BoneChat #136 - Cracking the Hospital Code for Ortho Startups: A $1B VP Tells All

Welcome to Bone Chat Discussion 136, and this one is special. I think we, we're lucky to have Michael McCullough today, thanks to an introduction from Mark Maloney. Um, today Michael is going to help us kind of pull back the curtains on how health systems evaluate new technologies, I think. We'll see where it goes. Michael's really unique because he's worked in 4 healthcare sectors: device manufacturing way back at the Pew, GPOs, distribution, and large healthcare providers in Georgia. And I think I got this right, Michael, you were responsible for a billion $1.2 billion spend at WellStar that consists of 11 acute hospitals, 5 health parks, 13 urgent cares, 9 cancer centers, and over 300 physician offices in Georgia. So anyway, this is going to be fun. Tee up your questions, and I'm turning the mic over to Michael. Welcome aboard.

Thank you, Tiger. I'm going to get started. I want to— I'll start out with an introduction. I've got a few slides we'll go through. My desire is that this is as interactive as possible. If you raise your hand and you don't— I don't stop, it just means I'm not seeing your hand, Tiger. So I'm going to ask that you give me some—

I'll mediate.

Yeah.

I think when I show my screen, you guys all kind of disappear, but Let's go ahead and get started. I'm going to share, and Tiger, if you would, let me know when, um, um, when my screen can be seen.

Okay, it's coming in. There it is, first of 3 slides. I love it. Oh, you're on mute, Mike. We're—

you're on mute. You stop sharing. I think maybe when I shared, um, I could—

maybe it'll unmute you when that happens.

Um, Chrome tab. Okay, how's this?

Am I still—

Okay.

Perfect.

We're hearing you.

I think when I share, there was a switch I didn't toggle on, so it muted me. Again, thank you, Tiger, for the introduction. Some of the topics that Tiger had shared for discussion, and again, if you don't see a topic that interests you, by all means, raise your hand. We'll throw it on the list. Clinical and economic evidence, so outcomes, the product selection process, what we commonly refer to as the value analysis process, risk sharing, standardization, which really ties into value analysis, operational impacts of robotics, surgeon engagement, and reimbursement shifts in the marketplace. So a little bit about me. I, believe it or not, I started my career in IT. I was, I have a background in technology, master's degree in software engineering. And it was about halfway through my career, I started getting involved in a lot of supply chain information systems. And while at DePuy Orthopedics in, in around 2000, 2005, I was given the opportunity to transition completely out of IT into the global supply chain at and I took that opportunity. It was very easy for me to make that transition because most of my career had been in IT, was implementing supply chain information systems. So I really had a great understanding. I was APICS certified, understood manufacturing and supply chain. So it was an easy transition for me. As Tiger Buford noted, I'd like to share that I've worked in what I consider to be 4 of the 5 healthcare sectors. So manufacturers, certainly J&J DePuy Orthopedics. I was there for 7.5 years. The GPO industry, and I can't recall, but it sounds like we've got somebody from Salt Lake City. So I worked for Amerinet, and at the time, 2012, '13, and '14, Amerinet was 50% owned by Intermountain Healthcare. And Intermountain ended up purchasing 100% of the organization and it became Intelair, which then was recently, and recent being 5, 6, 7 years ago, purchased by Vizient. A lot of time in distribution, so med surg distribution, orthopedic implant distribution, as you can imagine, applying technology into that space., and then also some pharmacy distribution as well. Um, one of my, uh, I guess real strengths and, and where I was really highly successful and very fortunate, if you will, um, was in, um, healthcare, uh, self-distribution. So hospital self-distribution. Um, Intermountain again was probably one of the first in the nation to stand up their IMAT, which is what they refer to as a consolidated service center, which primarily does distribution to all of their operations, but also houses other services. So for example, at the IMAT, they also have an IT center where they burn in computers and they do computer distribution, desktop, laptop distribution. They also recover those and destroy them. When the time comes and make, you know, doing their best to make sure that sensitive data is no longer on those hard drives. They run other services there as well, but that's just one example of a service that you'll see in a CSC model. I ran Lysar down in Florida for 2 years, which is probably considered to be— it was started in 1996 and considered to be one of the best CSC models in America. And then, of course, here at WellStar, I started their CSC and ran that for 7.5, 8 years. I recently retired this last February. And so if you hear me refer to WellStar in the present tense or past tense, know that I'm no longer there. I was the SVP of Supply Chain. Tiger, you did your homework. You did a great job explaining who WellStar is. About $8 billion in annual revenue, 11 hospitals, approximately 400 ambulatory locations. Tiger gave you a little bit more detail around 9 cancer centers, 5 health parks, over 350 physician offices across the network. Again, we were self-distributed and we had 17 service lines, and so that kind of starts wading into value analysis. And I know you guys are device entrepreneurs, medical device entrepreneurs and startups and so forth. So I'll try and tailor my discussion towards your backgrounds and your interests, but I may jump across service lines just to give you real-life examples of the product selection process because really the process is the same whether we're talking about cardiology products, whether we're talking about spine products, orthopedic products, or basic general med surg commodity products. The process, it, it deviates a little bit, um, you can have some unique nuances, but in general it's the same process. So, um, I'm going to jump in really kind of to the VA process. I think that was something that there appeared to be some strong interest is, how do products become selected in a healthcare system and in an organization? And I think that in one of the introductory emails I saw this morning, I think you used the spine example that you and I had discussed the other day, Tiger, where we went from— and this was an amazing accomplishment— we went from around 47 spine vendors down to 3, and which is monumental. And you can go, wow, that doesn't seem like much, but in our industry, in that category, specifically spine, that's a huge accomplishment. Now, I will tell you that to be successful in that, we had fantastic, excuse me, partnership from two of our physicians. And really, generally, our service lines have one physician leader, but in this case, we had two physician leaders. And in the spine service line, I would say about half of our physicians were employed, the other half were not employed physicians. Whenever we start a an initiative, we generally look at it, we'll refer to it as an initiative, a sourcing contracting initiative or a project. What we start out with is a lot of data and also establishing that partnership with our physician leaders in that service line. So we'll generally look at about a year's worth of usage data to determine which doctors are using which products from which vendors. We, we dig into not just purchase history, but we'll go into— in our, in our case, it was Epic— and look at case data, um, and then segregate the data out by, um, DRG and, and other—

for—

by physician and, and so on and so forth, so that we can really analyze where we're spending our money and how much money are we spending in those subcategories of spend within the primary category, in this example being spine. In, in this example, we had a lot of physicians that had their own, you know, product, products that they had they'd really kind of brought into the, what we'll refer to as the formulary, in this case, the spine products formulary. And we, we had to go to great lengths to determine, um, were those products, um, unique? And if they were unique, what made them unique? And in order for us to, to legitimize what we consider to be a carve-out in the category so that that vendor or that product could be could stay in the formulary. Because generally when you're looking at establishing a contract through a standardization model like this, you look at what's the— you at least start by looking at what's the strategy for this category. And when I say strategy, I mean specifically the sourcing and contracting strategy for this category. Our objective in this space, in this category for spinal implant products, was to get to 2 to 3 vendors and have a 90% committed contract portfolio to those specific vendors. This would allow us a 10%, um, of, of spend outside of those 3 vendors. It's also, and this is where I think it's important for you guys, You know, you're bringing, um, products to bear, products to the marketplace that, um, have some kind of a unique clinical, um, position in the market that differentiates you from Globus or Medtronic or Depuy or Synthes or whoever, whoever it is that is perhaps the bigger, um, uh, manufacturers in the categories that you work in. So, so you have to bring forward, um, evidence, hard evidence of the clinical efficacy that differentiates you from the current industry standard, we'll say. And I think that's really a challenge. And I, you know, this is an area where you guys are probably— you've experienced it in your very good at, at, at managing and maneuvering your way through that. But know that on my side of the table, we're really gonna evaluate that. And, and it can't just be, you know, soft data or, you know, we, we think data, it's gotta be proven clinical outcome data.

Got it.

And Michael, we got 2 questions. We got 2 questions up already. Uh, Kyle's first and then Mark Copeland. And you, you can drop the slides if you want to see better.

Yeah, let's do that.

So Michael, you just made a very interesting comment about that remnant 10% that's outside of your core contracts, and if you're going to be part of that, you got to prove clinical efficacy. Well, what I would suspect is that Now you've got the— you've basically said that in order to get to that 90%, that your 2 or 3 vendors have established that they have proven efficacy across their portfolio, and I find that very hard to believe. So it's a standard now that you're asking for someone to penetrate that group that you didn't necessarily hold across the board to those companies that you brought in. Now I'm sure that I'm kind of embellishing that a little bit, but hopefully you get my point. Like there is maybe two different standards there. I'm curious how you square that.

That's a great observation and great, great thought, Kyle. And I agree with you. But when we look at it from the healthcare provider side, we're looking at the spinal products category and we say to ourselves, who can bring forward a product portfolio that can serve a vast number of needs? And, and in that space, you know, the gold standard for that— the answer to that question is going to be Medtronic and Globus, right? And so this is, you know, this is the hill that you guys have to force yourselves up, which is And again, I'm making some assumptions, but in my experience when I've worked with smaller vendors, entrepreneurial vendors, they don't have that, that broad category of products, that catalog of products that they can bring to bear. They have generally more of a niche product that has a very unique place in the marketplace. Is my statement there correct from your observation as well?

I would say sometimes yes and sometimes no.

Okay, okay. Generally, that's how we look at it, whether it's right or it's wrong, that's how we look at it.

If I were to guess, if I was going to guess what you were going to say, I would have guessed that you would have said broad portfolio, clearly established, you know, if these are companies that have 20, 30, 40% market share and decades of history, there is so much logic there to say that they're established. They have the footprint of— in every way that you can imagine. And I don't know the spine market very well at all, so I will apologize if I butcher the heck out of this. But let's say that part of that portfolio, or that range of portfolio that Globus offers for spine, and it comes from their— what was their acquisition of NuVasive? I think I got NuVasive in my spine. So you've got 6 different procedures for thoracic, lumbar, and cervical. You've got different directions. Odds are that different companies, whether it's even Medtronic or even the players slightly smaller than them, might have a clinically demonstrated advantage over each different part of that portfolio, but they themselves may not offer all 6 different things. So you've placed, you've placed the premium on having the more comprehensive offering than necessarily only focused on the clinical efficacy of it, which is fine, but that just makes it a bit of a moving target if we're trying to— if those niche players or someone's trying to take a certain category on and trying to get in and they're trying to prove efficacy, well, that isn't necessarily the standard across the board. So I ask the question because I'm thinking about how to navigate it, and that's kind of where you're pointing us towards is how to navigate. It's complicated.

Yeah. So a couple of thoughts. Many of the physicians, at least the ones that I've worked with, came out of school in this example working with Medtronic or Globus. Right. So there's already an affinity there. And again, that's a hurdle that you guys have to, have to overcome. I get it. 2 more quick thoughts. I'm going to shift over into a different category. So endomechanical, so trocar endo advanced energy. And when you look in that space, you have Medtronic and you have J&J Ethicon. There is an up-and-comer by the name of Applied Medical. You may know of Applied Medical. They've made their mark in the industry in trocar through some technology that was considered to be very innovative, and they started actually taking a lot of market share away from J&J and Medtronic. Now, obviously, J&J and Medtronic's response was, oh, we're going to bundle, you know, that B word, we're going to bundle our trocars and our advanced energy and our basic endo and you're going to get a better price if you, you buy the bundle, and you're going to get punished, quite frankly, if you don't. So they, they put up barriers to entry, and we all know that some of those are illegal, but, you know, fighting those can be a challenge at times. Now, over the years, fast forward to 2025, now Applied actually has a very competitive portfolio of advanced energy endo and of course Trocar. So, so now what we're seeing are there's fast becoming 3 players in that marketplace. So I guess one thought would be is if you, if you're an organization that has a pretty broad portfolio, then that should give you an opportunity to play in that, that 90% space, right? And that would be a strategy that I would consider if indeed I felt I had that portfolio. Um, the, the other thing that we did exceptionally well in our spine initiative and in our spine category, and as I shared earlier, we had two physician service line leaders, um, they were very committed to two things. One was the integrity of the formulary. So in other words, um, the those 3 players, that, that was it. And then any, any exceptions— this is where innovative, more niche types of products would, would come into place or come into the port— the, the formulary. Any exceptions would go through a clinical review, 5 physicians that would review that product, all of the data that you would be providing around that product, and would say, we, we will allow this into our formula, because remember, and I say this, you may or may not know this, but the contracts that we sign, in this case with Medtronic and Globus, there's a, there's a clause in there that says if you, if new technology comes on, we can take that technology into our formulary and not have it penalize us on the 90%. So not only do we have the 10%, but we also have clauses in our contracts that say if Kyle's organization brings forward some new technology that's proven technology and you do not have a competitive product, we can bring that into our formulary under contract. So, so 3 thoughts that I wanted to share with you around that, but great, great hurdle.

Good questions. Go ahead, Copeland.

Michael, thank you for doing this. You just answered one of my 3, uh, for the most part about the clause. In that instance, just that it could— this is really my second— would WellSTAR, or would you typically, or places typically look at that as a, that clearly innovative, it passes the test and avoids those contracted, that contracted formulary options? Is that, does that fall in the 10% outside the 100%? Like, Because we get asked that a lot. If something that is clearly innovative, would that fall into that 10% or does it like, is it excluded because it's typically? I know I'm asking sort of a general question.

So great question, Mark. The answer is in my case and in a good supply chain organization's case, at least as I would define it, it's both. It can be either one of those. So I could have other branded products, common market branded products in that 10%. Any, in short, that 10% is an All Play. Right. So you could fall into that All Play. However, you could also, if you were bringing forward technology that was innovative and unparalleled in the marketplace, let's say I was, I mean, by the way, this happened to us. We were at 82%. On trauma with, you know, Depuce Synthase. And they were, you know, they were just crazy about— I'll give you a pediatrics— or pediatrics, they don't have a great pediatrics line. Orthopediatrics, by the way, has a great pediatrics product line for, um, for peds— trauma product line for peds, excuse me. So we were able to carve out all things orthopediatrics. If it was from orthopediatrics, it was a carve-out. We commonly refer to that as a carve-out. So any spend with them was not, um, considered spend against our contract commitment. So, so, you know, there are, there are— I wouldn't even call them creative ways, they're common sense ways. Um, but the key is, is, is your product unique in the, in the marketplace? Do you have clinical, um, proven clinical outcomes or evidence that, that this product is gonna be unique in the marketplace.

Yeah, thank you. I was wondering about that, and you're the first person I've ever been able to actually ask that question to who I thought would know the answer. So thank you. My other question was, I was in spine, so I know all these things that you're talking about. It's fascinating. But you went from 47 to 3 on the formulary. I don't want to presume I know. What was the rationale as to why you did that? What's the initiative? Is it pricing strength, easier back office, easier throughput, all of the above? You know, what drove that?

So, great question. And it really is all of the above. But I would argue that each actor in the use case, so supply chain's looking for, and I shared this with Tiger, I'm going to jump around a little bit, we define value as the confluence of price, service, technology, and quality. And in our industry, if you don't have quality, that's the price to entry, right? So price, quality, service, and technology. So everyone's looking at this purchase with that hat on. And I may say, okay, I'm supply chain contracting, and so price is really important to me. The physicians are thinking, you know, price isn't all that important to me, man. I got service. Service is a top priority for me. So, so the answer to your question is, in that example, it was And we always, we always, we, WellStar supply chain always approached, in fact, we coined ourselves this moniker, the clinically driven supply chain. We would not allow quality to be compromised for price, never. That was, we were very staunch about that. So the decisions that were made were made by our physicians. So in this case, Dr. Benedict, he was the head of one of the two in charge, and you may know him. He was in charge of our spine service line. He was very adamant about there's no reason why we can't get down to 3 vendors for 90% of our spend. And now I will tell you, I mentioned this 5-physician review board that allowed new technology. They considered all the new technology submissions and they said, yes, it's new. It's different, we will accept it in either through CARVA or through our 10%. And every one of those that came through, their rejection rate was about 70%. So they accepted about 30%, but they were very committed to anything, and anything that tried to sneak around that process, boy, they were very, steadfast because some of their colleagues would try and sneak things through, especially the non-employed physicians, right?

Yeah, Patrick, and then Kyle.

Sorry, I want to make sure I answered Mark's question. Yeah.

Okay.

Yeah, Michael, I think I'll put my own version of sort of kind of some of the other questions that have been asked already is that I think there's a lot of— I'll speak for myself, and, but I know industry-wide there's a lot of frustration with these, you know, RFPs and value analysis committees and processes in general, because it seems like when you sort of like peel back the onion every time, the major goal is just to reduce vendors. And it's like, and nobody, but nobody says that up front. They're always dressed up in all of this flowery language around, uh, and to improve patient satisfaction and to better, you know, strengthen pricing, you know, to lower costs and all these things. But then you go to, you know, you end up in dialogue with the healthcare organizations and it's like, is our pricing a problem?

No.

Is our service level a problem?

No.

Is our, you know, sort of clinical, you know, sort of, you know, clinical scores and, you know, the clinical outcomes, is that a problem?

No.

And it's like the actual issue, no matter what, is just our, you know, the people in the office are complaining that the people who issue the POs and and taking the invoices and stuff. They're just complaining that there's too much sort of bureaucratic mess because they're dealing with 15 vendors and we just need to get to 3. I think a lot of people would prefer if like there was just a lot more honesty in the game that's going on up front. And if we could just say we're getting down to 3 and basically if you're not one of the 4 or 5, you know, basically we're gonna pick 3 of the 4 or 5 largest companies. And if you're not there, you know, thank you and sorry kind of in the same sentence. But that never seems to happen. Until 8 months down the line when everyone feels like a lot of time, money, energy, and so on and so on has been wasted.

Yeah, yeah, I agree, Patrick. And I will say, I agree with everything I heard you say. And there's times where I kind of chuckle about how slow and fraught with red tape selection process is. And I say that and I kind of laugh and I think back to COVID, you know, we couldn't pick a glove. It would take 2 years to pick an exam glove, right? But boy, when COVID hit, it'd take you— if you didn't act in 20 minutes, you lost your exam gloves, right? So it was amazing how fast we— how nimble we became when we were under pressure of a pandemic. Now, You know, I, I'll just answer for, from my experience how, and then I also wanna kind of put myself in your shoes and maybe give you some thoughts around how you might wanna approach it. First of all, I think if I were in your shoes, you, you know, if you wanna, if you wanna participate at that healthcare system or that hospital, you almost have to follow the process. You know, so my advice would be how do you minimize your cost and your risk of loss going through that process. But if you're an entrepreneurial organization and you don't have that portfolio of Medtronic or Applied or, you know, Globus or, you know, Depew or, you know, Synthys or whoever the big player is in the category that you're in. My advice would be, how do you get in? Just ask the question, are there going to be carve-outs on this contract category? Are there going to be exemptions for unique products? I mean, that's really— because that's what you're, you're an entrepreneur, you're bringing forward something that's different than everybody else's product. And if the answer is yes, then, then that would be kind of my strategy, is okay, how do I, how do I take advantage of that as a smaller player in order to get my position and my product, my position in the organization, my contract on in the portfolio, and my product on the show. And, and I'm probably telling you what you already know, but I think your best, um, way forward is, um, a physician champion. You really need that physician champion to help present your product and make sure that your product— we had Every month we had every one of our service lines would go through the new product introduction process where products would come. We used a software product. Vendors would enter their product, but they had a physician champion, and that physician champion would speak to why this product needs to be part of our portfolio. And I think that if I were in your seat, that would be the strategy I would take is how do I get that physician champion at WellStar or at Piedmont or at whatever health system you're pursuing And if you already have a physician champion, which many of you probably do, they may be on the other side of the country, but you know as well as anyone, these docs, a lot of 'em know each other, especially in specific service lines, the orthopods, they know each other even across the nation. And, and you can build those connections and say, hey, would you mind making this phone call to Dr. Benedict for me to, you know, let him know what your experience is with my product. I think that's always going to be your best way to get your product on the shelf if you're competing with the big guys that, you know, we all know have a, you know, they have the, the benefit of being the big guy. That's, that's just the way it is. I, I don't know if I answered your question, but I would look at what are my strategies to— even in the context of this, you know, what, what would be questions I would ask? Is there a carve-out? What about new technology? So those would be my pursuits if I were the entrepreneur.

I think there's just as much frustration at, uh, I think there's higher levels of understanding of the difficulties of getting a product on the shelf, but it's sort of like doubly frustrating when you have your product taken off the shelf. Um, you like, you know, you're, you're one of 10 vendors doing business at a, at a, you know, Hospital XYZ, and the hospital says, well, going forward, we're going to we're going to issue a new RFP, and it's, it's because due to patient satisfaction and lower costs and that we want and all these things. And it's like, okay, you know, and you meet every criteria that they say they're asking for, but sort of like under the curtain is, we just want 2 vendors, that's it. Like, but nobody ever says like the sort of quiet part out loud.

See, your, your, your best defense is your physicians, because nobody in my position is going to go to Dr. Barry Mangel and go, hey, you can't have that.

Well, that does happen. That happens quite a bit in terms of if—

Wow.

Oh, that happens for sure. That like in the sort of vendor reduction process, somebody's out, you know, you can't, you literally can't go from 10 to 2 without telling 8 people, which means 8 physicians, 8, or, you know, at a minimum 8 physicians and therefore 8 companies Sorry, like it does happen. Now they may reluctantly agree, you know, there's a million reasons why, but that like that does happen at the end of the day.

It does, but again, I have to come back to is your product unique? Do you have, you know, uniqueness, clinical uniqueness that gives you a difference in the marketplace?

Yeah, and of course the answer is always sometimes yes, sometimes no, product dependent, or all those things.

Yeah.

I think you need your, you know, would your physician support that? The physician's using your product. Would they support you in regards to, hey, this, this reduces my, you know, length of stay, it reduces my OR time. It, will they do that? That's the question I think you have to be able to answer. 'Cause if they will, they're gonna fight for that. I know I, interesting. Physicians I work with would. I'll give you a great example, and I shared this one with Tiger. Now, it's different. I get it. This is capital equipment, but it's very similar in regards to the why. You know, I was sharing with Tiger, I'm a cyclist, so that's one of my hobbies. And our head of our surgical services line, service line, is a cyclist as well, Dr. Singh. And so we ride together a couple times a month, and I'm always challenging him around, you know, robots. I mean, we're spending a fortune on a million bucks on a robot, Da Vinci robot. You know, what's the real value of that? Because I, you know, I just don't— I don't see the value of that. And he said, you know, I get your position on the the clinical outcomes value and so on and so forth. But here's the deal. When I'm using a robot, I can work for 10 hours, 12 hours a day. Without that robot, my quality of life and my ability to work 10 hours a day doesn't exist. I, I can get maybe 6 hours, 7 hours in the OR. So what he's telling me is he can get 30 to 40% more time in the OR with his technology, with that, robot technology. And so I, I guess I would ask the question of you, Patrick, is, you know, what if you were to ask that question to your physicians, you know, what makes my product different than, you know, J&J or Globus or whoever you're competing against? How would they answer that? And if they were to say, well, you know, I, I can perform this surgery in 30% less time, that's huge value. Does that make sense?

And—

Oh, sure.

Yeah.

Yeah.

Mm-hmm. I know it's not, you know, and again, I don't, I don't have the benefit of knowing where each of you guys are at, what your products are and so forth. That was just an example that I, you know, I, I wanted to share around what the value is to that specific physician of, of, right. You know, that Da Vinci robot.

Yeah.

Okay. Olaf's up and then Maloney.

Yeah, thanks for that example. I thought it was a great example. I guess my question sort of is an extension of some of those others. So, you know, going in front of a VAC, you've got to do a lot of preparation, right? And you're trying to show that differentiation on the front end. And I know Copeland's talked about this before.

Thanks, Mark.

But for a lot of companies that are walking into a hospital, is there a way to figure out sort of what the current status quo is and like how stuff is positioned so you can figure out like, do you, do you fit in this 90% or do you fit in that 10%? And then you can develop that for the back.

I'm gonna, I wanna make sure I answer your question correctly. So, so your question is if I'm going into the hospital, you, you want, you want some intelligence as to what they're using, you know, from your, your general competitors in all the places and positioning. Yeah, right. When you say positioning, elaborate on that a little bit.

So, so example, like, you know, it's easy to say, all right, Medtronic has, uh, this big spine portfolio and they cover all these procedures and that's just what we use. Um, but, uh, so just in full disclosure, I work with a lot of, uh, I work for a nonprofit that works with a lot of startups, med device startups, and we've seen some of these companies, our companies go in and they have a feature that saves a lot of time or they have a feature that you can't quite do X, Y, or Z. It's easier if you're like, hey, nobody does this procedure in this hospital. But usually a lot of companies, it's a feature or a time saver or some other benefit. And I'm just trying to figure out if you can get intelligence on how something's positioned or you just start off with that proposition and then you use that search champion.

So how I would do it is I would try and figure out— I'm going to try and come up with an example. So let's go back to my Applied example. So I'm the Applied rep. And I want to know what trocars is WellStar using, right? I would, I would probably just start asking in general of the supply chain people. A lot of them will answer your question, especially contracting. So if you go, you know, pick up the phone and, hey, can I talk to the director of contracting and supply chain? He or she will probably, you know, a great first question might be, hey, when is your next RFP for trocars? That could be a great opening question. Oh, well, let me check. Oh, well, I've got you. Who do you guys use for trocars? Oh, well, we use Medtronic.. So, so that starts giving you the intelligence. And I think that from there, you know, you guys probably have good data or your, your, your partners would have good data, your, your manufacturers around who are the physicians that are performing, you know, open, minimally invasive, which procedures, cholecystectomy, so on and so forth at WellStar, who's the service line chief. You could even ask supply chain that Good question. Now, many of our— in fact, all of our service lines have their own, you know, physician meetings. Uh, with supply chain not there, we have supply chain meetings where we talk about products and services. Um, but I, I know most of those meetings, they won't readily bring vendors into those, those meetings. They're more private. But, um, and, and supply chain in our space, we did not allow vendors to come in. So you've gotta find a way to get to that, that physician, right? Specifically, I would look for the service line chief for the service line that you're trying to break into. Um, I, what creative ways can you do that? I don't know, short of maybe, you know, needing a hip implant and, you know, going and talking to, yeah, Dr. Kim, right?

I mean, part of my thinking was, like there's a whole, there's a big time suck into, you know, going and giving this proposition and then going back and forth with the VAC and like getting the surgeon on board. And if there's a way of just making it more efficient and it's like, hey, they have Medtronic or let's say, I don't know, they've got Smith Nephew for their large joints, right? And it's like that's their 90% and they have, you know, 2 other vendors that capture these other things. You're just not going to get in. Unless, you know, with your sort of me-too product. And it's, it's like, all right, then just walk away and, and spend your efforts on another facility. And, and that's the part, just improving that efficiency for a startup.

In my experience, you're gonna have to get a physician champion. That's all there is to it, because it's that, that champion is going to be the one that's going to break down the barrier to getting you a an exemption, technology exemption, or an allocation. In my example, the 10%. If you don't have that physician champion, you're not even going to get an audience because there's no reason to allow you in because, you know, no physicians are using you, right, as a vendor.

Yep.

I hope that answered your question.

I think that's a great point. I appreciate that.

That's— that is a really good one. Okay, Maloney, and then Cope.

I better talk fast here before Copeland gets going.

He's—

this is his area. I thought it might be helpful to, uh, let everybody know how I came to know Michael. Um, it was before— well before COVID years before COVID I started noticing that more and more smart investment money was going into logistics and supply chain in the medical world. And so I started kind of digging into it, and I started realizing that there were— what used to be this group of basement Neanderthals had somehow morphed into Harvard-trained, really smart people. And so I kind of started looking around, and I formed a relationship And I kind of wooed Michael to become a friend, and we met for coffee every once in a while. And it really wasn't even so much business related as it was my curiosity as to what drove this amazing machine and logistics and supply chain, because I'm not a supply chain guy, uh, and I found it to be fascinating. And I, I made friends with him and also a few other people that kind of do what he does. And it's— I found it to be always endlessly fascinating how they move, you know, a container ship from Hong Kong to a hospital in Kansas efficiently and smoothly and got it to the right place. And I guess now my question is, will technology— will AI and technology coupled together with all of the other logistics technology that we know is exploding day by day, allow the hospital, which was forced to go into self-distribution, one of his expert areas, to simplify that, to save a lot of money, to, you know, carve out more margin, be able to operate more like the QT with hundreds of SKUs for consumers, to— in other words, surgeons— to almost kind of reverse course, to instead of going from 47 to 3, to one day, because of, uh, that technology, be able to go back to maybe not 47, uh, but whatever you want, and deliver that in time? Or is that just a kind of a pipe dream fantasy world that we'll never get back to? What do you think, Michael? You think AI is going to have a big impact in what you've built in the last, say, 15 years?

Yeah, I do. And I see, as I was preparing for retirement, there were a lot of technologies coming to bear around whether they're AI or not. AI is obviously the buzz term, but Really, we look at technology as, you know, what's the value proposition around this technology? Why would I buy this? Why would I install this? Why would I support this? And there was a lot of really neat technology around supply chain. Some of the guys that had a real great handle on it were Bechtel Dickinson, believe it or not. But I got a demo of their network, you know, their 27 manufacturing facilities and they were going so far up the supply chain, looking at their supplier's supplier and where were disruptions going to be at in geographical regions of the world that could impact plastics, for example, and then create a supply chain challenge for their manufacturing process and so forth. So what I'm seeing is this How do I get quality information really deep into the supply chain to be able to make, you know, better decisions? I think the challenge, though, that I see is our industry is there are— uh-oh, I might be losing y'all. Y'all still there?

Yeah, we can still hear you.

Okay, it's still saying unstable network on my side. There are— so another big initiative, and I actually had my fingers in this, was around distribution to create a—

Oh boy, now we're losing you, Michael.

A 3PL-like model. Um, some of the—

the—

hello?

Yeah, we're kind of losing you now. Yeah, we're kind of losing you. Let's take away— let's see, let's take away your video maybe. Okay, keep, keep talking. All right, let's try bring him back.

Can you jump out and jump back in?

Yeah, we're just, we're running out of time though.

Oh yeah, is that any better?

Yeah, I can hear you now.

Yeah, okay, yeah, I think you turned my video off, thank you. So, I was involved in this 3PL model which was gonna replace some of the big industry leaders in supply chain. And it was really an information sharing model and also a way by which you could take your distribution center and turn it into a 3PL, really. The challenge with some of these innovative models is the same challenge that you guys encounter. There are big players out there that want to stop you from being successful. It's sad to say, but, you know, the Medlines of the world and you know, some of these other guys out there, they, you know, the status quo is to their advantage because they master the status quo. And, you know, it's these entrepreneurial minds such as yours. And in the case I was working with, the CEO of Deroyal, Brian Dubusk, a phenomenal mind, um, you know, you're constantly encountering, uh, pushback in the industry. We talked about it earlier too, how my colleagues in the industry are very risk-averse and very change-averse, you know, until they hit COVID. Then it was— then you saw them take on risk and change like there was no tomorrow because at that point there was no tomorrow. But now they've settled back into that old model of, hey, why should I— you know, I guess there was a saying, I'm going to date myself, you know, no one got fired by buying IBM. Now that tells you how old I am. But yeah, so, you know, those are some of the challenges that our new technology faces. Bases. I'm drifting off a little bit, Mark, my apology, but I think, you know, AI, yes, but it's really around to what's the value, and then the challenges are the status quo and the status quo industry players.

No, I think you put your finger on it right there.

Thanks.

All right, we're going to try to do quick, uh, quick answers and quick questions. So we got Copeland, uh, Kyle, and then Todd.

Go.

I'll ask one then. I had 3, but I'll ask one. Michael, could you speak to— I get asked by people all the time, like the people on this call, small startup med device companies, do they need to be on GPO?

Oh, great question.

Right?

And I know what my answer is, but I'm curious as to your perspective of that.

So my answer would be avoid that at all Oh, we lost you, but I think it's avoided at all costs.

Yeah, yeah, it does nothing but consume your time. And I, hopefully I'm not losing you guys. Um, the GP— and I worked for the GPO for 3 years, so, um, especially in medical device, in commodities, GPO adds some value, but in medical device, they really— we used to call them courtesy kind of contracts. So I could go get it, would be a courtesy price, which is useless, right, in the marketplace. Um, your best bet is always going to be how do you create physician engagement, physician value, and then let your physicians be the champion that knocks down barriers. Um, that, that's my— I've seen it work so many times, and I've seen all other options fail so many times that But, you know, my advice would be that.

Okay, no GPOs. Okay, Kyle, and then Todd.

So Michael, when you went from 47 to 3 vendors, can you tell us like maybe what you learned about the ones that you were able to cut? Were they just years away from a contract? Did they have only one product? Did their primary surgeon retire? You know, what were some of the lessons learned from the ones that you jettisoned?

Well, the number one lesson that jumps to mind is that Oh, geez, we're losing you again, Michael. Uh, those were, um, vendors that were compensated by those vendors. I mean, that, um, so, uh, but again, all of those products had the opportunity to come back through and be evaluated, a clinical efficacy evaluation by the panel of 5 physicians. So, and again, 30% of them made it and 70% didn't. So that was really a matter of, and they looked at everything and said, look, why is this different than, you know, the one that's already in our formulary? And if it is, they took it in, but if it wasn't, they rejected it.

So Michael, we've missed like the first 2 sentences of your response, but I think we caught after that. So you said the very first thing, and then we lost you for, 15 seconds.

My apology about the network. So the very first thing that really jumped to my mind was, as I shared about in that category, half the physicians were not employed. And what we found is most of the products they were bringing in or demanding that we bring in or pushing forward were products where they had some kind of a financial compensation. And, you know, we frown on that.

Yeah, that's, that is a no-go. It makes sense.

Yeah, interesting.

Anything else, Kyle, or go to Todd? You're good. Okay, Todd, you're up.

Unmute.

Uh-oh, no, I think I lost you guys.

There we go, I got Todd's back.

Okay, quick question, rebate strategy, does it work? Synthies has always done a, uh, rebate for trauma. Um, what a messed up industry. Rebates, rebates.

It's horrible.

It's horrible. Horrible rebates.

Um, we understand the purpose of rebates. Um, now what I would suggest is that your rebates— again, no GPO involvement, so this would be a rebate system. Um, the purpose of rebates is to mask pricing. That's all there is to it. It's, it's intention, um, is just so that if your price gets out there on the street, which it always does, no one really knows what the price is because, you know, you're charging me a dollar but you're rebating me back a dime for every unit that I buy. Um, so, so from a strategy perspective, it's neither here nor there. We don't necessarily like it. We always like to a pump, but we understand what it needs. You were able to hear my response. I'm seeing— were you guys able to hear my response on the rebate question?

Yeah, yeah, rebates are just a way to hide high pricing.

Yeah.

All right, any closing question? We— oh, Colleen, here we go.

She's dropping You know, I'm always happy to come back, Tiger, if you want to, maybe in a month or two. I'll let you all talk about it. And if you got other questions, I'm always willing to help.

So yeah, no, thanks for coming on. It's, this is fascinating. We, we'll probably do a round two.

Yeah.

Yeah.

I really wanna wish you guys the best. As you know, as I was chatting with Tiger, we, we were talking about athletes and how athletes have to make such a huge sacrifice. And I said, you know, your entrepreneurs are really like athletes. The, The lift, the push, the work is amazing. I applaud you and wish you all the best in your pursuits.

Yeah, it's not for the faint at heart. There's a lot of barriers to building a successful device company. Well, thanks, Michael. This has been great.

Thank you, Michael.

Yeah, thank you.

Y'all have a great day. I'm waving, by the way.

We're clapping.

Thank you. You were great.

Bye, y'all.

Thank you.

You had a great group today. What a lot, a lot of really smart people on this call today.

We did.

We did.

And it's, it's the topic, you know, everybody wants, everybody wants to know how hospitals think. And especially as small companies, you can't, it's hard to break the system.

My 3 takeaways were doctors sell doctors. You gotta have the champion. GPOs suck, and rebates merely hide pricing.

There you go, there's the summary.