Las Vegas Business Press :: News : Blood filtration startup opens

Blood filtration startup opens

Investors pour $500,000 into Hemo Therapeutics for Las Vegas

BY TIM O'REILEY

With their investments totaling $150,000, five members of the Vegas Valley Angels hope they can help jump-start a congestive heart failure treatment that has gained only sporadic acceptance in the past six years.

The money put up by the Angels, venture capitalists who collectively hear proposals but act individually, and $350,000 more from other investors, is budgeted to carry Hemo Therapeutics' first outpatient clinic to self-sustaining cash flow. The company, based in Woodland Hills, Calif., recently opened in Las Vegas. Early this year, Southwest Medical Associates, a division of United Healthcare of Nevada, became the first insurance-related group to cover the use of Hemo Therapeutics' therapy outside of hospitals. No patients have yet used it.

"Dr. (Joseph) Kaufman is the reason we are here," Hemo Therapeutics President and Chief Executive Officer Hal Lieberman said, referring to the Southwest Medical chief of medicine who made the decision.

MIKE STOTTS | BUSINESS PRESS
A test of 200 patients showed that ultrafiltration carried out the by Aquadex FlexFlo machine, seen here, resulted in greater fluid and weight loss for patients than diuretics.

Hal Lieberman
President and chief executive officer of Hemo Therapeutics says 20 patients a month will be needed to break even

The company's treatment, alternately labeled ultrafiltration or aquapheresis, mechanically filters dangerous water and salt from the bloodstream; the material can accumulate in people suffering from cardiac ailments. For several decades, cardiologists have prescribed diuretics to control the problem, either in tablets or intravenously for people in serious condition. Sometimes the older treatments didn't work well.

Personal observations from William Botts, an investor angel, about the effects of congestive heart failure figured in the business plan's evaluation.

"I have some experience with friends who were on typical diuretics that weren't doing the job," he said.

By contrast, the patients he observed who went through aquapheresis "had much better outcomes."

This was reinforced by the investigation of the process done by Dr. Allen Anes, the only Angel with a medical background. He helped persuade several of the others that aquapheresis works. Further, he sees psychological benefits for patients who are "scared to death" that they might essentially drown as fluid fills their lungs when diuretics no longer work.

The main thrust of the clinic is to try to expand the use of ultrafiltration away from the hospital, where it might be used as a last-resort treatment, to an outpatient setting for people who are still able to take care of themselves but are beginning to feel congestive heart failure's effects. Not only would this give Hemo Therapeutics greater economies of scale but also improve profit margins through machine rentals to hospitals.

"The ultimate success is going to be keeping people out of the hospital as well as preventing repeat visits," Lieberman said.

He projects the savings could more than cover the additional treatment cost.

However, the effectiveness of the machines, made by CHF Solutions of Brooklyn Park, Minn., is still not widely embraced due to the lack of large-scale clinical studies and the cost. A typical eight-hour filtration treatment costs about $2,500 for outpatients, although the price can vary widely depending on a person's condition. A dose of diuretic tablets costs less than 1 percent of that.

Even the company's signature clinical tests on 200 patients came to an equivocal conclusion: The ultrafiltration carried out by the Aquadex FlexFlo machine resulted in greater fluid and weight loss for patients than diurectics. But, the study concluded, "The cost-effectiveness of ultrafiltration is not established; however, this treatment may have favorable economic implications" for patients and insurers due to fewer and shorter hospital visits.

In a report completed in May, Regence Blue Cross Blue Shield of Oregon and Utah noted there was "much activity" regarding ultrafiltration; published results involved only a few patients.

"Given the prevalence of heart failure, new treatments must be based on large trials that utilize rigorous methodology and analyses," the report concluded, after critiquing the company's study on several technical points.

Without insurance company backing, it is hard to get paid for the procedure. This was the main reason the company pulled out of New York about one year ago.

Further, large-scale studies are often critical to sway doctors to switch regimens they may have used for years or decades.

"Physicians are a very conservative group of people," Anes said. "It's a slow process to educate them. If (the company's study) has been on 20,000 patients, there would be so much demand we couldn't build enough machines."

At least part of the conservatism stems from malpractice concerns, for which big studies can provide a legal safety net.

Without the big studies, which can cost millions of dollars, adoption of ultrafiltration has been spotty. At the Web site allnurses.com, for example, one nurse reported frequent use of the machine in a Georgia hospital while another in Miami said it had not been used at all more than a month after installation. The Miami nurse had started to forget some of her ultrafiltration training.

As a result, a large part of the money raised by Hemo Therapeutics will go toward persuading doctors, individually or in groups, to incorporate ultrafiltration into their practices. The contract with Southwest Medical gives doctors in the practice the option of sending patients to Hemo Therapeutics with their consent.

A treatment involves inserting a line into a patient's vein, then slowly running his or her blood through the machine's filters to extract excess water and salt. People with weak hearts or clogged arteries have difficulty removing salt from their systems, so the body compensates by retaining excess water that can swell joint and organs or even flood the lungs.

Hemo Therapeutics, a privately held 2-year-old spinoff of a different company, first sought $1 million for its own facility in Las Vegas. But Anes said the Angels persuaded the company to rent space in an existing clinic, then connected the company with Kidney Specialists of Southern Nevada.

"We didn't want to spend a lot of money on bricks and mortar," the doctor said.

Under the arrangement, Hemo Therapeutics rents bed space at a Kidney Specialists location about one mile west of University Medical Center on West Charleston Boulevard, and pays its staff who handle ultrafiltration patients.

By lowering the up-front costs, Lieberman expects the location to hit the break-even point at about 20 patients per month, or one per weekday.

The profits generated by the clinic, according to the business plan, would eventually help to pay for more clinics in areas with the high senior populations most likely to experience congestive heart failure, including San Diego, Phoenix, Los Angeles and Florida. Because of the expansion possibility, the Angels chose to invest in the company itself rather than the clinic as a separate entity.

Contact reporter Tim O'Reiley at toreiley@lvbusinesspress.com or 702-387-5290.

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