Monday, September 26, 2005

Emerging Technologies

In the Fast Lane

By Ethan Forman

Partners HealthCare System Inc. finds itself at the forefront of an emerging technology - not in medicine but in the use of radio frequency identification, RFID.

The technology is used to track equipment at the hospital system, but may also be used to track patients and staff in the future. Its use in health care has remained comparatively undercover considering RFID's more publicized promise to enable retailers to see, in real time, what's sitting in warehouses.

As with any emerging technology, RFID has broken through in some areas, but needs work in others. Partners is piloting its RFID system with a Lawrence company, Radianse Inc., and both businesses are hoping the technology delivers operational efficiency and a better bottom line.

"The real issue is, how do we make sure that equipment is where it needs to be when we need it for our patients and physicians," said Mary Finlay, deputy chief information officer of Partners, a system that includes Massachusetts General and Brigham and Women's hospitals.

"We are piloting that to see what kind of impact RFID can have," Finlay said. Still, RFID does not come cheap. "We really see that it will have some significant value, both in equipment tracking and then there is some interest in how can we leverage it for patient tracking, as well."

RFID is delivered in two ways: passive and active.

Both systems involve embedded radio frequency tags that provide information about a product. Then there are readers that receive the data, software to interpret it, and networks through which the data is moved. Passive tags are not powered and must be read by other devices. Active tags allow for continuous monitoring of people and things, said Reed Malleck, the chief financial officer and chief operating officer of 24-person startup Radianse.

Manufacturing Insights, a subsidiary of Framingham-based research analyst firm IDC, has not released a market forecast for RFID since 2003 because the market stalled amid questions about the technology and accompanying sustainable business models, said Michael J. Witty, program director of demand management strategies.

"I think it's starting to pick up momentum again, as a general trend," Witty said. Early questions about the technology have been answered, though it took longer than first thought. Witty said his best guess is that major adoption would happen in 2006 and 2007. Back in 2003, Manufacturing Insights projected the RFID retail market to be worth $200 million with the potential to grow to $1.8 billion by 2008.

In particular, RFID has been hailed as the next big high tech thing for the supply chain. A lot of that buzz has come from Wal-Mart Stores Inc.'s requirement that its top 100 vendors include RFID tags on pallets and cases. RFID is already cutting time off commutes at Bay State tollbooths as part of the state's Fastlane program. Experts say a lot will depend on standards to enable tags and tag readers to work together. That, and the price of tags must come down.

The lowest cost RFID tags on the market today cost about 15 cents a piece, said Kevin Ashton, vice president of marketing for ThingMagic Inc. of Cambridge. Some sticky label tags cost about 20 cents a pop.

"The challenge that any business faces that wants to put an RFID tag on an item is you make money by doing it rather than not doing it," Ashton said. But in today's high volume supply chain, there is not enough margin left to put a tag on each can of soda to track it. Placing a tag on pallets and cases might be another matter. The price of RFID tags has fallen, down from $1 each six years ago, and could fall to 10 cents next year.

"Around 5 cents, most things appear feasible," Ashton said. RFID may already be feasible to track a $100 shirt, for instance.

MIT's Auto-ID Laboratory, led by researcher Stephen Miles, is in front on market efforts to create network infrastructure so Wal-Mart's systems might, for example talk with Gillette's. The Auto-ID Lab is part of a network of labs under EPCGlobal Inc., an organization aiming to create a single RFID standard, called the Electronic Product Code, or EPC.

The lab's work has not only spawned standards.

It was founded by David L. Brock, Sanjay Sarma and Ashton. Today, Ashton works at ThingMagic Inc. of Cambridge, a company that makes RFID readers. Sarma works as the chief technology officer at OatSystems Inc. of Waltham, a maker of middleware that can manage and control RFID infrastructure.

Not all companies are using RFID in the way retailers are, with passive tags on cases and pallets. Radianse uses powered tags in its indoor positioning systems for hospitals like the ones run by Partners, which is also among the investors in Radianse's recent $11 million Series A round.

Gregg Malkary, founder and managing director of Spyglass Consulting Group of Menlo Park, Calif., recently surveyed 100 health care professionals at large hospitals and found 25 percent of them have invested in RFID technology, with the expectation that 57 percent would do so by next year.

"That is a pretty outstanding growth for an emerging technology," Malkary said. Most hospitals are looking at the active RFID systems, the type that Radianse makes. It's a harder sell for hospitals to use the passive tags to track drugs or supplies because of the cost of the tags, he said.

"This is a market that is evolving very well and really quite quickly," said Ashton of ThingMagic. He puts the market for RFID readers in the "low hundreds of millions."

But Ashton said it will grow steadily over a long period of time, driven by the emerging EPC standards.

ThingMagic is also seeing opportunity in radio waves.

On Sept. 1, ThingMagic completed a Series A round worth $10 million, the first such institutional investment in the company's five year history. The money will go toward product development, not operations. The 40-employee company is on its fourth generation of network-ready readers, the Mercury4.