an endemic problem. The Journal of Healthcare Management estimates that inefficient communication costs U.S. hospitals more than $12 billion annually.
Many companies have tried over the years to develop technology to cure this mess, but the best so far appears to have come from Vocera Communications (VCRA). It can connect patients, nurses, administrative staff, and doctors over one secure software platform accessible from smartphones, computer systems, and patient nurse-call systems. The company has more than 750 hospitals and healthcare facilities utilizing its products and it has secured an exclusive endorsement from the American Hospital Association.
Many hospitals consist of a huge interconnected complex of buildings that can be spread across a wide campus footprint, with staff often roaming to various locations depending on need. As you might expect, this can create a challenging environment considering the critical and sensitive nature of the information that must be shared.
Most healthcare facilities still utilize a combination of products that are outdated and don't provide a closed-loop platform that securely protects patient information. Those include landlines, numeric and overhead paging systems, and cell phones. That's where Vocera and its 15 patent portfolio of communication products come in.
Headquartered in San Jose, Calif., Vocera has been in operation since 2000, and its shares went public in late March. Chief Technology Officer Dr. Robert Shostak founded the company and he continues to lead the strategy and architecture behind the communication system. He founded two other technology firms prior to Vocera, and is known in the tech community as the father of the distributing technology paradigm known as the Byzantine Agreement.
Vocera's primary product is a lightweight, voice-controlled communication device called a ''badge'' that's similar in style to a walkie-talkie, though the company would never use that term. Users can speak the name of a coworker or department into the badge and get instant hands-free communication with that person or group over a secure frequency.
The software platform includes an optimized speech recognition engine that recognizes more than 100 voice commands, allowing instant connectivity to any other user. Additionally, the company provides downloadable software that enables full functionality of its badge device across multiple phone platforms, including Apple (AAPL), Research In Motion (RIMM), Cisco (CSCO) and Google (GOOG).
While the company is focused on improving voice communications, it also has solutions for secure messaging, patient transfers and specialized healthcare advisory services that were recently added through acquisition.
The purchase of Wallace Wireless has morphed into the Vocera Secure Messaging product, which provides an array of customizable delivery of pages, text, messages, alarms and alerts compliant with the Health Insurance Portability and Accountability Act. Meanwhile, Vocera Care Transition Solutions software helps manage the patient transfer and discharge, shift change, and physician sign-out processes resulting in far fewer communication breakdowns and medical errors.
These new operating segments currently represent less than 10% of total revenues, but management feels as though they will be strong growth drivers moving forward.
The excitement surrounding Vocera lies in the vast target market that lies in front of it. Research firm Robert W. Baird conservatively estimates a U.S. opportunity of more than $5 billion alone, not including 13 other English-speaking countries that the company is targeting.
To put it in another perspective, Vocera has penetrated about 650 of the 7,000 hospitals in the U.S, representing less than 10% of the total available market. Of those existing clients, most start with a specific division or department implanting the product suite, leaving tremendous expansion opportunities for the rest of the hospital.
Finally, about 3% of the company's revenues are derived from non-healthcare clients like the Plaza Hotel and the Beverly Wilshire Hotel. Healthcare is clearly the primary focus, but any industry where employees are not tied down to a desk but require frequent communication is a potential client base.
Vocera grew revenue by 40% in 2011, recently upgraded its primary communication badge, and is transitioning its manufacturing from the U.S. to Mexico that will result in lower production costs.
The balance sheet is in excellent shape, with $80 million in cash and no debt after receiving IPO proceeds. Shares are up 15% after about a month of trading, so look for investor attention to continue to heat up. It's another emerging growth small-cap to consider buying on major broad-market pullbacks.