Good morning, everyone. Thank you for coming. My name is Kevin King, CEO of iRhythm. I think I know almost everyone in the room. I am joined today by a couple of our colleagues. I will go through them here as we go through the agenda. I am going to spend a few minutes talking about the iRhythm strategy and particularly about how our single platform is driving growth within our company. I am going to follow up with Karim Karti, who is our Chief Operating Officer, and she is going to talk about commercial momentum, the impact that our platform is having on our customers. We will talk about specific customer metrics and performance metrics, talk about our sales force, et cetera. Mark Day is our EVP of R&D. We will talk to you about Zio AT, the platform that he and his team have built, and the value proposition and the status relative to our other products.
We are going to try to leave 20 minutes, plus or minus, for Q&A. The presentation is webcast. The presentation is on our website. The audio will be there appropriately as well. I think many of you know that we participate in a large and growing market. We describe the market as a funnel, and the middle portion of the funnel is the legacy ambulatory cardiac monitoring segment. It consists of about 4.5 million tests per year. That is referred to here as symptomatic initial diagnosis. We have been rapidly displacing legacy Holter monitors and event monitors with our Zio XT platform over the past several years. Here at this trade show, we are launching the Zio AT in a more full-marketed fashion, and that addresses a population of patients that are at high risk for high-acuity events.
In addition to that, the company has been investing in clinical studies to both expand the funnel above and below the core symptomatic market. Below the symptomatic market studies like KP-RHYTHM, where we have innovated and developed the capability for detecting AF burden and its impact on patient care or care management. As an important indicator here, we estimate that there are about 1 million patients that are in the paroxysmal AF management category that can now be treated more accurately or more and more safely through the Zio XT platform. Above the symptomatic initial diagnosis market segment is the high-risk asymptomatic population. Many of you are familiar with our mSToPS study.
Here we are targeting patients that have high risk factors of age, diabetes, hypertension, et cetera, that are asymptomatic and with the hopes of detecting silent atrial fibrillation, putting these patients on oral anticoagulation therapy with the idea that we would head off potential life-threatening strokes and things of that nature. We published the mSToPS study year one at ACC, and we are really happy that the results of that study thus far are showing that we are helping the healthcare system save money. The number of hospitalizations, number of emergency room visits, et cetera, have been decreased in the population of patients that have been diagnosed through Zio XT compared to the control arm with general medical care arm. That study will report out its three-year health economics impact in 2021, and we are hopeful that that will continue to show positive results.
The big backdrop for our strategy, I'm going to talk about here, this whole notion of being both proven and complete with a single platform really stems from the problem that healthcare professionals are faced with today. This is this notion of overload. If you take out your phone or your computer and you google physician burnout, you'll be inundated with a number of articles around how job dissatisfaction, how information overload, how time pressures, administrative burden, or too many patients are affecting the job satisfaction of healthcare professionals, as well as the loss of control for physicians. Their ability to adopt new technology is inhibited by the workload that they have. So we firmly believe that any new technology that comes adopted in healthcare has to have a lower input value.
The effort to get that value out has to be lower than the value that you derive from it. That's what we're trying to talk about here when we talk about being clinically proven to be better than gold standard and operationally complete with the seamless coordination of information in and out of their systems. We'll talk about how our platform does that. We'll talk to you about some of the measurements that we've made. It's also important to note the majority of our customers are also at risk for clinical, financial, and operational performance metrics. So when we're selling an ambulatory cardiac monitoring service, we're not just selling the clinical value, we're selling the economic and the operational value to customers as well. The platform that we have developed consists of five layers.
The first layer seen here on the bottom is referred to as our database layer. This is a proprietary cloud-based repository of patient information. There are over 2 million records here. Inside of each patient record is information about heart rate, heart rhythm, activity information, symptom information, indications of use, financial information, personal health information, et cetera. This information is incredibly valuable to us for creating new sources of value. This is the database that we use to derive our AF burden measurements with Kaiser and the KP-RHYTHM study. This is the database on which all of our artificial intelligence algorithms and so forth in our partnership with Stanford came from. This is a very, very meaningful source of differentiated value for the company, and it continues to grow as the company grows each year, 50%+ .
The second layer of our stack here is around the proprietary data analytics and reporting. This is driven by our ability to curate massive amounts of complex data for physicians into actionable reports. Again, as physicians are overloaded and pressed for time, their ability to view 40,000 pages of information per patient is not possible. It can't be done by mere mortals. They rely upon us to curate that data for them, put that into an actionable report, which is about 10 pages. That is all done through proprietary analytics and a reporting solution. The third layer of our innovation stack here is around an information system and workflow tools that our users interface to. It's called Zio Reports. This is a bi-directional exchange of information between iRhythm and our providers for ordering, for results reporting, for financial information, benefits, verification, interfacing to electronic medical records, et cetera.
The fourth layer is our clinical evidence and in-network contracts. As you know, the economic value proposition has to be supported by contracting with payers. We're nearly universally covered for Zio XT and well on our way with Zio AT on there. Lastly, at the top of the stack is our patented biosensor technology. Mark Day will talk to you about this. These are single-use wearable devices, both Zio XT and AT, that are worn by patients in a highly compliant, uninterrupted manner that allows us to gather this information that can then be fed back into the database. It's kind of a closed-loop system, if you will, I see at the pharmacy. The strategy for the company for the last seven-plus years has been on two axes. One is around being high yield or high diagnostic yield and low cost.
In order to appeal to health plans, we have to meet this criteria. Here we've mapped the cost of Medicare monitoring against diagnostic yield, and Zio is uniquely positioned in the high yield, low cost category down to the left. Compared to Holter monitoring, event monitoring, we're about three times as high in yield, and we are more expensive. Also we know that Holter monitoring and event monitoring had a lot of unnecessary repeat tests. We did a study a number of years ago that was published in the Journal of Health Economics, and that showed on average patients used 2.4 Holter monitors before they got a diagnosis. On average, the time to diagnosis was 18 months. We're rapidly improving upon that.
Relative to mobile cardiac telemetry and implantable loop recorders, while on roughly parity, a few points less than Zio in diagnostic yield, they are more expensive. Over time, we have taken away from the MCT market with Zio XT replacing some of that. Now that we have the capability for Zio AT as we can address that market segment as well. It's clear that longer uninterrupted monitoring detects more significant arrhythmias. This is proven in our 30 peer-reviewed studies. Lower cost and superior outcomes versus the gold standard, again, in our studies. We've improved the change in medical management in head-to-head comparisons, and we've been superior for AF detection both in historic indications as well as TIA. We showed this study in the past.
I think it's really important because there are a lot of patch-based technologies and other technologies, but none that have the full characterization capabilities of Zio. Here we're looking at two sides of the slide. On the left-hand side is the incidence of atrial fibrillation and other critical arrhythmias associated at the same time. When we detect atrial fibrillation, roughly 50% of the time we are also finding ventricular tachycardia, heart pauses, and AV block. These have very, very significant implications for patient management, and they are derived by our ability to monitor these patients for a long period of time continuously. Likewise, ventricular tachycardia about a fourth of the time, 40% of the time. On the right-hand side is the value proposition associated with monitoring for a long period of time.
This is the incidence of first critical arrhythmias detected beyond seven days, and you can see these life-threatening events, ventricular tachycardia, heart pauses, AV block, and their frequency at which they occur beyond seven days of monitoring. If you use a Holter monitor and you use something that's shorter, just on the diagnostic yield side, these types of morphologies, if you will be missed. I think many of you know that we have a small operation in the U.K., and this paper was published in February in the Journal of Electrophysiology, I believe, online. It was a randomized prospective study by which patients that had implantable pacemakers wore one of three different cardiac monitors. One was an event monitor shown in the upper left. One was a Nuubo Vest monitor, which is a company out of Spain. One was Zio XT.
On the bottom right was the Care Monitor by Cardi. Here what you see is the R-squared value for its correlation accuracy, if you will, between the ability to detect AF burden by the pacemaker compared to the various monitoring types. In all cases, iRhythm was nearly perfectly correlated with the pacemaker. 0.999 R-squared value versus a variety of others where the detection rates were equally inaccurate for over-calling as well as under-calling atrial fibrillation. The easiest way to see that is by looking to the upper left. You see the R-squared line is relatively flat, but it's really the gray area where the spread around the detection rates of over-calling and under-calling occurred, and that occurred in all three of the situations. The % failure to detect clinically relevant was reviewed, as is shown on this right-hand side.
Zio XT detected all clinically relevant AF events. CAM was about 10% failure rate. Nuubo Vest was 24% failure rate, and the Event Monitor was about 40% failure rate. This is really highlighting why we talk about proven and the clinical evidence associated with our diagnostic accuracy of Zio. Last slide here before I turn it over to Karim to talk to you about our commercial team and just the outstanding financial performance that we've had in the company. This is all predicated on being proven and complete. Over the last, I guess, six years here, we've got a roughly 60% CAGR. As many of you know, we reported our Q1 financial results just a few days ago. We had 54% growth year-over-year, about $47.2 million in revenue. Our growth margins equally are expanding. We went public in 2016.
Growth margins that year were about 67%, and we're almost 10 points higher now just a few years later. I'm really proud of the team and what they do. With that, I'm going to turn it over to Karim who's going to talk to you about our commercial momentum, and also let him introduce himself to you. Karim.
Good morning. As you heard from Kevin, the momentum in the past 2 years has been tremendous on the growth side. As we now have a higher base, the question is how do we keep this momentum? How do we sustain that growth going to the U.S. market? Really here, what we're going to talk about how the foundation of this is based on the strength of our platform and the strength of our commercial operations and service operations. When you look back at the penetration of our market today, it's about between 12%-15%, depending on where you estimate the market to be in the U.S. Largely, we have penetrated the smaller side of the market, the small to medium physician practices.
When you look forward and how do we maintain this momentum, we have now to look at the larger accounts in the health system, which you all know constitute the majority of the market and will continue actually to expand as consolidation continues. Now, as I mentioned earlier, we are under-penetrated in that segment, slightly below 10%. We have actually outsized opportunity in that segment of the market. We're going to talk about how we are continuing to build our platforms so that it fits extremely well in this segment and how do we expand our commercial and service capabilities so that we are driving the adoption in this critical segment for us for the next foreseeable future.
Now, if you turn our attention here to this specific segment, we have been, as I mentioned, very focused on the smaller to medium physician practices, which is normal as you try to drive early physician adoption. Now, when we're looking at this specific segment, the complexity of these accounts is tremendous. You have a huge array of decision-makers from service lines, directors, to physician champions, head of operations, looking at their quality and performance leaders, and you have to navigate that. You also have different settings of care. Now, we're not talking only about a cardiology practice. We're talking about the outpatient clinics and hospitals. We're talking about the opportunities in primary care, in emergency care, and in neurology. We have been very focused on the clinical adoption of our platform, and obviously it's one of the critical needs.
When you look at these healthcare systems and larger accounts, first and foremost, they want to be able to drive significant patient satisfaction because it is one of the key things on which they compete. They want to bring in more patients to their systems. They want more access to timely care. One of the most important critical need that we see is they are looking obviously for operational efficiency. Most importantly, they are looking at growing their cardiovascular programs. It's one of the most important programs in their system, and it is one that they are trying to build and pull through more patients into it. Most importantly, you're very aware that standardization is a critical need in this health system. They're clearly looking also for a platform that they can standardize on.
As we look at these needs, we have been reevaluating how we are going to market and how do we make sure that we continue to build a highly differentiated platform for this segment. Traditionally, you've seen the track record here has been outstanding. We've been able to penetrate the small practices by driving a very strong differentiation on the clinical needs. We just talked about the clinical studies that allow us to do that. We're now really focusing on making sure that we're significantly strengthening our approach to these large accounts. We're building more capabilities on top of the existing stack that Kevin just mentioned. We're building strong service capabilities around customer service, billing, EHR capabilities. Now we have, with these combined capabilities, we have a platform that we can go and sell at the enterprise level. This is a much bigger team sport.
This is not just sales people. This is the entire company that is focused on doing this type of platform sale. One of the most important things is that here the game is really to drive success for our customers. This is not just clinical adoption. This is actually driving real outcomes for our customer so that it drives stickiness and loyalty, and we can continue to build penetration and adoption of our platform. I think the best way probably to illustrate this is to give you an example of how we're doing this at an account here in the U.S. This is an actual example. It's anonymized, but it's a great example of how we're able to partner with a customer and help them drive significant improvements on their key outcomes, and obviously drive adoption.
In this specific case, we have been able to drive significant improvement in the time that they spend per patient for their staff. It's a 3x reduction. Most importantly, we've driven significant reduction in the patient wait time and turnaround between the time of order to when the report is ready for these patients. Finally, the cost per device, and this is really around labor cost, is divided by almost 4 times. This obviously leads to a significant improvement in profitability. In this specific case, we actually helped the customer go from a loss position to a significant profit position. When you look at this specific case, there's 2 big insights that comes from this example. One is, customers in this case had very significant pain points with their existing workflow technology they were using.
Some of it they were aware of it, some of it they were not. Our approach has helped them uncover the real issues with their health systems, and in turn has allowed us to have a stronger partnership and a stronger dialogue. In this case, as you know, the standard of care in the U.S. today is Holter. We're talking about an improvement moving from Holter to our platform. Just to give you some insights on understanding how severe the issues are with the Holters. Some of the wait times that we have seen and some of the backlogs are, we're talking about 2 months that patients are waiting for getting into the hospital and being able to be monitored. There's huge variation, but the improvement is not only in the ability to get them in a shorter time, it's also the consistency.
We significantly reduce the variation and we produce a reliable service that allows them to consistently work with their patients and get them access to timely care. Now, when the customer wins, we win. Obviously this is the type of penetration we have been able to drive in this specific account. This was an account actually that had originally adopted our platform, but just with few physicians. As we started to uncover their issues and their pain points, and we show them how to potentially significantly improve their operations by standardizing around platform, it significantly increased the volume level in a fairly rapid time. As you can see also, this increase is consistent over time, which actually is another proof of the consistency and the reliability of our service.
Now, I want to reiterate one of the key tenets here of our ability to drive this type of penetration and this type of adoption in accounts is the power of our platform. First of all, it's extremely easy to use. It's extremely powerful for all of our users to connect to our platforms, whether it's technologists, service line directors, and physicians. Extremely easy to use. The second is it has strong appeal to every user. Whether we're talking to the technologists or the physicians or the administrators, it has a very strong appeal, whether it's clinical, operational, or financial. Finally, it creates significant value for them as a whole. This platform connects all of them and is enabling them to create not only value financially, but significantly expand their cardiovascular program by pulling more patients and being able to treat more patients.
This, now monitoring was viewed as a roadblock, and now it is viewed as a gateway to help them grow their cardiovascular programs. Now, this is an example of an account in which we had initial penetration. Let me tell you a little bit more about new accounts. We've been sharing with you consistently on how fast we're able to ramp new accounts over the past few years. As recently as in January, we shared with you that that threshold was about three months to get to a volume of 15 a month. Now, as we have ramped up our capabilities on the platform and our commercial and service capability, we are able now to reach that volume in less than a month from the time we activate the service with these accounts.
Now, this is obviously significant investment in our platform capabilities that not only is based on the technology stack that we've just seen, but our service stack, which is extremely important to be able to drive that consistent delivery and reliable service, and most importantly, a very strong onboarding experience for our customers. This is obviously a key tenet of the company strategy to expand our commercial footprint and our service footprint. We are on track with our goal that we shared with you as recently as a couple of days ago.
Importantly here, as we are adopting this new model and driving this platform approach with our customers, we are more and more focusing on hiring and capabilities that will allows us to continue to drive this adoption in this very large segment in the U.S., which has tremendous potential and in which I would say early success and good momentum proves that we're on the right track. We have already invested in training programs that actually allows our commercial teams to tap into this approach. We have already implemented that training in our first quarter with a lot of, I would say, success.
The buy-in of our commercial team is very strong, we're able actually not only to drive this with new hires, obviously, that bring this type of skill set, but as you heard, the productivity of our tenure rep is also improving because they are adopting this approach. We are building a very strong confidence in our capabilities now to continue to drive penetration and most importantly, make the Zio platform the new standard of care for monitoring. We talked about the power of the platform, and Mark Day is going to help you now understand how we're completing that platform and make it even more powerful for our customers.
Good morning, and thank you, Kevin, for that introduction. It's my pleasure this morning to give you a bit more of an introduction to what we're doing in a new space for us in terms of how we approach the MCT opportunity. I want to share a little bit about what our platform looks like now and how we've built the Zio AT device to complete the offering in order to enable accounts to essentially get the whole platform for all for their needs. The first thing that will strike you is that the XT and AT form factors are identical, and the existence of the Zio AT patch, exactly the same form factor, exactly the same application process, very familiar reporting platforms, workflow tools to the XT device.
In a sense, this is very important to us because it addresses what Kevin spoke about earlier as a predominant need that we see in the marketplace. We need services and capabilities that are easy to use and lessen training burden on accounts. This is exactly our strategy of putting a device out there that uses the same workflow engine, the same reporting tools, the same application processes, the same interpretation methods between XT and AT, and essentially reducing the burden on clinicians to learn and adopt this new capability. What we've done, in essence, is put a telemetry and algorithmic capability in a very small form factor. What we've done in terms of adding devices is to add a gateway component, which is the cellular connectivity for patients to provide and enable timely monitoring during the wear period.
A convenient form factor. We'll speak a lot about why patient compliance and a lot of our design thinking is really critical to the success of this platform. Let's start off with some fundamentals about how it works and what actually the service is. Really the foundation of a timely monitoring service and a service that gives information during the wear time are the standard reports, which every patient will come through. Six hours after application, there's a baseline report. Then every day there's a report to ensure and provide information on how the patient's progressing. The main clinical benefit, though, comes in two forms. First, symptomatic triggers that are obviously communicated when patients press the trigger button. This is very important from a physician understanding perspective. We're looking at symptom-rhythm correlation here.
Typically, most patients come and are prescribed the device based on the fact of symptoms that they're feeling. Understanding what rhythm they're in at that time is important, and it's important for these high acuity patients to do that in a timely manner. The main value, though, here is that we understand that so many arrhythmias and so many conditions are asymptomatic. Enabling an automatic detection platform and a timely reporting method of these alerts, these asymptomatic alerts, is really the key clinical benefit of this. Here our approach is a little bit different. What we're focused on, again, is the load of information that not just physicians, but also the medical assistants, the technicians within clinics have to manage. The way we've done this is to implement a service that only provides actionable information during the wear time.
These are alerts that people receive, and they should be taking some form of action. They could choose to monitor, but it reaches a threshold where physicians and clinicians should be looking at this information to decide what to do with the patient. The reason that we can do that and only provide actionable information during the wear time about asymptomatic events is that we have a very proven report at the back end. That's exactly what we spent 10 years developing at Zio XT. In this report, we analyze all the information that was collected during the wear time on a beat-to-beat basis, typically about 1.5 million heartbeats over a 14-day period. That goes into all of our AI algorithms, our clinical team. We review and provide that report, which has got all of the actionable information in it that we already reported on.
As well as all the important information that you need to see in one space, in one place, in one condensed form to really create the right management plan for our patients. In essence, we created a solution that balances the need for timely awareness of information with a complete view after the wear period of what's going on in terms of the important pieces in the full context. I spoke a little bit earlier about how we leverage the form factor of XT and put all the AT capabilities into exactly the same type of design. This is important to us for a lot of reasons, which I'll talk about, but indeed, we leverage the XT experience in other ways.
Specifically, we took the 2 million records that were in the database, over 500 million hours of recorded ECG, and used that data to create AI algorithms that are backing essentially the AT service and its capabilities. We developed all this actually before even we put it on the first patient. With such a large database, we could take XT recordings and simulate what it would look like on the AT side in terms of the AT hardware and ensure that we were capable of detecting all the categories of arrhythmia that are important to physicians, all the criteria that were actionable that I spoke about. Indeed, that was all done before we even put the first patient on service. Since that time, we've been building up the database, as Kevin spoke about.
This virtuous cycle of more patients coming in, algorithms getting better, I think a key example of this is to talk about a case of complete heart block or the condition of complete heart block, which is a very tricky and subtle and infrequent and low prevalence arrhythmia, but clinically very significant. The need here is to develop algorithms and services that can be very compelling and provide a lot of confidence to physicians that we can detect this despite how difficult it is. By having significant amounts of data, even at a 0.7% prevalence in the population, we have 200 million records. There's a lot of data to work with. In essence, this is how even our XT service has really powered what we do on the AT side.
When we look at what's out in the market right now in terms of MCT devices, we see a lot of room and opportunity for improvement. Specifically, this has a lot to do with patient compliance and the burden that a lot of devices are putting on patients right now. This includes for a median age of 65 or older patients. This includes asking them to recharge batteries regularly, to exchange batteries, to deal with interfaces that are complicated. That's a high order of ask for a lot of patients. Our approach with Zio AT was just to create something that leverages the same principles of our Zio XT platform, simple, straightforward, and highly patient compliant. This point of patient compliance, why are we so focused on this? The answer also comes from our data.
If we look at our database and consider how many patients have one episode, we see about 10% of our prescriptions in terms of records that have one arrhythmia episode that could be as short as four seconds within 14 days. 10% of patients account for just one episode. Just over 20% account for three or less. Unless you have a service and a platform that's capable of very high patient compliance, and indeed our analyzable time is about 90%-98% on average across our recordings. You stand a very good chance of missing such rare and infrequent episodes. I talked earlier about complete heart block. Here's a perfect example of what this looks like. Here's a patient who, for the better part of eight days, was monitored with absolutely nothing wrong. Absolutely healthy, normal heart rate range, normal sinus rhythm for those eight days.
For exactly 16 seconds on the eighth day, they had a potentially lethal arrhythmia. A combined heart block and pause simultaneously. After that was done, fortunately, they recovered, went back to the sinus rhythm for three days. Unless you have a platform that was capable of recording continuously with that high compliance throughout that, evidence and examples and episodes like this are very easily missed. We have taken a very thoughtful approach to introducing the AT platform. We have been spending time ensuring that everything's working and acted right for us, and this includes all the way to the billing side of operations. We've been focused very significantly on contracting with payers to ensure we can minimize customer and patient friction as we ramp up to full launch.
We've also been focused significantly on adding our 24/7, indeed 365-day a year service capability, ensuring that can scale. Part of this very thoughtful approach is listening carefully to our customers and listening to their feedback and making tweaks to the platform. This is a new service for us. We had opportunities to do as we're doing something new and trying to be innovative with respect to our approach, asking for feedback and making minor modifications as we go. The last piece of this was an investment in new technology and new capabilities. Part of the LTE network that we're all using on our smartphones, but was new for Internet of Things devices, was introduced in 2018. We were one of the first medical devices in terms of this gateway to be certified on an LTE network.
That happened in mid-2018 as the first devices were coming out. What this does is it gives us faster bandwidth and faster recording capability with lower power and gives us a platform that we can invest into a future. We're purchasing assets for this service that we know have a long runway because this is a brand-new network that, by the way, Internet of Things networks, they don't change every two years. They change about every five or eight years in essence. What we did is we certified our hardware in 2018, about the middle of the year, spent the rest of the year doing verification, validation, field testing, ensuring that we could introduce this with confidence. That's all behind us now. In essence, what we're focused on now is ramping up all the internal services ahead of a major ramp later this year.
To summarize, what we've seen in terms of feedback from our customers is very reflective of this single platform opportunity. They see and they communicate to us a lot of confidence that they see in terms of the accuracy of the analysis that we're providing, and they truly appreciate the patient compliance that we're providing with this platform in terms of the basis for the confidence that they've seen the report. Certainly, we also hear and see regularly the feedback they give us on how consistent and reliable our service is. What I'm showing on the right here is an example of how this plays out for us. This is an account that we introduced the Zio AT service to in 2016. Much like the example Kevin showed earlier, we had a few physicians providing and prescribing the device in 2016.
As our efforts in terms of engagement with the account expanded throughout that year, indeed on a lot on that cycle of increasing adoption that we see in accounts, we got to about 40% of the volume by the end of 2017. We introduced 18, and we provided a complete platform to the account. What we see is 18 is used at about the 10%-15% range, which we think is about appropriate. Not all patients need this high acuity type of monitor with a higher burden and a higher cost. Most patients are much more appropriate for an Zio XT, but when we gave them that whole platform, we saw on the order of 85% of the volume go to this platform for their clinic, and only a few pulsar devices are very appropriately used for patients with very frequent symptoms.
This is exactly the power of providing a complete solution to accounts and what we are very strongly looking forward to as we ramp up the service later this year. With that, I'll conclude and turn it back over to Kevin. Thank you.
Thank you, Karim and Mark. Also want to make sure that everyone knows that Matthew Garrett, our Chief Financial Officer, is here as well. We didn't have enough time for four presenters, but Matt is here to answer questions. If we could open up to questions to the team about the presentation and so forth. We've got a microphone. If you would just state your name and where you're from, that would be helpful for us. We'll do our best to answer questions. Robin.
[Global Bank Driving Markets], Jason Morgan. Maybe you can help us understand a little bit with the launch of Zio AT here, how does that change the discussion going into accounts? Was that a roadblock before, does that help you further penetrate and overtake every other competitive device from a hospital-wide?
Sure.
Can you repeat the question? The question here from Robin is how does the competitive landscape change within accounts now that we have a more complete platform? Is that okay to paraphrase it that way?
Yeah.
You want to take a crack?
Sure.
Please.
First and foremost, I'll say that our growth is not constrained by not having that ET. The biggest need out there is our customers have this massive burden right now because they're using devices that have significant implications on their operations performance, on their patient satisfaction, on the clinical side with very low yield. First and foremost, I would say the potential of the platform without ET is very, very large. Now, there's no doubt that a portion of our customers where they are users, where they are hidden users of MCT, that opens the door. Please be mindful that number 1, the MCT penetration is a very small part of the market, and it is actually highly concentrated in fewer accounts. It is not widely adopted. The market is driven obviously by the bigger entities.
As you know, the coverage is not very strong on the MCT side and has significant restrictions. We do think that it will provide significant momentum for us in the future, especially in those accounts that have interest in that.
Jason.
Hi, how are you? [Jason L. McCain] Cordis Innovative. Two questions. As you sit in the shadow of the Salesforce Tower, it strikes me that enterprise selling could be different than typical medical device selling. I'm curious to know what, in terms of your sales management and your sales representatives, you instituted in terms of hiring these kinds of people. Maybe educate us a little bit the difference between typical medical device sales.
Sure
what you're doing now extending the service. The second question is on that service, Kevin, how would you characterize your competitive moat? We think about your IT, we think about your conclusion on the front end, your AI and algorithms on the back end. The service aspect here, the proposed product seems to be, to me, what is the most competitively differentiated and maybe the most difficult for someone else to replicate. Maybe you could comment about that.
Sure. Maybe I can take the second question and if you want to take the first one. For the longest time, we've been talking about the value of our service in our reporting capabilities and workflow and so forth. We've never really described the Zio patch, if you will, the device, as the unique value add. As valuable as it is and as highly packaged as it is and as highly compliant and valuable, it by itself is just one element of that stack. When you have to go back and when we go back and think about the problems that our customers are having, this burnout, these pain points, these inefficiencies in healthcare. In order for people to change or to adopt change, you have to do it in a way that the effort for them to adopt is less than the value that they get out.
If you ask them to do more work, they're out. A great example of that is not long ago, we had a physician panel to
We were discussing new reporting capabilities, some of which are shown here at HRS. Physicians were evaluating a variety of capabilities. One physician was nodding one way and the other way as we were going. I asked him why he was doing that, and he said, "Look, I can give five minutes to interpret a Zio report. If some of these features are making it less time for me, I'm going to use more of it. If any of these features are more, I'm going to use less of it." They value their time down to the minute. This is the big part, I think, what Karim was describing about our ability to appeal to their problems and helping them to create value for their patients, and to spend more time. That's what derives the stickiness.
In order to do that, you need that completely vertical stack. It's a closed-loop system. You can't have just one component of it, you have to have the complete component of it, and each of those components need to work seamlessly with one another and interact with one another. It's not just a patch, it's not a database, it's not an algorithm, it's not a contract, it's not a literature. It's an entire system that is valued very much in the same way that you might interact with Salesforce and its ability to affect your workflow in your commercial enterprise or in your organization. Karim, you want to talk a little bit about Salesforce and what we're doing different?
You're absolutely right. The traditional med tech devices.
Right
is more about counting features and benefits. The approach we're taking, obviously, we need people who understand the medical space, can launch a rep into a very complex, large system that does not understand that landscape. The difference is about the ability of those sales people to actually learn new skills, and their ability to engage with the different stakeholders. It requires a certain level of capability to be very inquisitive, and the ability to connect at a different level with the organization. Now it's not about connecting only to the clinicians. It's about connecting to the service line director. It's about connecting to the key thought leaders, and frankly, leveraging a lot of that connectivity and understanding that our benefit is not only the attach of the report, but again, it's about the platform.
This is how we hire for, and also this is what we train for. I would say that so far we've been able to find the right talent in the marketplace, and we also have been able to significantly up-skill our most tenured reps. Very successfully. Now clearly we are building a training program and a more theoretical approach while we are continuing to Dan's point, to build a stack, because a lot of these capabilities also go through the interconnection within our organization. It's our ability of our sales people to connect with the development team, with the customer care team, with our clinical operations team. New for our customers, they don't necessarily look at whether we can provide a service. They are looking for the consistency at which we are delivering it.
That's probably the most important part that we are hearing from our customers is they say, "We can rely on you. We can trust you because we've seen all your teams, and we know that you're capable of delivering that service.
Gotcha.
Vivian Wong with Federated Crossing Funds. You have clients there with one-tap fitting through 70% penetration of the video. I'm just wondering, if you look across your early customers, your earlier adopters, what is your penetration in those accounts and what might be the storage, or does it differ in an EP versus a cardiologist?
We'll take it back to him.
Great question, Vivian. Sorry, I was sitting in a corner. We talk a lot recently about our sales force productivity levels, in which we increased them from 2.5 at peak to 2.5 at average over 4 years. I think a lot of that is coming due to the fact that we are seeing, and we should point out, significant penetration, even in our most mature accounts. All the statistics that we provide regarding these sorts of gains to our sales comes from accounts that we've had maybe on board for seven or eight years. The uniqueness that we're seeing, and this is something more anecdotal than specific, the uniqueness that we're seeing is even in some of the legacy accounts, we continue to see growth. Growth above what we even anticipated when we structured our forecast three or four years ago.
The way to think about this is, at some point, you think you reach peak productivity in a particular brick-and-mortar account. What we're seeing is that what the rep thought, what our sales ops team thought, or what I thought were not accurate. The reason is because we are further penetrating ways that we never did thought before. Number 1, we're going downstream into neurology with critical and stroke. Number 2, we're going upstream into the emergency rooms where again, there's this whole kind of stacking of all the things that we need to do to be successful. I'm not sure we mentioned much about EHR today, the EHR ability helps us to be able to penetrate deeper into those accounts.
The third thing that we're seeing, and this is very anecdotal, but it's an intriguing feature, is there are accounts that thought they had achieved their highest level workflow in terms of the number of individual patients they can bring through in any given day in a particular clinic. We're actually expanding that pipeline because Zio is actually improving their workflow in a way that allows them to see more patients on any given day. Indirectly, what I guess I'm trying to say is it's very difficult to pinpoint exactly what maturity is in any given account because we're continuing to grow in the accounts that we thought were mature. Trying to place a specific number on, are we going to be 80% penetrated or 90% penetrated is difficult.
As Mark's presentation pointed out, there's still going to be a small percent that will ultimately still use Holters, appropriately so, over 24 or 40 hours. There's no reason to believe that in any of the accounts that we've gone into, particularly these large integrated systems, that we can't achieve the levels that Kev described or that Mark showed earlier.
Thanks.
Thanks. Rajiv Sharma from Jefferies. Just a couple questions. You think about this idea of penetrating into part of the larger accounts. You know that there's, I think, a slide that showed that they go from a loss-making to a profit-making endeavor on monitoring. I'm curious, do most of these large accounts perceive themselves as losing money on monitoring? They do have their closet full of monitors that they continue to deploy. When you think about shifting that to you guys, it does shift the way that they think about the economics of what they're doing. Is that perceived by them as a loss-making thing now?
I think Everyone repeat the question again. I think by and large, healthcare and healthcare professionals are way behind in their ability to assess their profitability, their cost accounting, their workflow, and things of that nature. Oftentimes, as Karim said in his presentation, many of them are surprised. Most people think that their ambulatory monitoring centers and their cardiology departments are highly profitable, until you actually start to measure it, and you find out that they're not. The eyes open up and go, "Oh, my God." I think the comment that Matt was making as well, many of these organizations are capacity constrained. You may have 10, 15, 20 monitors, but if they're on 10, 15, 20 patients, the next 20 that came in, they can't be serviced.
This is one of the benefits of having a single-use disposable biosensor that can be deployed in all of these different departments at nine or 10 different locations in these large systems for hundreds of prescribers to have access to. All of the workflow benefits that Karim was describing. When you add all of that stuff up, you end up with the throughput benefits, fewer unnecessary repeat tests that don't get paid for by insurance companies, queuing utilization of resources, and a higher patient volume.
I'll go next. One on XT. Excuse me, AT technology. I'm curious, as you think about expanding the labor component of that, so the cost of monitoring, how did the gross margin look like on that product for you over time? Do you offer it the same high mid-70s that you're offering with your current offering?
The answer is yes. There's no reason to believe, based upon obviously the higher price point of that device, that service, I should say, that we will be in that same 70%-80% gross margin. I cautioned early on it will take a little bit of time. There is absorption. We have a 24/7 service in order to support that business, so it will take a little bit of time. There'll be a small drag on gross margin as we launch. However, we've baked that into our guidance of the 75%, 70%. The major question is, yes, we'll absolutely be able to achieve the same level of gross margin that we do with the XT.
Yes. Follow-up, sir.
Thank you. Eugene Mannheimer with Dougherty & Company. Please talk about maybe some of the challenges of selling something like telemetry into a market that's already established with one or two large players versus the XT, in which you were effectively the pioneer or the inventor of that market.
I think you have to think about it not as an individual product, but as a platform. When you go into many accounts today, there may be as many as three to four different vendors, if you will, or companies that are servicing accounts. Could be an ambulatory monitoring MCT company, could be a Holter company, could be event monitoring company. This is a big part of why there is so much difficulty for these accounts to become productive and profitable. The real value proposition here is the single platform, and that's the differentiator for us in terms of our ability to penetrate these large accounts. The capabilities that Mark described on patient compliance and the ease of application for the clinical staff cannot be understated. Mark flashed this gateway in front of you for a second here.
This is a gateway that's a single-use gateway. It does not need charging. It does not need interfacing by the patient. It comes automatically paired, it's just a passive device
These are devices that don't need service by the monitoring staff in hospitals. It's just out-of-the-box works. There are unique product capabilities, workflow capabilities, I think the single product are the driving factors for differentiation there. Of course, the clinical benefits that Mark was describing as well.
Just one there, I think.
[Jay Shaw, Morgan Stanley.] Tom, the new selling model that you have in place, how does it affect how you think about the sales force infrastructure and your ability to serve existing accounts and the rate of expansion into new accounts? Then one for Matt, just on sales force productivity's increased from in four years, 2.5 to 8.5 average. With the new model, has that changed going forward? Is that still your timing?
You want me to take that?
Yeah, look, we're very excited about the sales force productivity expansion. I think when, again, going back to the IPO, I think the number was one, we said $1.4 million at scale. I think we always were optimistic and cautious with that number, as you all know. I think we're all pleasantly surprised at how fast it has grown. It's very difficult to answer the question in terms of what's peak productivity because we don't know. Based upon the example Alexis gave, if we have our longest legacy accounts that continue to grow in double digits when we thought that they were fully saturated, that's a good problem to have. We're not at a point of saying that we've reached peak, and I don't think that we would today, but we've always said we'd update it as we move forward.
I think the area where we have found the biggest change since IPO, when we talk about our barriers to entry or our mode, and again, back to the staffing system, is around workflow. We have made significant investments in the organization, whether it be customer service, whether it be toll-free lines for billing support, whether it be onboarding services, whether it be EMR, EHR integration. That is where we're starting to see real productivity scale from an office perspective that has a direct impact on our ability to drive further penetration and productivity with the sales reps. The answer is that we're optimistic that we'll continue to grow. We'll obviously update from a guidance perspective as we move forward. I don't believe we've reached peak yet because peak keeps changing.
Just to build on that and also answer the question. What's changing is we're not doing a one-to-one sale. We're doing a one-to-many sale. One-to-many sale is not based on selling the benefits, but on making the benefits to the customer so obvious that they don't want to change their platform and grow their platform. That's a very different approach. Now they are adopting our platform not just because they like to use it, but because it's a liberating platform, literally. Our technicians don't have to deal with the burden, the physicians don't have to deal with the burden, and the patients don't have to wait for orders. If you think about that is driving, obviously, potentially, the good activity on our platform.
Good morning. Joanne Lynch from BMO Capital Markets. Two questions. The first one is, you referred to the Zio AT as a single platform. I'm trying to get my head around what does that mean. Is that in terms of a single platform sales cycle, data management, usage? Can you just expand on it a bit more?
Sure. I think the answer is yes to all of those. Both Zio XT and AT share the same stack, same data repository, same algorithmic capabilities, same reporting structure, same order entry, the same interfaces to electronic medical records. They have different contract sections because they have different billing associated with them. Many of the elements that Mark was highlighting on the wearable wireless platform. When Mark tells us Zio AT, we're saying that we built into it the wireless capability to it, but the remainder of the platform is the same. This is a capability that's highly leveraged and highly useful.
Just to build on that, Joanne. I don't care if you read or stack. If you want to think also about it in terms of market-facing and internal-facing. Outward-facing, the users are seeing the same user experience with both XT and AT. They're seeing the same report, they have the same order, they have the same customer service. That's how they're seeing it's one platform. The internal reports address productivity and scale. Those are going to be based on the same stack.
Second question is, as you get into larger accounts, does that translate into more staffing orders or anything else in terms of needing different types of salespeople or different types of-
I think the answer is no. If we were headed in terms of inventory consignment, things of that nature, I think that's one of the other advantages of Zio XT and Zio AT. As you all know, manufacturing in the U.S., we have plenty of opportunity for expansion, and we've never been in a situation of having inventory shortfalls. We hear that time and time again as it relates to other products and services throughout the field. You can imagine, once again, related to staffing, if we were able to come in with a platform for both Zio AT and Zio XT, place them on the shelf from a consignment perspective, and they never have to worry about inventory shortfalls. That's another huge advantage for us as an overall entity.
Well, one of the accounts that just asked, one of the accounts that we've referenced in the past, the larger accounts, is an account that has 10 locations, has 300 prescribers, and we service 9 different departments. All of the prescribing, all of the order entry, all of the claims benefits, patient eligibility, are all done digitally through our platform. We know which physicians are prescribing, when they're prescribing, how to deliver inventory to them to keep them at certain stocking levels. They don't place orders with us. We maintain inventory as a flow, and this is a benefit for us, and it really improves Salesforce productivity because sales reps are not selling inventory. We're managing all of that stuff through our information system. I think we have time for one more question. I think we've run over, yeah.
This one's maybe for Mark and Kevin both. Just curious around the ambitions for R&D. You guys have two new products commercializing. Obviously, you guys are probably working on something else. Just curious where you guys are focused going forward. Then the second is around the ZEUS algorithm. What's the openness to licensing or something like, Mark, your background, ZEUS inside of a pacemaker could be pretty interesting from a share of wallet perspective from someone who's already going into the heart. Just curious on those two.
Happy to answer that. From an R&D perspective, we are continuing to invest. The last thing that we ever want to do is be replaced. We believe very strongly that we have built a platform that is clinically superior. We are investing to maintain that level of strength. The second is that we're making a tremendous investment in ease of use. We have put an entire design team in place to ensure that the products and services that we provide build are done with a very careful eye towards usability and workflow integration with our customers. The final thing is we're working a lot on the back-end things that you don't see to ensure we can continue to scale with the same quality level that our customers have come to expect from us. We'll obviously be disclosing more of those as it goes.
You can go to our booth and see some of those innovations that we're just diving into today, and of course, strongly investing in for the future.
Maybe to add to that, is it possible that we would either private label or white label our algorithms to other people? Absolutely. There's no reason for us not to derive benefit from that. I think in the long run, the value of our database will help move healthcare from being reactive to proactive, right? The ability to use all of that information to do predictive analytics. We see this today in some of our data where atrial ectopy might be a precursor to atrial fibrillation. If you see atrial ectopy in a patient, can you head off atrial fibrillation in the future by treating that patient? Our ability to mine that data, gain meaningful insights, might allow us to be more proactive than it is reactive. The reason why I say reactive is because 99% of the patients come to us are symptomatic.
They already have the disease. The question is, can we uncover the disease ahead of time and help them to proactively manage that? The more enriched our database becomes with more data, not just ECG data, rhythm, rate, heart rate, other types of clinical information, the stronger that probability becomes. Okay, I think we've sort of run out of time. Thank you so much for coming. We really appreciate you getting up early to see us and your interest in our company. Thanks very much.