The webcam, a video camera developed in 1991 to monitor the coffee pot in a Cambridge University computer laboratory, could provide a life-saving service for hospital patients and people with chronic illnesses.

Webcams are now used for everything from YouTube videos to traffic monitoring and security surveillance. They are so ubiquitous that engineers from Oxford University have developed a system to detect heart rate, breathing rate and oxygen saturation, using the camera in an ordinary laptop. Many computers now incorporate a camera for Internet instant messaging services such as Skype.

Professor Lionel Tarassenko, director of the Institute of Biomedical Engineering, said his new software had several potentially life-saving applications.

“People with Chronic Obstructive Pulmonary Disease, often known as smokers’ disease, may need oxygen and have to be admitted to hospital if their condition worsens. If they are using a computer with a built-in camera, we could monitor them while they are doing it.

“Patients in hospitals are often in individual rooms. We can put a webcam in the ceiling and make sure that their vital signs are OK during the night. The system will alert the ward sister if there is a problem,” Professor Tarassenko said.

He has set up a new Oxford spin-out company, OxeHealth, to commercialise a system that works even in artificial light, without the need for any physical contact or extra hardware.

Professor Tarassenko said the system had been tested on kidney patients receiving dialysis at the Churchill Hospital, where it compared well with the finger sensors routinely used in hospitals to measure pulse rate and other vital signs.

Finger probes use a photodiode to measure changes in light reflection, while Professor Tarassenko’s camera records light reflected from the patient’s face.

“When your heart beats, the amount of light that is reflected varies by tiny amounts, and it also depends on how fast you are breathing. We just use a normal webcam, and our software means you can use it one metre away from the patient.”

He added: “You do not need any contact with the patient. It is completely non-intrusive."

The new company will receive up to £500,000 venture capital funding from IP Group, subject to certain milestones being met. Professor Tarassenko said the money would pay for researchers from the institute to turn the prototype into commercial reality.

The company’s business plan envisages the recruitment of a chief executive and a move to a start-up lab within the next year.

Professor Tarassenko said several companies specialising in so-called ‘telemedicine’ had contacted him after seeing publicity about OxeHealth from the university's technology transfer company Isis Innovation.

Tom Hockaday, managing director of Isis Innovation, said: “Oxehealth’s product has the potential to make major healthcare improvements by reducing the number of times patients need to visit the doctor, and allowing doctors to adjust treatments quickly in response to real-time monitoring.”

Oxford University Hospitals NHS Trust chief executive, Sir Jonathan Michael said: “We are delighted that Oxehealth is the first spin-out directly linked with the trust.

“The study in our kidney unit was essential to demonstrate that the technology works in a clinical environment, for the benefit of patients. Oxehealth is another example of the many innovative opportunities which the partnership between the trust and the university is making possible.”

Alan Aubrey, of IP Group, said: “Digital health is an exciting and growing area and IP Group is pleased to support Oxehealth as it seeks to develop new products that could transform healthcare and patient monitoring.”

Oxehealth hopes to sell its software licence to technology, medtech and pharma companies and to organisations conducting clinical trials.

It is the fourth spin-out company founded by Prof Tarassenko. Third Phase, founded in 1999, was sold to clinical trials specialist Cmed, while Oxford BioSignals merged with his third spin-out, t+ Medical, to form OBS Medical, based in Abingdon, which provides mobile-phone and other technology for patient monitoring.

He said of OxeHealth: "Our research has transformed the ubiquitous webcam into a non-contact sensor for monitoring the most important vital signs.

"Our close collaboration with biomedical scientists in the university and clinicians in the NHS Trust has enabled rapid translation from the lab to the ward.

"We believe our webcam software offers a step-change in the way the health of individuals can be assessed in the home or the hospital.”

The Institute of Biomedical Engineering, opened in April 2008, is designed to allow engineers close contact with medical staff to develop new healthcare devices.