Augustine Medical Case

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AUGUSTINE MEDICAL, INC.
The Bair Hugger Patient Warming System

Winston Rivero
MK 4900
Prof. H. Barksdale
October 16th, 2012
Industry Analysis:
• Many competitive technologies are available for the prevention and treatment of postoperative hypothermia. The fall into the two categories: o Surface Warming
▪ Warmed hospital blankets
▪ Water-circulating blankets
▪ Air-circulating blankets and mattresses
▪ Thermal drapes
▪ Infrared heating lamps
▪ Partial warm-water immersion
▪ Increased room temperature
o Internal Warming
▪ Heated and humidified air (used with intubated patients) ▪ Warmed intravenous (I.V) fluids
▪ Drug therapy.
• Approximately 21 million surgical operations performed in the United States or 84,000 operations per average day. • Approximately 5,500 Hospitals have operating rooms and postoperative recovery rooms in the U.S o 31,365 postoperative hospital beds

o 28,514 operating rooms in hospitals.

Company Analysis:
• Augustine Medical, Inc. is a firm that develops and markets products for hospital operating rooms and postoperative recovery rooms. • Founded by Dr. Scott Augustine, an anesthesiologist. His personal experiences in the field of medicine have helped Dr. Augustine develop a product that offered all the features that nurses and patients would appreciate the most. • Initial capitalization of $500,000 that will be used to cover fixed costs such as: salaries, leased space, and promotional marketing during its first year of operation. • The Bair Hugger Patient Warming System:

o The Bair Hugger Patient Warming system has several advantages over other treatments: ▪ Warm air makes patients feel warm and they stop shivering almost immediately. ▪ The system does not cause burns

▪ The system can be used safely around electrical equipment ▪ Disposable blankets eliminate the risk of cross-contamination ▪ The system does not require the patient to be lifted or rolled. o Consists of a heater/blower unit and separate inflatable covers or blankets (12 in total). The warming time per patient is about two hours. o Plastic covers are patented. Heater/blower unit does not have a patent. o Subcontractors determined the costs of the components to be: ▪ $380 heater/blower unit

▪ $0.85 per plastic disposable blanket.
o The system is sold through medical product distributor organizations around the country. The margins paid to the distributors are: ▪ 30% of the delivered selling price on the heat/blower unit. ▪ 40% of the delivered selling price on the blankets • Competitive Products: (Exhibit 1)

| |Advantage |Disadvantage | |Warmed Hospital blankets |Simple, safe, and inexpensive |Cool quickly | | | |Only insulation | |Water-Circulating Blankets |Slightly to moderately effective |Heavy, expensive | |Average Prices: | |Can cause burns | |Auto: $5,072.50 (4,850+5,295) | |Leaks around electrical equipment | |Manual: $1800 after 40% discount | | | |Disposable blankets: $23 | | |...
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