BoneChat #102 - Orthopedic Industry Crisis: Consolidation, Vendor Lockout, and Rising Access Costs.

So we'll see who straggles in, but we have, it's open topic today. So anybody have things that are burning or you have a, you have a big wham the last week or—

I got a burning one. I just got off the phone for a burning topic.

All right. Hit us with it, Al.

Not a happy one. We are— Philadelphia is now part of the growing trend of hospital consolidation and limiting competition. Just got wind that the second largest health system in Philadelphia market is going to vendor and knocking everyone out. Massive. Massive blow to a lot of us. They expanded and bought so many hospitals that they have— they're touching every company that, that exists in outside of two vendors. And it's, it's really disheartening. It's not going to hurt me personally on the immediate business side, but literally like the three things we have teed up for 2026 are all at Jefferson Hospital.

So, um, you know, what does that look like, Al? So do they just, they just wipe the decks clean and everybody has to resubmit for—

no. So this is— so what, what ends up happening is, and, and in very particular to the Jefferson Health System that expanded, they bought 3 hospitals outside of Philadelphia in what's the Pocono area called Lehigh Valley Health Network. And when they bought the Lehigh Valley Health Network network that was an 80% DePew hospital. And the rest of DePew, that's my, my old group has a very small share of the rest of the hospital businesses. But because of the weighted number for those 3 hospitals and this new VP of finance that came from Duke, that's his reputation preceded his arrival. His intent is, was just to do this. He's anti-industry, he's anti everything. He views us as just, you know, kind of whipping post. And so they're not even— their RFP was, was a scam. I mean, it was just all— it was worthless. His intent was take the, the weighted current business and just negotiate hard with, with DePew and Zimmer. To think about the Rothman Institute no longer allowed to utilize Stryker within the Jefferson Health System, you wouldn't— I mean, you'd like— they're going to tell Bill Hozak that you can't do strike or knees or hips in a Jefferson facility. Um, they're going to go 90/10. And, um, I mean, you're talking— you're not just talking about one small health system like, hey, we've got 3 hospitals and, you know, guys, you can go play elsewhere, right? This is like— they own— it's University of Penn, And Jefferson owned Philadelphia. Um, there is no, there is no, I mean, there's great, you know, all, all, all the teaching institutions of years past, Hahnemann, Graduate, all those, even Temple, Einstein, they're just, they're just non-existent anymore with the exception of Temple. And there's, that's a very financially strapped, uh, hospital. Um, so it's, we're actually I've never— haven't talked about this, but we, me and a friend of mine in Detroit, are actively talking to DC, uh, and a lobbying group that wants to attack the dynamic. They want us to write a letter so they can submit it to the Department of Justice relative to these type of, uh, income-deflating, um, uh, limited competition for no reason Essentially, these, these supply chain finance people just want to put a feather in their cap that they saved all this money. In reality, at the end, they don't save any money because it's— there's just costs everywhere that now you're beholden to two companies that can basically do whatever the hell they want.

Are the surgeons employees there in, in that system?

Not at Jefferson. At Penn, yes. Got it. Jefferson's had a, you know, kind of a handshake deal. Well, you know, that's not even true at the Lehigh Valley Network that I mentioned. They are employed. So again, that empowers them. But it's called like the Jefferson Enterprise decision essentially. So their surgery centers and things that they're partnered with are left off of that. But you're talking about, you know, a lot of these employed centers don't have— they're all HOPDs. So you're not even having the arena of migration to play in, right? So it's a bad thing that's going on, you know, not only across healthcare in general related to, you know, these big United Healthcare, CVS Health, or all these other things that are being initiated to own the physician, therefore own the patient. But now you're talking about hospital consolidation and limiting our ability to do business. It's just for companies when you make decisions now, 100%, the scorecard we kind of use when we're picking strategic surgeons or even distributors, number one has to be access to the healthcare system. Yeah. You cannot put a, you cannot put a design chip You cannot put it, you know, resources into a distributor that are in markets that you cannot play.

Wow.

So it's a microcosm. It's going on all over the country. Yeah. Raymond's got a comment, question, a little bit of both.

Can you hear me okay? Yeah, sure. Let me start with the editorial comment. I don't know, it's just Raymond pontificating on something he doesn't know a whole lot about, but I just arrived at NAS in Denver today. I have no idea how many people will show up, but in a sense, you know, I guess the thought is that for various reasons exhibitors have reduced the amount of attention given to NASP, but is it because surgeons no longer are the decision makers? Like you just said, if access is how we're going to survive as, you know, startup companies or whatever, then why spend money on surgeons? And I hate to be so cynical, who really don't have a say. They're employees. And then you have these hospitals that are making these kinds of economic decisions. Now, that was one comment, um, or editorial comment, but I have a question. If there's an initiative to go to Washington and lobby and whatnot, what's the basis of their argument? Is there a legal— is there anything that from a legal point of view prevents a hospital system from limiting the number of vendors? I mean, in my mind, they have full right to do that. Now, the quality of the service may go down because then they are not incentivized. But, but what's the basis of the lobbying? Is it just an altruistic healthcare quality is going to go down, or is there some kind of legal reason why they shouldn't be able to do that? Do you know? But then I have a follow-up question.

No, we've gone down this path. So we went, we spoke to a whistleblower lawyer. Related to some of the smoking guns we've found around the country. Um, a lot of it, and, and then the GPO relationship. So it's kind of like a weird entanglement that if you look at the GPO relationship, the DOJ and— or the, the lobbyists we were talking about were surprised to hear that 70% of the administrative fees now to the GPOs are going back to the hospitals. Then if you look versus where it was before, where it was 70% going to the GPOs, So what they're doing with that dynamic in itself is doing is it's keeping elevated price levels at a certain, you know, point because it's affecting that. Now, if we also talk about the Medicare dollars and any rebates are involved or anything like that, they're often not being recorded because the hospitals can't even keep track of what the rebates are and where the money's coming from, right? So if they're charging one thing and getting rebated back on the other, So there's, there's, we're exploring, but then in a very emotional way, it's about limiting competition and affecting people's lives.

Yes.

So restricted trade.

Okay.

So my third comment was actually going to be my agenda item, but I think it fits. It dovetails pretty well, unless you think it's too much of a rabbit trail and we could talk about it later. But this is an aha moment for me, and I was curious if the rest of the group on this call is aware of something I just learned of yesterday, but maybe I'm late to the game. Of late, the vendor— there's something called Simpler, which I guess is part of Lumiere or something, or it all gets confusing to me. My sales guy takes care of all this, but he's saying that they are now charging a $200 a month fee just to have the privilege of applying for your— a back committee with no guarantee that you're going to get in, but you're having to pay a subscription fee for the privilege of maybe getting an opportunity to get approved by a back committee. And so, and then they also charge the 1099s, uh, byproduct. It's another version of of extortion, you know, rev-tracks and extortion. Yes, so I don't know whether that's a separate tangential comment, and maybe it is, but I just wanted to vent and find out whether anybody else is aware of this new added cost to just even have the privilege of being submitted on the VAC committee. Is this— am I late to the game and everybody else is aware of that, or is that new?

A little bit. So it's a major, major ongoing movement on LinkedIn for the last year and a half to 2 years.

I'm not talking about Rep Scrubs. I'm talking about—

I'm not either. We're talking about credentialing. It's all wrapped up because Rep Scrubs are owned by, you know, the credentialing systems. So they're accessing our data and they're accumulating our data of where we are and what we're doing and who's checking in. But the credentialing systems have been on our radar forever. And, you know, there are, there's a couple organizations, there's a young lady that's starting, there's a couple people out there that are starting, you know, a different version of that, that's, you know, less extortion and more actually bringing more value to the facilities.

But yeah, it's called Simpler Spend. And it has nothing to do with getting the credentialing. It has to do with giving a company the opportunity to get before a VAC committee. So it's like you have to pay a subscription just to even get into the VAC committee at a hospital.

I did not— I'm sorry, Raymond, I went on a tangent myself. I did not listen to you clearly. I am not aware of that. Is anybody else aware of that?

No, not on that one.

But Raymond, I would like— Ask Copeland about that. Copeland will know.

Is he on this call?

No, not today. He's not on.

Yeah, I was thinking about him. I was shocked. So we're going to have to pay $2,500 plus $200 a year or for every application just to have the privilege of maybe being told no.

I'm like, likely being told no, right?

Hey, can we go back to the point about, though, about the hospital situation that you were talking about a few minutes ago? It's kind of where I wanted to add two cents. I mean, I think we all have ideas about implants and who should have access to which implants and whatever from a corporate perspective. But I think if I were going to be involved in a lobby, I think I would play the patient's outcome. Piece, right? Because I wouldn't want a surgeon who's been operating for 30 years or 20 years or 10 years or 5 years, um, suddenly now being forced to use another implant. And you can say on paper these implants are all the same, but it is really the basis of how comfortable the surgeon is with the product that they're using. And the fact that, that now some hospital system is going to mandate that a surgeon uses a specific implant, I think it's dangerous. I think it's dangerous. And I, like I said, I, if people ask me what kind of hip or what kind of knee they should get, I've got very strong thoughts about it. But in the end, I'll say, you know, you got to feel comfortable with the surgeon. You've got this, the surgeon trumps everything, right? So if you've got a patient or a surgeon rather who's using a product that he's never used, the cuts are going to be different. You know, the implant philosophies are a little bit different. The, you know, the, just the whole way it's all set up. And I, I would play the danger card, warning, warning, warning, danger to patient safety. And I would think that patient outcomes are going to disintegrate at these facilities. So, step off my soapbox. That's what I want to say.

Well, in the old days, the surgeon would threaten to go across the street to the competitor.

And I wonder if they won't still.

Surgery center. But I don't think they have those options.

They don't have the options anymore.

They're gone.

Not as much, huh? Yeah.

No.

Especially if they're employed. They can't.

Right.

And certainly not employees, but, but don't they still have power? I mean, they can still leave, right?

That has to be against their contract, their employment contract, being forced to do something that they're not properly trained on.

Exactly. And okay, we can bring in and we can do training, but that doesn't replace 10 years or 5 years or 20 years. I'm thinking of Hozak and, you know, those guys. Um, it doesn't replace all of those years of comfort. I mean, they can put in a total hip, total knee in their sleep. And now they're going to be forced to do something that, you know, has a different design philosophy than potentially what they, what they think is right.

I, I don't think this is going away, and I, I agree with Al. I think, I think Raymond needs to pick hospitals and MSAs where it's more friendly. I think you just literally, you get out of those regions, right?

Yeah, I've already obviously thought of that. I have one. Situation going on right now, which is great on one hand and terrible on another. I have a surgeon who is an employee who has actually postponed her patient until the hospital will allow us to— or allow our implant to go in, which I'm like, oh my goodness, I feel awful for the patient, but she's fighting the battle. I don't know how it's going to turn out. So I'm, I'm thrilled for that. She, the surgeon, has got that loyalty and interest, but I'm very saddened for the sake of the patient.

That's what, 12 to 18 months, right, to go through the VAC committee and all that stuff?

Well, she's trying to fight a one-off approval in this case, and even that is a struggle. And so, but she's an employee, and so, but I commend her. Kudos. But I also feel awful there's a patient behind this. So there's another— I don't know if it's a danger thing, it probably isn't in this case, but it's very much of an inconvenience for the patient.

It's a lack of competition. I think Al said it best.

It's—

you're eliminating competition, which is bad.

Right. Yeah. Yeah.

Yeah, I just— I don't know if you guys read it or not. I just wrote this article, 14 Contrarian Truths in Our Industry. And one of them was sales is the hardest part of building a company by far now. I mean, design, regulatory, you know, FDA funding, those things are easy compared to sales. Sales has gotten really, really hard because of this access, these access walls. Stephen.

Brian, Dr. Brian Blackwood did a talk at AUCUS on the credentialing side of things, and he's been the guy that's decided, let me, let me go after all these companies. And what he has found is Rep Scrubs and all this credentialing has actually just all been a rebate, essentially just a kickback back to each individual facility. So it's very interesting to see the simpler side, you know, you're essentially getting a kickback to try to get a product, you know, even just to go to a committee. So he's really made it his, you know, his mission to go after these corporations that are just essentially extorting us.

I'm sorry, repeat the surgeon's name again. I missed that.

Brian Blackwood.

Okay.

He's, he's actually Boulder. Yeah, Boulder based. But he had a great conversation on it. Kevin Brown, we recorded Kevin Brown will probably be posting it.

Kyle, what are you doing on the— when you're— because you're developing, you know, products and stuff. Is that, you know, I would imagine that's your internal discussion when you're trying to figure out your strategic partners and stuff, where you're going to be able to go with some of your—

Yeah.

I mean, North Shore in, in Chicago has put a full moratorium on any type of biologic scaffold coming to market now too. It's, it's crazy. But yeah, it's definitely what we're trying to take into consideration of where to, where to launch, when to launch, where, you know, what, what the credentialing services are in those areas, just relying on the distributors in those areas to help us out with it. There's also some distributorships that have contracts with a hospital, hospital, so you can fly underneath that, that contract. But it's definitely, it's definitely a concern right now. This one concerns me quite a bit. Now you're spending so much money and eating into your expenses just to try to get into a facility to have those meetings.

They're just adding friction. They, they hate new products. And they hate the small companies and they're just adding friction.

So Rep Scrubs has a case study on their website of the reduction in actual new product submissions on there.

That's awful.

So who was saying there's a new rep track system that's got less extortion? Was that Al?

Yeah. Her name—

yeah, let's have, let's have them on Bone Chat. That would be fascinating.

Yes, she's good. Um, Cheryl Blanchard.

Cheryl, right? Yeah, I know Cheryl. Cheryl's— she's the— Annika?

No, no, different Cheryl. Different girl.

Halbert. Yeah, no, Cheryl.

Cheryl Halbert.

I'll, I'll put her link down.

Put it in the chat. And you put it in the chat.

She'd be great. She'd be great. She's getting out there too. She's really active on LinkedIn and she was just somewhere. I know she was at AUKUS and she was at somewhere else where I was, but I mean, it's all by design, right? I, you know, when I say my, so we just penned a letter, well, typed a letter to all the small, smaller OEMs because I tried to engage distributors that I felt would be engaged across the country to help kind of join this alliance. We even formed the Alliance for Independent Medical Device, um, organizations. And nobody wants to do the work. And so me and Sean Milford were just working our ass off and we're like, what are we doing? So, uh, now that it's come to, to affect me, it started with him in Detroit, um, I'm just going right to all the other orthopedic manufacturers I know and saying like, we've got a group interested in DC to help us. Now we have to, to Laura Lund's and Raymond's point, we have to dial in what we're looking for and what's wrong with it and why hospitals, you know, limiting vendors. But it crosses over into the very emotional space of patients and insurance selections and, where they can and can't go. So it's all a similar theme, right, that we were losing control, we're losing the ability to do business. It's not a free market, and we have to better understand the relationships as it relates to the Medicare dollar, because I think that's where we can potentially tie in what it means to the taxpayer. Into the federal, into the health, the health of the health system as it is, you know. So we'll see. I mean, it's not an easy thing to try and sell somebody to get involved with because it's like, all right, do I just—

I'm— lobbying takes a lot of time and a lot of money, and it's hard to get noticed, right, Raymond?

All right, again, an engineer practicing sales without a license is very dangerous. Um, but here's what I would like to propose, that in our invoice to the hospital that require a $200 a month fee just to be able to sell to them, we just add an administrative fee to the price of our implant. Or surcharge or something. But I don't know how well that will fly. They'll probably laugh at that. But it comes to mind.

I like it. Well, I had an idea that was— I was kicking around putting on LinkedIn. I'm not sure about the consequences, but if every rep truly spent a week doing nothing but opening a box That's it. That's our job. That's what you're paying us nothing for. We're not to be your staff extenders anymore. We're not to check on the schedule. We're not to go running for lost instruments. We're not to do anything. Our job is to open a box. That's how you value us. So that's what we'll do for a week and see how you operate. Because we, we truly— I, I'm— Tiger, it's a thought. I haven't. I'm not saying I'm gonna put it out there.

Yeah, they've taken away the incentives. I don't know, it's— I mean, Arthrex already does that, right? They've got $50,000 box openers all over the country, right?

Yeah, but those guys are still— they're still hustling, they're still checking schedules, they're still keeping an eye on what's going on. Hey Doc, that room's not moving. Hey Doc, they're missing this, let me run. Like, that's That's happening every day. We're all doing it. We're staff extenders. There's no gray area.

I just think the whole sales model needs to be rethought and I have no idea what the answer is. Kyle, go ahead.

Yeah, so a couple things that I'll note from more of the front end part of things where my focus tends to be, you guys, all this conversation is around what happens as it gets into the patient and I tend to be thinking more about what happens on the front end. And there's two important things that come to mind. First is when you start building your model, your business case, your, your market strategy for new products, it's becoming baked into the cake that you're going to go to friendly places, easy to get to surgery centers, you know, part of the family, and it's going to take you a year or two to start phasing a product out into the broader marketplace because all these dynamics. And so What that means is that everyone is guaranteed to have a delayed adoption of something new coming into the market. And then, you know, I think the other thing that comes into play there is that patients end up being funneled into places where new technologies are available if doctors think it's needed. So, you know, if you've got surgeons that are employees or part of a big hospital system and they know that they're never going to get something approved, but there's a new technology that their buddy across town is doing, they're just referring patients out. And that ultimately ends up being lost business to the hospital that they may never even be getting a sniff of and may not even be realizing that they're losing it. But I'm sure that that is happening at scale.

Hmm. Interesting. Interesting.

So I can interject on that. So Stryker, when they came out with their hip arthroscopy table, came out with a full-blown marketing program. And the table itself was better for patient care. There was no post, um, and it was significantly more expensive. But the marketing program showed on average a 30% increase in patient, patient coming to them for those hip cases. So surgery centers justified it just because they knew that they were getting more patients coming back. So it kind of goes to your point of if there's new technology and you can find a way to potentially market it, it should help patient, you know, population coming to you. There definitely needs to be some type of study that can help on that from the hospital side. So, hey, if we're not adopting new technology, we're we're losing money significantly. I don't know how anyone feels on that one.

I think the delayed adoption is a really important point because I see a lot of startups, it affects their cash flow. You know, they, they, they have a new product, they get a, they get regulatory clearance, they go to their friendly customers first, and then they try to go out to other places in the country and it's impossible. And they get into that— surgeon says, I want to use your product in Phoenix, and it takes 18 months to get any cash out of Phoenix. And it, it just really hurts cash flow for the little guys. You gotta pick your territories, I think, really carefully. And I don't know what the answer is. It's tough. Sales is the hardest thing. Who would have guessed?

Maybe it's rural. Maybe it's rural first now.

Yeah, well, the margins aren't as good usually. That's one of the things. Raymond, are you selling outside the US at all?

So, so he said rural, not OUS.

Oh, rural.

I thought you said OUS.

No, but what— and the reason I was going to say actually rural has better pricing, okay? And so if you find the right place, and there are a fair number of places. I've had mixed results as far as OUS, if you, to answer that question. I think it's, yeah, the jury's still out for me on that. I'm not giving up, but the US market, obviously there's a lot of advantages and set terms and things like that.. But yeah, I'm— you got to be scrappy, I guess, is how I'd put it.

Yes. Wow. Yeah, this is a downer subject, but it's so important.

I, I, I said it wasn't going to be pleasant. I— it just was very topical. I started the day off great, and then I got a phone call, and, uh, I probably would have came up with a better topic to start.

Geez whiz.

I know, buddy. I know it's, it's, it's, uh, it's unavoidable.

So I don't want to, I don't want to name names, but it's a really prominent surgeon texted me a couple days ago and said ortho is dead. Said it's just, it's not the same anymore. Everything's hard for, for everybody. Um, what I, I didn't want to push him on that, but, uh, Uh, we're going to talk about the— we can talk about Globus just killing it right now. They're eating the world. Uh, and then Therese got a huge haircut. We could talk about those, one of those two things.

Globus and spine?

Yeah, they're mostly spine company, but they're, they're, you know, they've got, they've got—

dabbling into hips and knees.

Dabbling into joints.

Yeah.

Even sports now too.

$11 billion company and they grew something like 30, 40% sales year over year. I mean, it's just insane. They're killing everybody. Uh, I don't know how they're doing it.

Well, how is that possible if ortho is dead and if no one can get anything approved in any hospitals? So what's— so one of those two pieces of information is wrong, right?

Exactly.

And I think what the doctor was saying is ortho has gotten really hard for little companies. I think that's what he meant, 'cause he's a, he's a startup guy.

Not Mark Froemsen, is it?

What's that?

It's not Mark Froemsen, is it? No, no.

Yeah, but I mean, does Globus have access, locked in access to big hospital systems and nobody else has? Or do they just have a, you know, 1,000 products?

So I'm sorry, I didn't read the article and I kind of scanned that. But is that 30% NuVasive revenue or is that already year over year outside of that? I can't remember.

Here, let me look.

Let me look. It can't be, it can't be Recon. They, they, I know what's going on there.

Yeah, but my, yes, I agree with that. But, but NuVasive, you know, when did they buy them? A year and a half ago. And so if you're comparing without NuVasive versus with NuVasive, then it's really not that significant growth. Yeah, but I don't know. I didn't look at the numbers to see whether it's with or without Nivasive a year ago.

Well, so let's— in 2023, their revenue was $1.6 billion. Last year, the revenue was $2.5 billion. So, I mean, that is a massive—

but that was Nivasive, probably.

That's probably a Nivasive bump.

Yeah. And so are you comparing What I'm trying to understand is when was the new base of acquisition? That was a year and a half ago, I think. So it may be you're right. So it could be that if it's over a year, then that may be real growth on both sides.

And you got to imagine if they did it right and if the merger of those companies was aligned with complementary product portfolios, You would think that if each company was a billion-dollar company, that together they can become a $2.5 billion company because they just get same-store sales across both sides of the product line, right? So they each can grow because of the other things that each side of the equation can offer. But that's still 30— 30% when you're talking about 10 digits is pretty good. Yeah, talk about Treece. Like, what, they did layoffs with, uh, Treece?

They've got to do layoffs. I mean, their, their stock's in the toilet. They're down to— I mean, their market cap is now equal to their annual revenue, like $220 million. That's insane. That is insane.

Have they just gone too long without, uh, turning a profit?

I, I, I, everybody's got their theories. I think I have two theories. One is they taught the world about bunions, a bigger market than you think. And, you know, and so now there's a ton of competitors. This is like SI-Bone. SI-Bone was the first one to do the SI fusion, and now there's 50 companies. And they, they taught everybody about the application. And SI-BONE's always struggled since then. So I think it's competitors. And then the second thing is I think they're just late to develop a whole bag worth of foot and ankle products. Like, I mean, look, they were— the experiment was Paragon versus Therese. Paragon had a full bag of 100 products and they got acquired for a billion dollars. Good for them. Therese kept trying, kept going.

They wanted to own the first ray. What's that? That was their tagline, was they want to own the first ray, right? Which represents 15 to 20% of the entire market opportunity when you get below the tibia.

Yep. Yeah, distributor, we've been approached, I think, 4 or 5 times. We have a pretty robust foot and ankle for competitors.. And, you know, so cost, you know, then becomes a driver, right? You can do the same procedure for less. And that's how we were able to take market share from them.

Hmm. I'm, I'm, I'm working with a couple podiatrists on a project and, and I, on a calcaneal system, and I said, what do you use for bunions? Oh, we use lapoplasty. I said, well, why do you use lapoplasty? You go, the products are all the same. It doesn't matter. But Treece just brings us patients in the door. It's a, it's a patient referral system that's, that's better than anything. That's, so we have to use lapoplasty. I thought that was an interesting comment.

Well, they do. It is effective. We, we did, we weren't able to convert one surgeon for the same thing. The same mentioned. But the catchment area is really congested in this, in Philadelphia and New Jersey. And, you know, that becomes everybody else who's not involved with that. And then you sales tactic, you use where they're heading versus, you know, people who aren't seated at the table. And then you just, you know, start to whittle down their usage of trees and they just move on to somebody else.

Yeah, I think they're just late in filling out the bag. They should have started building, you know, 10 products to sell 2 years ago, probably. I don't know. It's—

but that's— well, I haven't met a ton, but a handful of the Treece reps that I have met are not exclusively Treece. They're selling a bunch of stuff because even though it's a well-paid procedure, it's not enough to be standalone. And as everybody knows, when you're sharing resources like that, that puts an automatic ceiling on the amount of effort that you're gonna get. And most of us have to deal with that. That's real life. But they're an entire company that you would think would have stood up a more viable business model for their reps to not have to be shared. And maybe it was for a period of time.

Yeah, that's one of the most underappreciated things. And I don't know a lot about sales, but I talk to these little companies and they go, oh, we got, we got 30 1099s all over the country. Well, how often do they, you know, talk about your product?

30 people that spend 5% of their time on your product means you have less than 5 people.

Yeah. The sales reps are going to lead with whatever's the easiest to sell and whatever's the highest margin. Yeah.

Or ultimately, the math is just how much money am I going to make per year on this product? That was the thing we ran into with Sonoma that was impossible with the clavicle. It was cool and doctors liked it and they had 600 different customers try it at one point, but the number one surgeon in the country performed like 12 a year. You know, you can't, you can't get somebody's attention when they've got to go put in a bunch of effort to do one case every 2 months with a doctor.

I sold that Sonoma Nail and it was the easiest door opener that you had, and that's why you led with it, because it was the easiest way into the, you know, led to the most revenue in the quickest time. So thank you for that, we appreciated it.

That's—

yeah, it was, it was a great wedge product. It was just like, well, The next 3 broken clavicles I saw were by 16, were 16-year-old boys and I'm not doing surgery on them. So sorry about your nail.

Yeah.

Yeah. Yeah.

Geez. How, Raymond, how many products do you have in spine now?

So we have, we are a, and my marketing guy or sales guy says, don't ever say this at all. This is a, we're a, One pony company that does many tricks. In fact, our implant is called OneLift. It is literally one anterior lumbar spine cage that can be used in multiple access corridors. And that's the beauty because oftentimes you need to make a pivot mid-procedure or call an audible is what I sometimes call it. And having a versatile implant that allows you to get around anatomy and so forth, plus you can either do, have the patient in the supine position or the lateral position. So from an economic standpoint, by having just 44 SKUs, which is a typical size for an ALIF, you can do 3 different types of procedures. So it's really one product. Now we are working on more stuff, And, you know, how could an engineer, product development engineer, runs a company, not do product development other than this pesky thing called money or lack thereof. But yeah, I mean, we're focused on anterior spine. And so we're gonna continue expanding the bag and making life easier for that procedure. Did that answer your question, Tiger?

Yeah, perfect. Perfect. See, that's the other thing that a lot of companies don't do is they, you can stay small. I mean, you can turn a profit with 5 employees. You just gotta stay really small, pick your customers very carefully, keep your inventory down, be careful who you partner with, and you can get to break even. I mean, it's, it's a, a lot of people, the investors don't like the strategy because they want a company that's going to grow and grow and grow. And but it, you can create a great lifestyle business, I think, with very few products and a really small team.

Um, just got to be patient, right?

Yeah, it's the long, it's the long game. Yeah. One of my favorite companies is Icarus Medical, and, um, I'm going to have them on Bone Chat, but there's 3 engineers that came out of University of Virginia, and one of the engineers was an avid snowboarder, and he had arthritis under his patella and he couldn't snowboard anymore. And it was painful to get out of a chair even though he was like 25 years old. And so he said, well, I'm an engineer, I can fix this. And so he started buying all these knee braces to try to, and none of them worked. And so he kind of Frankensteined together a patella offloading knee brace that worked for himself. And he goes, wow, this is cool. I can snowboard. I can jump out of a chair again. And he started, if I got this problem, other people have this problem. So he started selling it, created Icarus Medical. I met those guys 5 years ago or something. They were doing like 3 guys were doing $200,000 a month out of their garage, you know. And now, I, I mean, I just saw they were, they're one of the fastest growing companies in, uh, Virginia. I'm going to have them on. They probably, these guys are probably doing $20, $30 million in sales now, and I bet you they don't, they don't have a lot of people. Um, I mean, I love businesses like that. And he had a, he had a 3-part thing. He had prescriptions for custom braces, and then he also, where he went through physical therapy people, and he also did a direct-to-consumer. So people just buy it with cash over the website. And then the 3rd thing, he created a partnership with Hanger, Hanger Orthopedics, and they would bring him customers. And boy, they kept it lean. Anyway, Dave Johnson, Icarus Medical. I'm going to have them on pretty soon. I love those little businesses, those like lifestyle kind of businesses, self-funded, you know, uh, profitable instantly.

That's phenomenal.

I love it.

They just—

yeah, they just posted they're hiring like 4 regional managers, I think, or in the process of, but But you mean, to your point, they've been growing really fast. I think it's a great product. But Tiger, I have to jump. Thank you for doing this. Raymond, I will be stopping by your booth later. I'm in Denver, just down the street.

Don't have a booth. You can call me. Yeah, it's a whole nother story. But yeah, feel free to— I don't know if you have my number.

I don't. But if you want to say it, I'll take it down and text you.

Sure. It's 352- 262-9524. And I'm sorry, your name is?

Stephen Flutie.

Oh, okay.

Thank you.

Yep.

Yep.

I'll definitely— we'll grab coffee or something in the area.

Yeah, I'm here through Sunday.

Perfect. I live here, so.

Okay, very good.

And look for Andrea Davis is bouncing around.

Look out for her.

Yeah. I don't know who else, what other bone chatters are there, but Yep.

Well, appreciate everyone. It's great talking to you.

Take care. Thanks, Stephen.

Yeah.

What else is burning? I shouldn't ask that question.

Well, I had an interesting meeting. If you look at, we're in development on something that's going to be really good for ASCs. And one of the things, about the hospitals, the Cleveland Clinics, the Penns, the more and more hospitals are, have these innovation divisions, right? These things where they actually take ownership, partner, research, all that stuff that we all know. And the people who don't are the major ASC companies. And so I, a friend of mine is very involved with them. On the funding side and consulting side. So I actually have a meeting next week with the CEO of one of the, and the chief innovation officer of a very large ASC company to explore them venturing into that innovation world, especially because migration to surgery centers is so prevalent and it's so topical and it's where all the manufacturers and small companies want to go. They traditionally have been downstream, right? So they, they would rather partner on a, on a financially beneficial kind of like global contract. But this one company has interest of developing like an innovation arm where they would actually have ownership of some of these innovations.

And how many, when you say ASC Group, how many surgery centers is that owned by one entity? Is it like 10?

And they have 800.

800. Oh my gosh. And they're, it's not private equity?

No, it's owned by a larger system that, they acquired them. So they're still under the same umbrella. Of a larger health system. It's under the Tennant Health.

Okay.

And are they still stiff-arming new products?

Because they're—

No, no, not at all. But what's— what we're trying to do is I've kind of got a Trojan horse on this one. Yes, I would love to have them to take— we think what we have, and I'll— Tiger Buford, I'll be circling around with you to show the group soon enough. But we think what we have is true relevant innovation that checks a lot of boxes for patient throughput, revenue increasing, and all these things within the surgery center. So, but I'm also interested to talk to them about what, you know, where they see their own revenue streams coming in this, in their ASC space that they own all these ASCs. And I'm curious to just get their perspective because the worry is that the hospital executives who have retired with a pension are now being hired by the surgery center companies to now turn this fluid bastion and panacea for us to do business into hospital bureaucratic molasses. And that's my, I wanna find out if there's intent to, you know, participate in these things, you know, or so it'll be interesting to get their perspective. But I got like a— I got to control the laundry list of probing questions without giving away that I'm trying to really find out what their strategy is. Right. Because it's all hospital executives taking these positions with leadership and they're coming from a mindset of exact opposite of what we want for the surgery center market.

You're gonna ruin it. Yeah.

Wow.

That's crazy. That's another point. You can, a startup can make a living with ASCs only, right? You can have a, but your product's gotta be designed and built for, you know, no trays, disposable, you know, no wrap or light wrap. But you can, you can do that. You can make a living. Off of ASC strategy only, I think. I'm not sure anybody's ever— any medical device company's done that yet.

Well, they're, they're trying and they, they sell them on it, right? Stryker does, Stryker does the best job, but that's locking them into capital offset, right? Capital purchase offset. So it's not easy They're messing with things, especially as hospitals convert their failing surgery centers into hospital outpatient departments, which essentially means you're doing business with the hospital again. Not happy. That's not a happy topic.

No, no, you're full of joy today.

Full of joy.

I guess let me spin the happy side of that then, Albi. Because I've always wondered to a certain degree why a hospital system, why a group of surgery centers, why they wouldn't just effectively pay themselves by taking the step and investing in creating their own product that they then could sell to themselves at cost and have it be— the math would eventually make sense, right? Just to use simple numbers, it costs you $1 million to develop your own version of an Actis stem, and instead of paying $4,500 for it, you pay a raw cost of $700 because it's owned by your company. Now, there's going to be conflicts of interest and stuff that get embroiled in that that come into play to some degree, but there's got to be a way around that that would allow you at some point— you'd pay yourself back pretty handily, I would suspect. Is that the type of thing that you're, that you're talking about, or is it purely ownership of equity and innovation that then they can sell to the rest of the world and it doesn't have a revenue target improvement in the surgery center?

Yeah. So when they would own part of our, our device, right? But they, it's not an implantable. So I'm clean on the implant side of things, right? This is a device to help them throughout the day in surgery. It's not, it's not billable. We're not billing Medicare. It's a cost that they need to spend. It's just that ours is better and ours is less and ours checks all the boxes that their existing market leader presents the challenges to them. So implant ownership is a whole different thing, man. That goes back to the pods and the conflicts and all that, Kyle. I don't know, brother. I've never been in charge of an implant to go down that path. I've just kind of made things as inexpensive as possible in our distribution side of things to be more attractive. But, but I don't know. See, ours, ours, I guess it would be similar to, you know, if they were to invest in digital health. So they're big, they're big initiative right now. They think it's going to be digital health, you know, the electronic EMR systems and patient throughput systems and those things. That's where they're looking right now, which is why I'm able to get the opportunity to even talk to them because they think that's the path they're going to go. Which is probably the right path, then therefore utilizing their own system that they have ownership with or co-develop with their innovation department to then institute across their systems and save money. But on the implant side, brother, I don't know. I know there's conflict. I just— it hasn't been relevant for me to be a subject matter expert on.

Yeah.

Raymond, earlier in this conference hour, somebody said the migration to ASCs because the larger hospital systems won't allow innovation in. So Al, is your angle— I'm not sure who's pitching who in your meeting, but my question is, if you're pitching them, is your angle that in order to help them grow their ASCs even more, if startup companies with cool innovative technologies would, uh, be— do some kind of exclusive deal at the ASCs, would that be attractive to them? Again, I'm a little not clear on what you're trying to do, but I'm just trying to connect some dots here.

So they are the customer that everybody wants. We've talked about it here, is where I'm going to be able to play, right? Regarding the hospitals, yes, there, there's a whole different economic thing with failing ASCs, but in the most part, all we're doing is talking about migration of elective procedures and maybe, you know, small trauma cases to the surgery center. So if that's the ultimate customer that the OEMs and the major orthopedic companies across the board want as their customer pipeline, because we're all trying to be ASC solutions, then if the ASC company that owns 800 centers across the United States have an equity stake in that, will those startups then be more attractive to somebody who would want to acquire that. Right. So if Kyle is developing something that the ASC, okay, group are able to then invest in, his eventual acquirer, he's already got a pipeline of where they want to go. So yeah, it's nuanced and it's not probably going to be clean. Our device is going to be easier because it's very operational.

If you're willing, I'd be interested in hearing how your meeting turns out and if there's any opportunity for others.

Yeah, I got, I got some thought to put around how that, that, that lunch is going to go. Yeah, he's coming into the area, um, and, uh, my buddy does, uh, raises money for them and is involved in private equity on the good side though. He's a consultant with it, with, with the good, uh, very good company, um, So, yeah, I mean, I wouldn't have mentioned it if I didn't think it could be a future bone chat discussion. Good.

The hospitals have these innovation centers because they want to market better to patients, right? They wanna say, we've got the new robot, we've got the new minimally invasive surgery that nobody else has. Isn't that the purpose of the innovation centers? Like at Cleveland Clinic?

Who knows? Yeah, yeah, I mean, they have, they have ownership, like they have co-development, uh, agreements with a lot of things. I mean, I don't think for robotics and different things, I think it's more innovation that they want to like partner with, you know, smaller organizations that are innovating. Um, but there's a lot of competition for that now because there's a lot of money out there related to the R&D, you know, elimination in the big 5, right?

They're just— yeah, they don't do R&D anymore. They're, they're—

yeah, education and M&A. Education and M&A, right? Uh, so we'll see. Interesting. So let, let— just one last comment about that medical education. So we, we're, we're pitching something, and DePew is coming to, you know, they, they want to talk to us about you know, all of their educational events. So listen to their— where their budget is. They execute 650 educational events per year, training over 2,500 surgeons. So they want to talk to us about, you know, helping out with one of the problems they have with that existing market leader versus our solution. But 650 educational events.

Two a day. If, if you get rid of the weekends, it's three a day.

That's incredible. Amazing, right? I, I mean, that number— and this is the person who runs that for Depew, like, that put that, that data point in this morning into an email. I was like, holy shit. If you want to know, it's called indoctrination. That's what it's called, indoctrination.

Yeah. So of that, you're going to have probably 150 of those events or more are going to be individual things, some sort of one-off, some sort of visit, maybe even more than that. Maybe upwards of half of them are going to be very, very small group because you said 2,500 doctors and 650 events means they only average 4. So you got an event with 10 or 15 people every weekend pretty much year-round, and there's going to be maybe more than one per weekend. There's going to be, say, 40 to 60 of your events are going to be larger. The majority of them are going to be smaller. So it'd be curious, Al, to see how they calibrate, like where, where there are needs to help. Because as you can imagine, the bigger the event, the more that goes into it, the more cost, the more planning, the more execution. But if they have 5 times as many small events, maybe that's actually where they need the most help in managing logistics of that much more volume.

Maybe both.

Well, and if the 650, if I look at the few that have now gone back to their distributor model, If it's 650 under the DePew marketing educational budget, right? How many are getting done with one? Are we just talking about a consulting fee for a surgeon who trains one person? You know, is that considered part of their educational event? I mean, the way you framed it was they're running 650, right? So, um, you're right, Kyle. I don't know.

I don't know what's captured under that number, but sounds like a lot of Marriott, local Marriott, It's in a neighborhood somewhere. Yeah, that's a call for John Alleman's Overland mobile training thing. That sounds like the Pew should be all over Overland.

Yeah, they'll also be counting, 'cause I was in the education team for a couple of years there, they'll also be counting webinars and other online events are counted in that as well.

Probably dinners too, right? With all of that is— is part of that.

Yeah, well, we'll see. I just thought it was an interesting number.

It's still an— it's still an interesting number. I was just made up of a bunch of different contributors, for sure.

No, no, no, no, I like it, dude, because you got to look at— nothing's absolute, right? If you just slowed it down for a second and if something makes an impact on you, like, wait a second, just think about that a little bit more. So I like that perspective, brother.

Interesting. Wow. Yeah, the big guys have so much scale. And that's, you know, that's how they win. Yeah, just massive scale. All right, we're up on an hour. This has been fun.

Sorry to bring the mood down for half of it.

Luckily it's a sunny day here, so it's all good. The sunshine in here, so it's okay.

Hey, I'm, I'm, I'm, I'm a Philly guy, man. We're negative. We wake up, we wake up annoyed at the world and pissed off at the, at half the people in our world, you know, like that's just That's just our nature.

That's funny.

Awesome.

Well, we're glad you could vent here then.

Good to talk to you guys.

Yeah, yeah, yeah. That's what I'm here. Yeah.

All right, guys.