BoneChat #25 - Michael Simpson- Gramercy Extremity Orthopedics technology and business model

So we are live with Michael Simpson. He's the CEO of Gramercy Extremity Orthopedics, or GEO for short. Uh, Michael's a brand new member of BoneChat, and he's going to share a deep dive into the GEO technology and business model. Let's stress test the GEO model for him. Handing the mic over to Michael.

Thanks, Tiger. Appreciate it. Hey, hello everybody. How y'all doing? You know, I'm honored to kind of go through how we developed our company, how we started it. A little bit about my history. I've been in high orthopedics for 25 years. I was a president of Orthofix at one point, and then I moved over to SBI, became the CEO. We had a great exit there, and then I thought I was ready not to retire, but maybe not do this anymore. And then I got a couple of calls from some people, and suddenly we're doing a startup. You know, we've had our challenges. We run it very, probably more like my personality, very, very tight. We don't spend a lot of money. We, we do it smart. And so when we started this process, we really wanted to change the manner in which product was delivered during surgery. And we, and really it's a lot of focus on orthopedics because that was our background. But in my history, even before I got into medical, I was, I worked for a a supply chain company that did logistics with RFID. And so, and we also did all the toll roads and everything else. So, you know, I thought it was a great technology. And so when we started evolving as a company, we thought, why can't we bring RFID into this system? And so what we did is we brought in some consultants to help us with the hardware. One of our founders just happened to be, who I've known for years and he worked for me, um, he's got a PhD in biomedical engineering. And I didn't even really realize this until we started working together again, uh, he had a double E. And all those— all his assets all came into play. I mean, he, he had a kind of a background in software, so he was able to manage a lot, a lot of things. So, uh, so we engaged these consultants both on the hardware and the RFID side and the software side. So we were, you know, we weren't an implant company, we weren't making any implants. We had to focus on making this technology. So we went in the marketplace. One of the pieces we had to make sure is our delivery system had to be— have as little metal as possible. RFID does not like metal. It gets in the way. And so we found a— what's a medtech cart out there that was a lot of plastic. And so when we designed the infrastructure, the technology around this, you know, one of these big questions was— and if you kind of understand how this works is everything we do is in a sterile pack, both, both implants and instrumentation. Instrumentations are disposable. Uh, we don't do any autoclave trays. Uh, we don't burden the facility with cleaning any of our products. Uh, and so that was one of the benefits to the facility to save money. Um, and so when we had this all developed, we got all the electronics working, got the software working, uh, we built a user interface, uh, which we had, and that was really on the ortho side. That's where we kind of came more into play because we understood how these cases were processed. And so that interface became what, what the user sees. And so after a lot of development, a lot of work, we also went down the path. We thought, well, what are we going to do first? How do we prove this is going to work? We designed a bone screw and we knew in our mind that we're going to need a stream of revenue, whether this becomes a capital sale or just a consigned activity. And we put product in the cart. And so we tied it to an ERP system. And the way I like to think of this is we hardwired it, and it's not— everything goes across the cloud, but every call and every put, it was all tied to X-Tuple, which is— was an open source— it still is an open source software package. So we had to hire a software guy on that side to make sure our system worked with all the RFID information coming in and going out. And so it all came together, and At the same time, we're developing packaging, sterile packaging that works uniquely in our system and will take orthopedic products but could take anything that would fit in the package. Another challenge was making the— getting the sterile, the sealing validations completed. If you've ever done sterile packaging, there's a ton of work there. So we've got a lot of moving parts, a lot of things happening, and then we get around to doing it. So we, you know, this took like 3 or 3 and a half years to get to this point. Years. And so we did a fundraise. It was a friend or family, but we raised a good amount of money. And it's the only one we've ever done to this day, 9 years later. And some people look at it, you know, they come to our conferences and they'll go through everything we've done and they say, how much we raised? I tell them and they almost pass out because we've done so much with the money we have to get a product, technology, software, packaging all in the marketplace. Is a very expensive adventure. So I still remember to this day the first case we ever did. You know, it was like being there when a light bulb went off or, you know, the phone worked. And it's like, so the doctor called me and he said, he said, Michael, we did our first case. We processed it at the cart, at the delivery system. We did the tags. We put in— I'll come back and explain how the tags work. But we did this case and he calls me probably even before the patient's out of the room. He steps out and he calls me. And I'm, you know, in another part of the country and I'm looking at the case come across and he's telling me what they used. And I was like, hey doc, I already know what you used. I got it right here on my screen. And that's how it worked. I mean, that, that, that, that day was an amazing day for all of us because we proved the technology did work. To step back a little bit and kind of explain how it does work, we shield our delivery system. Everything in it is shielded, and inside there we developed the infrastructure for RFID reading. Okay? And then we developed it outside of the cart on how we read things outside the cart. So if you can imagine it's a point of sale system in an orthopedic surgical suite and you're processing cases immediately, you— what you do is our tag is inside between the lid of the sterile pack and the label. You peel it off and you just stick them on top of the cart. You create a case, it takes about under 30 seconds, 4 pieces of information. That's all they need. You hit scan and suddenly you just populate a screen of everything you use. Every product has a serial number to it attached. So we, you know, there's some requirements here just from tracking devices. So every serial number is tracked. It populates that implant usage form. And when they close the case, then it's communicated via email to whoever we needed to communicate, whether it's the purchasing manager, the circulator, the rep. But the real important one is back to us, because when we get it here, we know exactly what got used. We're pulling the product and shipping it for next day replacement. And so now we've— now we're shipping this product and it's arriving at the facility. The rep could take it in, the whoever, the purchasing manager, and all they have to do is put it inside the cart, the delivery system, and the cart is constantly pulling and it'll actually transfer that inventory from our facility here to that inventory location.

So there's—

look at that— provided something real important to the customer, which was a complete logistics solution where they're never going to have to worry about product. And by the way, no two carts are the same. No, no two delivery systems are the same. It just depends on what they use. And so we use the information, the consumption information, to determine Okay, we don't need that plate because they never use it. And I— or I don't need 3 of those because they only use 1 a month. And so that becomes a— from an OEM standpoint, that's a big bonus because in our industry, if you know anything about autoclave trays, they're sticking hundreds of everything in there. I mean, in every different version of it too. And they come in with these trays and of course they're having the facility clean those trays. And I'll now go off a little bit. There's studies out there on how much those trays cost to clean for a facility. They range from $100 to $400. Um, and so now we can go in there with our system, say, hey, you know, stop cleaning trays, we don't need you to do it. And by the way, we just eliminated the bio burden from your sterile activity associated with OEM products because none of our stuff gets cleaned. It's already sterilized. It's, it's never touched a body. And I'll tell you the funniest joke. I, um, if you know what a reamer is, and Tiger, I know you probably know this, but so we have a, we have these reamers that we, that are also part of our MPJ system. And we've had a couple of doctors complain about them. And so they got them. I said, what's the problem? He says, it cuts too quick. Like, what do you mean it cuts too quick? It's— I don't know. I just, I just burned through the bone too fast. I'm like, that's because they're reusing reamers and you're used to using a very dull reamer. And so I looked at it as a positive, like, well, you got a new device. Shouldn't you do that with a new patient? I mean, why would you put something used on a patient? And so this is what we've been trying to do all along, is focus on these two areas, which is reducing costs to the healthcare facilities and also increasing patient safety and health. Because, you know, processing— I'm sorry, go ahead.

You have a question?

Yeah. Everybody go to the websites in the chat if you can see that, and you can see a picture of the cart. And then Kyle's got a question and then Asher.

Shoot. Yeah. So Michael, like 12 years ago at the Pew, we did some stuff with single-use reamers and drills. And it was such a logical thing to say, look, I mean, you wouldn't reuse a saw blade or a scalpel. Why are you reusing these other cutting tools? So it's, but it's funny because not, not everybody in the industry has kind of connected that. They used, they're used to things getting dull and over and over. Tell me about with, with your business model, what do you think distinguishes you from Flower Orthopedics? Because I got to know that company really well, and I think in principle there's a couple of core differences, but I'd like to hear what— how you would describe that.

So I'll tell you that the biggest difference is, if you look at Flowers or Intebones or any of these companies, what, what is the one thing they probably have in common? If they— is they overbox. Okay, so they'll overbox a tray, and what that means is basically they're delivering in flowers, I think they're called pods, but they'll, they'll put their trays, the double sterile trays inside some sort of box. And I've heard this and I'm not seeing, but people complain about this. It's like, well, this is more confusing than being able to, you know, than just doing it, dealing with trays because I'm going through all these boxes. So the rep has to bring in all of these sterile to almost— they don't have to go to central processing, but they have to bring in a lot of stuff. And I've heard this a couple of times. The difference between us and them is if you look at our tray, if you look at our system, we don't box at all. So the GEOCART can, can you can have up to the big one at least 1,200 packaged items. And so when you're trying to find something and this is a big difference, you're just opening a drawer and going straight to it and unpackaging it. You're not, you're not fumbling through things. And I've, I've heard that's a real issue with these sterile package companies that just do sterile packaging. What we've done is we've taken that sterile packaging concept and just said, look, let's make this an efficient exercise, uh, for the customer. And then the other thing we did is, if you get— I don't know, I can't remember what's on our website, but if you go in there, you'll see maybe some images of our drawers with product in it. The way we— we got experts that know human identification of how you identify things. Uh, we do Tallman lettering, we do certain aspects of it to where you can find an implant and an instrument kit very quickly. And that was one of our concerns to begin with. Will they be able to find this product in a sea of products? And it turned out, yeah, they— yes, they can, and it's not difficult at all. So I would draw that distinction in the way we deliver the product between a sterile company, the 5 or 6 that are out in foot and ankle, and us. And did that— was that a good answer? I hope it was.

Good question. Go ahead, Asher.

Uh, so I have a 2-part question, but they kind of root back to the same underlying concept. Um, the first one is, I'm familiar with the vending machines that you used to see in the old school days with like Zimmer or DePuy, I forgot exactly what company. And one of the big complaints I always heard about those was they take up a massive amount of foot space when they're not being used. And the sort of second part question is, when, if you're just starting off with a new hospital, how do you deal with loaners, with reps having to sort of wheel this cart in and out of the hospital? 'Cause a lot of hospitals simply just don't have the foot space to, to hold something like this on consignment long term. So I guess, how do you, how have the, how has the perception been comparing this to like the old school vending machines? And then what do you, what do your reps deal with when the hospitals don't let them keep inventory there long term?

So good question. Um, I always come back to trays. You could probably find in any hospital a room somewhere with just racks and racks of products in trays. So it's not, not every— in a good portion, they allow these, the storage of this. It was a challenge when we first came out with the system. We had a large system and then we went to a smaller delivery system that's probably no bigger than a cart that you'll see in a hospital being pushed around for anything, for med delivery, for whatever. And so it is a challenge, but more in an ASC market than a hospital market because they'll always find a cubbyhole in a, in a hospital. And that actually kind of scares us because then it gets buried. You know, the concept was depending on the size of the surgical suite, the thing can stay in there if they want to, or they can put it in the hallway. The uniqueness about the system, let's say you're in an ASC and you've got 4 rooms and you've got a hand guy and a foot guy and whoever else, they can come access the cart outside of the room and you can have multiple cases. So you don't need multiple carts. Now, we don't, we don't move the cart in and out of the facility. We either find a way to make it stay in the facility and we consign it for no cost. We don't want to be more expensive than anybody else. We don't want to add a burden. So, uh, the, the idea, and it's always, uh, you know, something we look at, is there going to be the volume there to support that? But you're right, footprint is always an issue. But I always tell people, like, well, then get rid of those trays off the shelf and just roll this thing in there. And, you know, and suddenly you'll get free space. I liken that kind of concept— if you go to the grocery store, everybody's jockeying for a shelf space, and that's what's happening in orthopedics too. They're always trying to get their space on the shelf, and the cart— we always find a place for the cart. The only challenge is usually in an ASC where they're very limited in space. So, but we usually find a way to make it happen. Was there— I think I answered both your questions. Maybe I didn't. I don't know.

Well, I guess, so how is this different than, than like just like a mobile vending machine with like sterile pack boxes in the machine?

Well, it's orthopedics, okay? I mean, you know, you're not— you are dealing with implants, and there's not a lot of systems out there like that that do implants in the manner we do. You can't, you can't put— I once, I was at a conference, a Becker's conference, and I saw somebody try to make a mobile, you know, like a vending machine with this you know, spinning and the dropping and all that. And I think they put about 100 parts in there. I was like, you can't do that in orthopedics. You've got to be able to get volume. And if I can get 1,200 individual packaged items, then I'm going to cover all their cases. And by the way, I don't need to have 2 sets of trays for every case, which a lot of facilities are now requiring that you bring in a backup system. Very expensive. We don't even have to think about it. You could do 5 cases with our system. So There is a big difference. Basically, we're in an environment where you have to have high volume, and I don't see vending machines out there that can do that. Good.

Steven, and then Mark Maloney.

Are you guys also manufacturing all these implants yourself?

We are the manufacturers of record, and we outsource the manufacturing. We're not a machine shop, but that was something we just weren't— we didn't want to go off and do that, and it was too expensive. So I love manufacturing and I'd love to do that, but we're not going to.

The reason I ask, I look specifically at the staples. You know, there's a lot of pre-packaged, pretty good staples on the market. Like if you could do some type of licensing with BME and J&J and say, yeah, you can utilize this and find some type of backdoor there, that'd be an interesting play as well, specific in an ASC. Because I just, I know I'm coming from old foot and ankle days. A lot of these cases are moving to the, to the ASCs now.

Absolutely. Our staple system, I mean, this is the my view, and I get a lot of feedback from surgeons, they basically say you need to market this more. You need to market that particular system because the uniqueness about that system, one of the things that you need is unique besides the delivery. I mean, the staples, they're not that much different. They really— a lot of staples are all the same, but the way the unit delivers it in a sterile package, you could actually, if you're good at using this system, you can take the staple back out using the same inserter. And there's really not many that can do that. I mean, we can actually open the legs again, but but you got to be good at it.

We just—

we didn't design it that way, it just turned out that way. Yeah, thank you.

Yep. Yeah, Mike— Michael's company is really not an implant company. It's hard to get your mind around that. It's really a smart supply chain logistics point-of-sale company, uh, but he just— they had to make implants just to test the system.

So we just— then it just kept rolling from there. And, you know, if we weren't in orthopedics, we probably would have never done it, but having that ability to do some of this, improve these technologies. And, you know, I go back to packaging is so important. You know, it's, it's testing all of our packaging. And we had to come out with that packaging when we first started. We weren't really sure what size of package we needed, so we just kind of guessed and it worked out.

But to build on Stephen's question, why couldn't you be an agnostic provider and just sell anybody staples or screws?

That's, that's a great question. And we can, and I tell the people that are involved in our company all the time, it's like, I'm going to go back to, and somebody asked me this not long ago, if I were going to do something different, what would it be? That technology, when we developed those interfaces to the ERP system, I'd have done that differently. Because today, I can't just port that data over to anybody. It's all going through my system. And people don't want that, and I don't want it either. I don't want to be doing their billing for 'em and collections and everything else and provide— what I want to do is provide 'em a system to manage their own inventory and dump it into their system. And we're getting pretty close. I mean, we're actually been working on a solution for that. So that's something I wish I'd done, we had done differently, but we're going to solve that. And then we could put anybody's product in there.

Interesting. Okay, Mark.

So actually Tiger asked the questions I was going to ask, and I was just going to ask you, are you an implant company or a logistics company? Because it seemed to me like you're a logistics company, and that is of keen interest to me. I have deliberately cultivated over the last few years some very high-level relationships at big hospital systems for the senior vice presidents of logistics, and have generally found that they're really brainy guys, and they were very prescient in moving into that field rather than just hospital administration. And that's kind of where a lot of the smart money has gone because so many of the things, like for example, your products, the development of those foot and ankle implants and staples, we're pretty high on the bell curve of development. There's not a whole lot of difference, but that delivery system is fantastic. So that, thank you, Tiger Buford, for answering my questions. I appreciate that.

It's a good question and I get it on a regular ba— and usually I say, are you a technology company? I remember I did a Cannacord conference years ago and that question came up. What are you? Are you a technology? Are you an implant? Are you a software company? I said, I said, we have to be all those right now. We just had to. And if I were to pick a category I'd like to be, it's technology. Because when I start putting other people's products in this system and solve solutions for those other companies, we are really more of a technology slash logistics supply company at that point.

Got it. Go ahead, Asher.

Yeah, building off a lot of these questions on the types of products, do you feel like this is more economically viable for foot and ankle where your implants are significantly smaller than, let's say, like a hip or knee implant or like a large deformity spine construct? So how do you, I guess, how do you envision adapting this to other types of orthopedic procedures and products?

It's a good question. So, and I answer it this way, and I get that. So you're right. To begin with, foot and ankle, smaller products, higher volume, you know, and, you know, even the instruments are not that big. But when you do get into, and as far as knee implants, I think the implant itself is okay. It's when you start trying to do something with the instruments. And I think the worst and hardest one is probably external fixation because not only are there the implants so big, but so is the instrumentation. I truly believe this. If a company is smart enough and they've got really good packaging engineers, they can package anything. The big question is, can you reprocess it? Okay, so that was another business model that I really may have to go down because we've thought about that, and I've talked to our, you know, our providers in packaging and sterilization. Nobody is going to let me bring in something that was in a surgery and bring it into their cleanroom. They're just not going to. And, and if somebody knows a company that does that, I would love to know it, but to get to those bigger type procedural things with large instrumentation, the cost would not be that bad if you could reprocess and repackage it. Now, you may not be packaging in a, in a tray, you may be packaging in a, a sleeve or something, but I absolutely think if we want to help our industry reduce cost— because I get this all the time, they are cleaning way too much stuff, and I just recently heard another facility is going to start charging orthopedic companies to clean their trays. And, you know, you got to take that burden off the customer. And this is why my industry drives me crazy. It's like, you guys, you got to start thinking a little bit outside of your current way of doing things. And if a company would step up— and I've heard some companies do it, but I don't think they— I don't know if they really do, but that would be kind of a big move for us to get into that side of the business. I just don't want to do it, but I think it's almost going to be required. You know, for larger companies to, to stop asking their customer to clean their trays.

Makes sense. We've been talking about a theme here is labor. Hospital labor has become a big problem, and so that makes sense. Uh, Steve and then Kyle.

I would say another big problem would be, um, billing. And so I don't know if there's some API that you could build, that you could build to actually plug into whatever systems, you know, that are using for that. So that would be an interesting model instead of having to go back and I don't know, redevelop something. If you could plug an API in and then put that type of sensor on the internal packaging of an implant, that'd be really interesting.

Yeah. One of the things we looked at early on, and I, I've met several logistics purchasing managers and facilities and, and I wanted to do this, but they're, they're hesitant to do this. So like, why don't you just give me an open PO? Okay. Make it for— it's non-committal open PO. I mean, the cost of creating POs and facilities is very expensive too. If you gave me an open PO and I'd use that charge sheet to tap into that PO, you would only have to create one PO a year instead of 500 or 1,000 or whatever you're doing. And, you know, I just, I couldn't get any traction there. And I, I think it's such a simple solution and I'd love to be able to tap into that. And I'll tell you where else I would like our company to go is, is into the HR stuff. Not be an EHR company, but be a company that interfaces and provides— because all that stuff is hand put in or maybe even barcode, I don't know. It becomes a burden for the facility to do that and a lot of them hate doing it. But if we could create a system that would go, okay, here's the surgery, here's the 20 parts, I don't care what parts they are, they all got used, I got their serial number, we know the patient name and the date and everything else. Let's just upload it into Epic or something like that. Yeah, and to me that would be a home run. It's just, I mean, that's, that's a bigger thing to try to get to at some point, but I'd love to.

Yeah, if you can expand into— we're talking about like the Recon world essentially. There is your cart, cert— a, a nurse will take off whatever implants they think they're going to use, and then they should essentially swipe on a sensor by her computer what's being used or not. So that would be interesting, and then automatically goes into the bill and they can put back whatever.

Yeah, so, and the other topic that's come up recently is capitated pricing. Or procedural pricing. And it's another thing we're looking at, a modification to our software is how do you, how do you manage that when you're providing other parts? Not— do not— and so a big difference between us and also other companies, we do not do procedural kits. Okay. We believe that you should only use the items that you want, number one, and that you need. I've had surgeons complain about certain kits. Hey, they're telling me I've got to use that size. Plate or screw or whatever, and I don't like that. In our system, you don't. Every individual implant, whether it's a screw, a plate, or what, is individually packaged. You pick what you need. But then to go to a capitated pricing market, you kind of have to figure out, okay, if I allow you this and then you use other things for other parts of that surgery, how do I keep up with that? And so those are all, to me, software-type solutions that certainly can happen.

Kyle?

So Michael, what I find interesting here when you think about how this can make its way into the orthopedic space, let's take total hips as an example. You know, you're never gonna be able to probably offer something here that lives in the world of complex revisions or X-fix like you mentioned before because the number of comorbidities and variables and complications are just through the roof.. But those are the same reasons those procedures aren't likely to make their way largely or even at all into the ASCs.

Great.

But the other thing that I find interesting is at some point this industry is going to decide that for primary patients with the right indications and at the right treatment point in their disease, we've reached good enough. I mean, there are dozens and dozens of different products on the market that are established at 95+ percent survivorship beyond 15 years. Right now, as an engineer, I kind of want to say we can keep making it better. But realistically, we are not far from people realizing and accepting we have reached good enough. And so in your world and what you're trying to do with this cart and control that and a push to the ASCs, what I wonder might emerge is, is the ability to say, look, if you've got one type of blade stem that's offered in two sizes and two offsets with a couple of head options, and this generic cup and this generic liner, and that's all you need. And then the instrument burden isn't tremendous beyond that. It all kind of carries forward. But what's gonna end up needing to happen, or the only way I think that happens, is if there is a, a balancing act between cost savings, where it's being performed, and a recognition of we've reached a good enough survivorship place.

Yeah, you know, it's, it's our industry. And sometimes we're our own worst enemies. I mean, we just kind of want to keep developing the same stuff and we want to change the color and, you know, make this a little wider. But it all is the same stuff at some point. I mean, I always, always believe the development of any additional orthopedic products, it's got to be pretty drastic to be any different than what we've got. And then you, then you think about, well, then it becomes a general— it's, it's a commodity. And we talk about things just being commodity products and then the system could deal with that pretty easily. But you're right. I mean, it's like, you know, do you get to that one type of product? And if you ask a surgeon, hey, you know, you do this type of procedure 100 times a year, do you really need 5 different types of this type of product to do the same thing? And I think they would say they don't, but it is kind of the way our industry works right now.

Yeah. Another fact is I think the outcomes are disconnected from the product development. So, for instance, total knees or total hips, by the time you figure out if it works or not, 15 years later, you can't get that hip or knee anymore. Right. Your own version 7, you know, and it's different poly and different everything. So the outcomes are disconnected from, from products, unfortunately. We have a chat question, uh, with each cart as a stocking and inventory control point, are there potential challenges with a larger facility and having the restock go from the centralized point to distributed throughout the ore? So I think it's a logistics question about, you know, just getting the product through a giant organization.

So half of our, half our systems are in hospitals right now. And so, you know, again, when we replenish things, you know, instead of our shipments, if you think of shipping a tray to a facility and if you know anything about how they manage trays, you, you could have trunk stock and we all know what that is, or you can have a case inventory where you're sending things in for cases. And that becomes a pretty big bill. What we're shipping is a very small package. So ours probably goes in the small or medium-sized FedEx box. And we put geotape all over everything. And then the people that really know what geo is in the facility, they know where exactly to send it. So if it's going to the logistics individual, or I may ship it to the rep and have him bring it in. And it becomes a simpler process at that point. So it's again, it just depends. We've never had anything get lost that way. And so we know when that, that product actually is received into the cart. If we ship it and the next day it doesn't get there, we know it. And then, you know, then there's a process. Okay, now somebody needs to start looking for it. The amazing thing— I didn't really tell anybody this, but when I get to work here in the morning, and I go into my ERP system, which is unique to us, I go into a cart management screen and I just hit a query and I can see the cases as they're happening. And that's powerful to, to anybody that's running a company. You can see exactly who used what, how much they used, how much it costs, and then you know exactly what you have to ship that day. And that makes our, our ability. So in this industry, if you're trying to find something, you're a company, and you're trying to find something out in the field, you know, get on the phone and start calling because that's probably the best way to do it. What we do is we just go through the carts. We just go, okay, I'll talk to my logistics person. Tell me where this product is. Tell me where all the locations is. We're running low on it. I may have to reallocate it and then I'll get a list same day and he'll tell me exactly where it's at. And then I'll get on the— I'll have somebody get on the phone and say, we need to move some of this stuff around. And that's how you do it with this system. And it works pretty good.

That's really powerful. Okay, Kyle, and then Mark Maloney.

Mark, go ahead.

Yeah. Why don't you get rid of the cart and just become a software agnostic logistics ERP company?

Because we don't have an ERP module. We don't write ERP software. I mean, I don't— and I don't want to do that. I mean, I— the idea was to become something that changed our industry and changed it in a very impactful way. And I— if you stand in those surgeries long enough and I've been doing it for years, you know, when you see somebody over here where there's somebody writing things down on a piece of paper, okay, okay, what was that part number? What's the description?

What?

And you think, are you kidding me, right? I mean, this is, this is what we do. And that hasn't changed in 40— I mean, I don't know if it's changed much at all.

I get that. I get that. I, I'm asking you that because I'm actually working on the user experience of a software program right now that is completely agnostic and that allows a rep in the OR just to make a few clicks on a template and that goes right to the ERP and right wherever you want it to go. So, I mean, I, I love what you're doing. I'm just asking, why don't you just, you know, instead of being an implant logistics company hybrid, seems like you could grow a lot bigger by becoming just a software as a service company.

Could. Sometimes. I mean, we, we don't actually, we don't write our own software. We outsource the software like we do the implants. But, uh, we do, you know, we've been working in this long enough to know exactly what kind of, you know, so this piece I talked about, the one thing I would change if we did something different. This is what we're working on right now. It actually becomes that what you're talking about. I mean, suddenly I'm just a provider of information to other ERP systems, which is, which is what you want. And by the way, this doesn't have to be— we talk about not just being worth— I mean, we could put catheters in this. There's a lot of things we could put in this system. If I can get my hands on it and tag it, that's the most important part.

Thanks. Yeah. Okay, Kyle, you're back.

So, Michael, I think you just alluded to this, but one of the hit on it. With what you described, as far as you can come in, come into the office, do a query, see what happens, see what cases in real time— have you, have you had the experience where that has given you the opportunity to, I guess, customize or adjust in real time for the demands of a given market or a given product or a given practice, where you say, look, boy, this, this doc keeps using my 6.0 cannulated screws. Let's adjust his standard inventory to carry more of those because just that's the makeup of his practice. Have you seen that, that sort of thing happen in real time?

Yeah, we actually have. I'll give you a real-life example. So we have an 8.0 screw, which is kind of an outlier. I mean, it's a very large screw. It's the largest screw we carry. And, and I, you know, we have so many links And after about 3 years, I'm looking at this and I didn't start looking at it for 3 years. I've been looking at it for a while. I just eliminated some of these products. I didn't just, I didn't just not disclose, not, not do it anymore. I just took them off the list of things I want to support because in that case I could find, you know, an 8-0 screw from 100 to 130 or maybe from 90 to 130. That's the largest volume and everything else is a waste of inventory. And so I just said, you know what, that's it. I'm not making any more of these. And we're moving them out. And so that— those kind of decisions are made strictly off the data I pull. And, and, and I'm gonna add one more thing. So we don't meet every day in logistics. We meet once a week. But in those meetings, our data is so real-time, we can figure out exactly what got used in the last 5 days and base our logistics and purchasing decision off of that information. And that's what we do. That's how we manage it. It's a good question.

Good stuff.

So— and, and your data is tied to a unit and that unit, you could have 5 units in a territory and that data is not accumulated together generically just because it got billed to the same system, right? So you've, you've also created a level of granularity if you want it, right?

Exactly. Because I know I've, I think I said at the beginning, there are no 2 cards that are the same as far as what's in them. And, you know, if that guy over there is, is not even using 8-0 screws, I pull it out, you know, because at some point you think— and the fallacy in our industry is that if you look at these autoclave trays, they stick every possible everything in there, okay? No matter who it is, they just load them up. And there's so much not used. And think about this, think about all those products that are not used, how many times they get washed. I've looked at some, some data on that too. When you go through a cleaning process, just, it's just, it's not the same after 100 or 200 washes. And you think about, well, I don't know if you'll ever use that, but if you did, it's, it's certainly not a new part anymore. And so where we can better manage this is just like, well, I'm going to go into that account, I'm going to say, you know what, this is what we're going to pull out, I'm going to go send it to someone that actually uses it, or I'm just going to stop carrying it. And we've got to those decisions too. And that's a big That's very powerful of the system to allow us to do that.

Good. So Michael, let's turn it around and you ask the, uh, group, uh, I know we talked about growing distribution, software, funding a little bit, and kind of the rep light concept, but ask, you know, you've got us, ask us anything you need.

Well, the, the one— thank you, Tiger, I appreciate it— the one thing we're really not— and look, I've been in, I've managed sales before, but we're really not a sales company. I mean, and we're not really trying to be, but we do want to— the way I look at the system is to increase the value of our company isn't really necessarily about implants, it's the distribution model. And if I went from 30 carts to 60 or 100, suddenly I have a footprint that becomes extremely valuable. And when we talk about putting other products into the system, then people could go like, wow, I could get into 100 accounts. And, you know, all you have— and obviously you got to get on contract, things of that nature. But I could deliver this and you could help me do that. That's to me a very valuable exercise. And so when I'm looking at— and what's, what's my biggest challenge in the market as far as— and I'll go back to what this kind of— this is not a rep list system. It's not. And, you know, people have used those terms before. I, I always call it a rep light system. I need reps. I need reps to get me into accounts. I need reps. You know, you just can't walk away from the system either. You got to keep it organized. You got to make sure it's, you know, it's technology. You just can't assume it's always going to, you know, be as clean, but you got to make sure you interface with it. So my challenge in this market in orthopedics is really distribution. And when I look at foot and ankle, it's hard to find distribution that isn't carrying 2 or 3 lines. We don't have any direct employees in the field. You know, as a startup, you always go distribution first. That's just a general— I think I've always understood that. But finding— and I've engaged a firm and we've done a lot of search and we're actually bringing on more distributors now. It's just been a challenge. And the other challenge is when we place a cart, we're much more cautious now. I mean, I can place tons of carts and, and sell one screw a month. I was like, no, we can't do that. He's— you got to get buy-in and you got to get volume, otherwise the cart's a wasted asset. And so when we go down that distribution model, you know, that this is something I, I've— as a company, we have struggled with finding, uh, enough distributors and getting distributors to really, um, you know, really engage and get the— it thinks it I think it makes their job easier though, because there is a value here. They can go to the VAC committees and talk about how much they can save and how much, you know, even if you look at when patients get sick and the legal expenses with that, I mean, there is a definite cost benefit to the facility. So it makes it a little bit, you know, if we just want to be a plate and screw company, you know, we've probably gotten not very far. I mean, because it's kind of already been done so many times. So that is a challenge of the company, is, is really finding distributors, uh, in markets that, uh, aren't really carrying a ton of competing products. I mean, I, I, I know I can't be the all everything to a one territory, but I certainly would like to get enough attention and find the right people to promote the technology and sell the product. So that's— I put that out to the group if somebody has, uh, and again, I, I've actually hired some groups that have done really good as far as finding distributors for me. But I mean, even in my own home state, we're located in Dallas. I can't really— I haven't had a lot of success finding distributors.

So for what it's worth, what are you doing to find distributors, Michael?

What's the— well, like I said, I've engaged a search firm too, and they've, you know, they've done a pretty good job. And, you know, a lot of the conversations are really good. You know, I think I probably get maybe a 50% hit. They got it. But, you know, the ones that I don't get, they're carrying 5 other products and I kind of stay away from those. And when I say products, 5 other foot and ankle products right now. Long term, if we need to go down the path and continue to make implants for whatever, it'd probably be upper extremity, hand, things like that. So, and I think of that in terms of the ASC market and what surgeries are happening in those markets. And, you know, if you get a good SportsMed guy, you get a good foot and ankle guy, you get a good hand guy, you know, you kind of, you want to provide the system to multiple disciplines. And so finding the right distribution is important for us.

Do you, do you pitch it to a distributor or rep that you can cover more cases with less effort? Absolutely. Money.

Yeah. Yeah. And they all get that. They absolutely get that. You know, does that get them away from some of the other lines they carry? It's a hit or miss. Sometimes you almost have to go down the path and say you place a couple of cards. And you find out the hard way. The most expensive part next to the card itself is delivering the system and picking it back up. Okay, it goes LTL. And so you gotta, gotta be smart about that. You gotta figure out, okay, is this an account you're gonna actually promote and get volume out of? Otherwise, I don't want to ship it. So that's why finding distribution is extremely important.

Interesting. Asher and Steven are up.

So I've got, I guess, a comment and then a question. Um, for you guys specifically, one of the things that we did, what I've done in the past when I'm like, you know, struggling to find distributors in a specific geography is just offer an override to distributors that you're currently working with to refer business where you pay them, you know, a small percentage of whatever revenue they bring in from other distributors that they introduce you to. And, you know, you, you make it time constrained, you know, profit-based, whatever it is, but It's a great way to incentivize your current distributors to refer you to people that are in non-competitive markets for you to essentially just get a free referral— not free, but, you know, a compensated referral based on actual revenue generated. And then I guess my question is, is based on your difficulty potentially finding distributors, I actually don't get why you're going through distributors at all. It— I don't understand why you wouldn't go directly to SCA or USPI and essentially just say, we can offload all of your inventory storage and we can significantly streamline your inventory management at all of your— at all the ASC they own or partly own, and then just essentially force the distributors to adopt this as a new way to store their inventory, and then work with all the local manufacturers selling into those ASCs and essentially just repackage their inventory in your system. Because I think if you go through SCA and USPI, they have all of your customers, they know all your customers, and they're going to understand the financial incentives way better than your distributors will. And I think expecting your distributors to take on the work to then change their workflow is a really difficult ask because they're so accustomed to it. It's difficult to change human behavior voluntarily. Whereas if you go through USPI or SCA, they'll just force the distributors or the manufacturers to use this similar to how like a lot of these hospitals force manufacturers to use specific coding or billing services.

So good question. Good point. We've done that. Actually, the override piece I've actually done in certain areas. And, you know, most people are okay with it. There's just a lot of energy to get somebody up and running and sometimes it's disappointing. Back to the SCA USPI question. Yeah, the problem in our industry, which has never gone away, and I'm not saying it's a problem, it's just reality. Surgeons still have a lot of— a lot to say, and they should, on what product they're going to use. Okay. And so that's really where a distributor can come into play in helping those surgeons accept our technology and our product. So I totally get the override piece. We've done it to some success, but not a ton. And contracting, it's something I want to get, I would say, better at. I just do, because we don't really have any national GPO contracts or some of this stuff. And it's kind of one of our charter objectives this year is to try to do more of that. You know, when you're a small company, you know, and you got the CEO and the chief technology, we're all doing this same stuff. So you know, we get on whatever we can get on at that time and we focus on trying to figure out how to get the system into more places. But you're right. And we had— we've had conversations early on. And, you know, that's why we try to go to different conferences to meet people that are not just, you know, surgeons, to meet decision makers and facilities, whether the C-suites or whoever it is. It's just— it's just a matter of resources is what it comes down to and being able to do all this stuff.

So I guess just to— I don't know if I didn't ask my question as well as I should have. If you're product agnostic, you're not asking surgeons to change their product, you're not forcing distributors to essentially change or promote a specific product over another. You're just asking the facility to effectively repackage their current inventory in a different meat using your cart and the software system, integrating somebody else's product into your cart. So from a workflow standpoint, And I see Mark shaking his head, so maybe I'm misunderstanding, but wouldn't it not be more effective to go to the underlying people who drive the inventory storage and financial decisions and essentially push the manufacturer similar to like one tray, where instead of using, you know, a generic aluminum tray, you're now forced to put your instrument sets in a one tray set? And that's kind of like the closest analogy I can think of where the underlying product doesn't change, it's just how you're packaging and storing it.

Yeah, so first, we're not product agnostic yet. Oh yeah, okay. All we can, all we can do is sell and package our product. The software changes can make us product agnostic, but that only gets us a solution. I have to convince, or we have to convince, these other OEMs to do this, and that's, that's not easy. Uh, so if you— when I say other OEMs, if they want to, if they want to use a Stryker plate or a Paragon system, whatever, I got to get them to agree to that. And that, you know, not everybody wants to agree to that. And so when we talk about going and getting contract, I would love to be able to have them say, hey, you know what, you need to put this in the cart and you need to work through that company, figure out how to tag it, because that's really what this comes down to, going into sterile packaging and tagging. Now, the companies that have recently acquired all these other companies like Crossroads and, and Intobones and Novostep and all those would be ideal companies to work with. Because they've already sterile packaged it and that would go into our system very easily. It's just getting them to the table and kind of making that something happen like that. But our software isn't ready to do that yet, but it's good. Got it. Okay.

All right. That's what I was just understanding, because I was thinking if the implant is already sterile packed, you can just piggyback off of the existing barcode and then just effectively fit in that sterile packed implant into your tray. Absolutely.

Now, the only other challenge we have is, is capacity. When, when I— when we start putting other people's products into the system, every one of our trays, the way we manage the inventory, if you get a chance to look at that website, you'll see it's very much in a row. The package fits perfectly. There's no other packages that look like that. Those packages are unique to us. So there would probably be a reduction in the capacity of what you can put in the cart. That doesn't— that's not going to kill it, but we just have to figure out how to manage that piece and get them out of the boxes because we don't do boxes. Boxes take up too much space.

Good, good, good stuff. Mark's up.

So the question of distribution is an age-old conundrum and challenge. And all of my experience over the years, and by the way, I was the first Orthofix guy here in the Southeast, so I knew that product line, but not spine. I was X-Fix.

When was that? You probably— why don't I know you?

Well, because after building it up, it was the, I was, I was with EBI in the early '90s.

Oh yeah.

Built it up and they, they wouldn't give me a distributorship and they basically lied to me. So I became director of sales at Orthologic and I took Orthologic from $2.5 million to $30 million and it all came outta EBI's ass.

So good for you.

It was, The, but the, it's the, it's an age-old challenge. And I only have this observation, and that is in every Salesforce I've either ever helped start or led, the quality of distribution was directly proportional to the inspirational leadership of the regional manager. Absolutely directional. You can take a really great regional manager, can take a very average distributor and just put them on fire. Right. And it's not just taking them to dinner and wining and dining them. I don't know. It's pretty— it's, it's almost an indefinable X factor. But that's the— that is the challenge to me, finding those guys.

No, I do believe that you need to— you need to treat the distributors as your customer also.

Absolutely.

You need to do that. And they're not important to you. They're not going to do anything for you. You're just wasting your time and money.

I mean, I tell my regional managers, I said, the first thing you got to say is, you work with me and I'll make you money. Take me to the places that won't see you. Take me to the doctors that won't buy from you, and I will help you make a deal. And, and if you can't do that, you're not worth it. So anyway, good luck to you on that. That's— I love what you're doing.

Thank you. Appreciate it.

Good stuff. You want to— oh, Stephen's back.

Yep.

I was just gonna say, for trying to locate distributors, MedTech Intel, phenomenal platform. Definitely check it out. It gives you a whole profile of who the distributors you're working with from a surgeon standpoint or a doc's— sorry, a company standpoint. Pretty gritty platform they have over there, and it's pretty inexpensive as well.

It's called MedTech Intel?

MedTech Intel.

Yep.

I'll actually put it in the chat right now.

I appreciate that.

Tell them that you went from PitchSync and you'll get a discount for that as well.

Excellent. Yeah. You know, the funny thing is people, when they talk about our system, they call us the Pixis of orthopedics. Now Pixis is different. People understand that. So early on, we, we would have loved to figure out how to tell somebody exactly what tray, what row everything was in. It's a little harder than that. So it is different than Pixis, but that's That's kind of the acronym that gets thrown around with us. And I don't mind it because FIXXX is a really good system.

Yeah, Michael and I were talking earlier and he said— I asked him, what does the customer think you are? And he said, we're the cart company.

Or we're the RFID guys.

You're RFID guys with the cart. They don't think about the plates and screws. It's interesting. Anything else, Michael? We got a few minutes. You wanna talk about funding software or—

Yeah, I mean, you know, you know, we, we've talked about AI. I, I think we've talked a little bit about that, but that's, you know, as a company, we're always looking for ideas, you know, around healthcare and, and maybe it's not even in orthopedic surgical procedures, but, you know, to, to us, this system is an incredible platform to collect information for that. And so I think as we move down in developing more tools for the system, you kind of look at that, okay, if you had machine learning languages involved in this process, what could you teach somebody in that room that would help them? And again, sticking to the two things that are important to us, reducing their cost and increasing patient safety. I would love to hear any ideas on that area. And don't limit yourself to a surgery for orthopedics. There's a couple of systems out in the market right now that, that are, that are RFID-based. Any time I see somebody send me something that is loading up orthopedic stuff and it has window or glass in it, I always go and it's like, okay, that's, that's not us. That's, that's not what our— you can't have glass. And put product in and expect to, to read accurately. Uh, and the, the thing about RFID is, which people don't realize, is when you start reading in an open environment, uh, it doesn't stay where it's at. It's bouncing off every wall that it hits. Uh, and so when we were out in the field, I've literally had to move some product, uh, into another room so it would stop reading it. You know, you open a drawer, you hit a read, and you scan, and suddenly you're picking up everything. It's like Now our system only picks up our stuff. It won't pick up another tag. And that's the way we developed it, which is— was important. But yeah, so it's kind of— we see a couple of folks out there trying to make similar systems, but no one— so we did patent our— the way we do this, we've got some really good patents and it allows us to really get volume into this system. And the reason why— so they have enough stuff, they have everything they need for these surgeries and they don't need to be going looking anywhere else to do a particular procedure. But anyway, I thought I'd just add that.

Here, I'll throw out one idea. I mean, imaging systems are getting really sophisticated now with AI. Why couldn't you take a CAT scan or MRI or X-ray and the GEO system say, this is what you need for the case? You could.

You actually could. One of the things we tried to do, and people just don't use it like I think they should, You remember the, the cards, the case cards, you know, this doctor uses this equipment, this saw blade, this on every case that we built that into the software. If people want to load that up so they're not actually reading it, a library card, it gives them that tool. We can download data, we can download procedural videos remotely. We can— and by the way, the other things that we can download pricing, any changes, everything. We don't have to physically go in front of the customer and say, hey, by the way, this is our new price, or something like that. You just— it just gets loaded. I mean, I remember at Orthofix, we'd come out with a new price schedule for the year, and it wouldn't be out there until like April or May. And then we finally got it to them, and it's like, okay, here's our new price. Half the year's over, and you're wondering why maybe this process doesn't work. But the great thing about that is we can actually make these remote changes easily. So it's helpful, but that's a good point. And that's kind of learning too. I mean, that helps, you know, if they could just pull up a video right there in the procedure. Now, the one thing people freak out about and we always do not do is we don't have a camera in that thing. We're not videoing anything in surgery. That's a bad thing. So we make sure no capability doing that.

Yeah, HIPAA. HIPAA is everywhere.

Yep.

HIPAA is everywhere. Yeah.

Mark, who do you think is your biggest competitor, um, as far as selling your implants are concerned?

Well, in foot and ankle, there's a lot. Probably, um, you know, I, I would say Stryker's my biggest competitor just because they're the biggest guy, but that, you know, it's hard for me to compete with Stryker. Yeah. I'm trying to compete with, I'm trying to compete in the AC market for the most part instead of There's different orthopedic companies that play in one, don't play in the other. I think Smith Nephew does really good in trauma. I don't know how, you know, so maybe they focus there. So since I'm in both hospitals and ASCs, I'm probably running into everybody. But, you know, also the smaller companies, I mean, I'm competing against them. I think to be a small company right now in orthopedics is not a good place. It's hard. It's very difficult. And, you know, you just got to— you got to have solutions. If you don't come to the table with solutions, then nobody really wants to do anything with you.

Yeah, I think if you want to make a small fortune in orthopedics now, you better start with a large one.

Yeah, that's true. That's true. And I go back to what we've been able to accomplish with just a little money. And it's because the way we, we as a group run the company. So we watch every penny we spend. We really do. And I think that's important when you're doing startups. You've got to— don't, don't get in front of your product. Don't get too far in front of your product. And what I mean by that is don't go hire 20 sales guys to sell something you haven't even released yet, uh, or don't go hire a big exec. You know, this happens a lot, and this is how these companies spend so much money, uh, and it's painful to watch all that money just go out the door.

Do you focus on the ortho foot and ankle or the podiatry, or do you care?

Um, both if we can. I mean, I think Both of those markets are important to us. We work with MDs and DPMs and, you know, there's a lot of volume. I mean, you know, there's different opinions on who does the most, but, you know, there's a lot of DPMs out there. You can't ignore that market. But at the same time, you know, you just want to serve as many customers in that area as you can because the person who ignores one or the other is going to hurt, in my opinion. So you got— you got to just make sure you're taking advantage of whatever business opportunities you can because again, it's all about the technology to us. So, you know, you'll see MDs and DPMs working together at times. And so I don't really care as long as they're using my stuff. That's what's important. Yeah.

What's the threshold for foot and ankle surgeon? How many procedures do they have to do to kind of earn a cart?

That's good. We, we actually measure that in dollars. I, I'm not gonna disclose the dollar amount, but you know what it really takes, you'd like to see you know, 15 cases at a minimum out of a cart each month. And there'll be some month— it's funny, as we get into summer, things slow down and then it gets busy again. And then, you know, it's just like, so you have a hard time keeping thresholds. But, you know, I've got some facilities that require 2 carts. Maybe one gets too full, you have to fill the other one up. And if they've got the volume, we'll put a second device in their system.

So, but basically one foot and ankle procedure day, roughly something like that.

Pretty much. But you know, they don't all happen on one day every day. It's, you know, what I've learned, and maybe I didn't know this before, Wednesday and Fridays are very busy days. Um, it's just the way, and Mondays are not busy days at all. I'll get cases, but they're fewer.

That's great transparency to all that, all that data. Well, thanks. We've gone over the hour. This has been great. Thanks, Michael. Yeah, good stuff. And welcome to Bone Chat. There's a different topic every week. Thanks for sharing.

You bet, Tiger. Appreciate it. Thanks for having me. Thanks to everybody. Great questions.

Take care.

See you, Mike. Great stuff.