BoneChat #39 - Useful logistics service for small ortho companies, discussion with OrthoEx CEO.

Welcome to Bone Chat Discussion number 39. We're thrilled to have Tony Pasca Lacroix here today. He's the founder and CEO of OrthoX. OrthoX is a specialized orthopedic third-party logistics service company, and it's something everybody needs when you start commercializing or before you do. So handing the mic over to Tony.

Welcome.

Well, I, I, I appreciate it. So I, well, I wanna start with my background. I appreciate you inviting me in. Um, so I'm in Scottsdale, Arizona. My background was 16 years at UPS and FedEx as a senior manager, one, and running 2 of the 4 largest, uh, you know, operations in the company. And after that, I got recruited over to Stryker. I did 12 years of hard time at Stryker. Um, ran one of their, ran, uh, the kind of the Western United States for for the orthopedic trauma division. We probably handled 1,000 cases a week amongst 5 different locations. And in that period of time, you know, I learned quite a bit. And then I started to get— we flipped it to a distributor. And then, you know how distributors work. And so I became a little available to the industry at that point in time. I was kind of talking to a gentleman named Josh Sandberg who I became partners with. And we kind of, we launched OrthoX along with some other companies. And we, Josh had seen, and we had seen this gap. And this gap with startups is the fact that, okay, I got a great idea, I got a surgeon, and I got this entire, you know, commercialization I need to happen. And how do I go about doing that? So we built a group of companies that kind of fit in that mold. Am I allowed to share my slide deck?

Yeah, yeah.

I don't know what—

No, please do. Yeah, absolutely.

So I just want to make sure that I can—

Tony's got very few slides and, and it's right to the point, which is great.

Yes. So hopefully you can see the business overview slide right now. All right, I appreciate it. So OrthoX is, is part of a medtech incubator, um, and I'll, I'll move over to medtech incubator. So as you can see here, it starts with, uh, MedTech Intel, which is a market intelligence company, an intelligence company It houses and holds probably 11,000 distributors in it. Every orthopedic and trauma surgeon in the country. It tries to link all the fellows together. It will give you kind of market intel when you're trying to launch into it. OSP Advisors is, and is a market access and a corporate structure, kind of helps you build out your corporate structure, helps get on the GPO and, and, and Gain Market Access, and then there's OrthoX, and I'm the president of OrthoX. Um, we handle operations and logistics for all types of different companies, startups, so trauma, spine, um, biologics, all of that. And within that, we do all the management of, of inventory. Within that, we have Surgical Health that manages your instrument trays, your, your implants, your consignments, your billings at the hospital. We'll manage your POs, expiration date, shipping and freight. So that's all kind of wound up into Ortho X and Surgio. And then this year we launched OrthoBooks. And so we'll go order to cash on that. So we can do— we can collect your POs, we can manage your books, provide, you know, back office support in, you know, providing reports all the way from accounting to CFO-level type of accounting. So like I said, this is our kind of medtech incubator, the group that we're in, but I'm the president of Ortho X, so I'm gonna switch over to Ortho X because that's what I really care about. Um, veteran-owned business. We're in Scottsdale, Arizona. We just moved into a 25,000-square-foot warehouse. We specialize in inventory management, uh, instruments, implant movement, all of that type of environment. Um, So one of the things that has set us apart is we're focused on the startup.

Okay?

And so we understand that, that it takes a ton of capital to, to get a product to market, to get it, get an instrument implant to, to gain that traction in the market. So we're very startup friendly with the way we structure our contracts. But we specialize in all the things that you see on the, on the screen here. Inventory management, national loaners, warehouse and distribution, initial importing, So that's kind of where Ortho-X sits in its, in its core, you know, business. I think we cater to the small, more complicated companies. I have 9 dedicated employees that this is what they do on a daily basis. And so, you know, you— it's streamlined, it's seamless. So when your customers or distributors want to reach out and, and get inventory and implants and all of that. It— we work, um, hand in hand with the manufacturer's quality system. As you can see, we're 13485 qualified. So on this portion of it, I'll stop, pause, take a breath, and let you ask any questions about what the— what Ortho-X can do for you, or anything that, that you may have a question on. Anybody?

Hey, can you guys hear me okay? Yeah, there we are.

Yeah.

Yes. Question for you related to sending banks out. We are a— we have disposable products all in a single tray. They go out in banks and a lot of times come back to us. They don't really stay in the field, so send it for a case and it comes back so we can control the inventory. Are you guys prepared to do something like that?

That's our core business.

Okay.

So that is part of our core business. So that's the national owners part right here. So in the national owner, second, second one box down, that's really what Surgiova Health is. It was built specifically to manage what we do, what you do as a company. So national owners manage consignment. So you may have a mix of consigned inventory and a mix of national owners. So we can handle the replenishment and the inventory management on the consigned locations, and then we can ship out your loaners and bring them back, track them, track how long they've been aging in the field, replenish them, get them back up, and turn them back around in the same day.

All right, great.

Thank you. Good, good question. Do you, do you guys handle, um, biologics? Yes. At all, Tony? Like dealing with storage of orthopedic implants in the heat and Vibration.

So we are at, um, we are a tissue bank now, so we, we have tissue license in every state. Um, Florida was probably the most difficult. We're still waiting for one thing to come back, but we currently have tissue licenses across the US. Uh, we have 3, 4 biologics companies that we do ambi— uh, ambient temperature biologic shipping for them, and we can do temperature-controlled shipping but not cold chain. We're not stepping into that market. So we're staying away from cold chain at this point.

And what is cold chain? Explain that to people like me that don't understand.

So if it would have to be shipped at like 50 below and monitored the whole time and all liquid nitrogen kind of stuff.

Yeah.

We're, we're, we're not getting into that realm. We can ship it if it's, let's say it's on ice or you wanted a temperature control, but you had a specific SOP that you wanted it packed, we can, we'll handle that. So our quality system covers all the requirements of 13485, but it will also incorporate any SOPs that any of the companies that they have. So we are able to mirror those SOPs and we have a way of tracking it and training our team on it. So, yeah, question.

Yeah, go ahead.

Where are your warehouses?

We're out of Scottsdale, so we have one warehouse. Everything's there? Yeah, yeah. And that— I, I believe it's a competitive advantage because one, we don't have weather disturbances out of Arizona. We can, uh, route things around any, um, uh, hub closures for FedEx and UPS. And we also have a time zone advantage over everyone, which allows us— if you're on the East Coast, you're 5 o'clock, your 3, 4, 5 o'clock billings will get replenished on the same day. And we support the West Coast. So the California, you know, distributors can get the same day. So you don't have— you actually reduce your carrying costs because of the fact that we're on the West Coast. And one of the things that I didn't mention is because of the amount of product we ship, we have a very large discount with FedEx. We pass the greater portion of that discount on to the companies that we do business with. And so that delta from, you know, maybe your 30% discount you have now to my discount covers probably 50 to 70% of the, my operational charge or the fee that you would incur by using us.

Tony, I have a quick question.

Do you operate outside the US as well?

As in, do I have part— I have a partner that works in Europe that we refer to. So if you're trying to get into the European Union, I have a business selling relationship with a company that mirrors our product line, our service line exactly. Through Ortho-X, and I can introduce you to them, and then they will help, you know, work through all of the, the requirements you need to distribute in Europe.

Great.

But, but nothing in Latin or South America yet?

I don't— I can ship into, to Latin and South America, but I don't have a footprint there. So if you had a distributor, I can export to them but I don't really have a warehousing or distribution in, in any of those countries.

Great, great. Thank you. So Tony, um, tell us kind of a day in the life of a SKU. So whether if it's a sterile pack implant or an instrument tray, so what actually happens? So, you know, there's a surgery in, you know, Chicago on, you know, next Thursday. So how do you guys get the order and how does it fulfilled and then how do you get it back? I, you know, this is way over my head logistics.

Yeah.

Trying to understand.

Not a problem. Yeah, it's kind of what I do. So, we just kind of go from a, let's say it's a national owner. So let's just say, you know, you're just starting up and you're trying to, to build a footprint. So you dump all your instruments into Ortho X and all your implants. What a distributor would do is they would reach out, request implants and instruments. We would ship them to them. So we would fulfill them based upon their request. They can do it via email or they could do it via the software package, either one. And so then we would put the case together and ship it to the distributor based upon his delivery date. And then when he does the case, obviously he's going to have a bill sheet. He's going to fill out his bill sheet, lot code, part number, and then he would either take a picture of it email it to us or upload it into the Surgio platform. But either way, they can do it either way. And at that point in time, we would process that, enter the bill sheet. If you engaged OrthoBooks at that point in time, if a PO was provided, we could invoice the company or the hospital at that particular point in time. So when we get the bill sheet, we would, you know, enter it into Surgio, then that would update all your inventory. So it would update the the quantity in the national loaner that is out, it'd update your inventory table. We would prepare the replenishment. They would already have labels to ship it back to us. They ship it back to us. We would pull the inventory that was used. We'd verify all the quantities of the, the, the implants, and we'd go through and inspect all the instruments. We do it, all of it twice. That's our protocol, so that we have an initial inspector and then we have a second inspection so that all the instruments have, have been, you know, validated and checked that they're in the set and that they're clean and, and operational before they go out. And at that point in time, we would, you know, wrap the setup, put it on the shelf, and that would be done. Now, if it was a distributor that had a consignment, he would just handle his business, fill out his case, send us the bill sheet, and then we would send out replenishments via FedEx if he had multiple cases. We bundle them together and send them out as, as, as one shipment. So we probably handle, we're up to about 30 to 35 shipments a day on replenishments, and we probably do 6 to 8, maybe 10, 12 loaners. We have a, I'll show you in a little bit. We have like 19 customers with probably, you know, 6 have a graduated timeline for coming on. So our pipeline's pretty strong, which that lends to the level of quality that we've been producing and the value that we provide because our services, to be honest with you, all told are probably less than a full-time head. And that's the thing is you can't beat. So I beat almost everybody because I have economies of scale.

Right.

So as you're trying to grow your company, as you're trying to grow your business, you're getting 1 or 2 or 3 cases a week. Right. That's to my operational team. That's 15, 20 minutes. Right. And I can build it into, you know, my across all 8 of my employees. And so I win on the economies of scale. So I'm able to pass that cost reduction through to all these different startups. And so that's where the value added.

Got it. So what, yeah, let's talk about cost. So what, so let's say we have a new startup and let's just say they're doing 10 surgeries a month to start off with. Mm-hmm. So what would, what does that cost? Is there, is the charge, is it a monthly charge? Is it a transaction charge?

Is it, it's both. So I have a base, I have a base, what we call account management fee that pays for our expertise, our $13,485. You know, the building and everything, the infrastructure to go around it. So it's kind of a base fee. And then there's an amount of space fee. So it's a shelving fee that as you grow, we grow, right? And so if you take up 1 rack, then you get charged for 1 rack. If you take up 2 racks, then it's a 2-rack fee. And so as you grow your inventory and your business grows, then that expense grows, right? And so that's why I say we're very startup friendly is the fact that You know, I have an account management fee, which is a not— I would say it's, it's not an exorbitant amount to be, to do business with us. Right? So the barrier of entry is very low. And typically for startups, I'll do a 24-month wrap, a ramp up. So I'll start at a very low figure because you're gonna have a very low footprint. And then that figure will go up. So you're not using a ton of capital. You know, because it's just, you're just burning at that point in time if you're not churning cases. And then there's a, um, transaction fee. And the transaction fee would be for a national loaner, there's a certain fee. And then for doing replenishments on consignment, there's a fee. Um, you know what I mean? And so they're all encompassed. And so we try to roll it all together and make it as simple as possible. Um, but like I said, 10 cases a week with 1 shelving unit and 10 sets. I would venture to say you would be less than $5,000 a month. I mean, that's my best guess, right? And that would probably, you know, depending on what service levels you're shipping stuff. And you would, you know, that would change your bill because, you know, some companies use standard overnight, some companies use 2-day.

So, so kind of $5,000 a month to get started, but it could kind of go up to $10,000 a month.

Yeah, no, some of the bills, I mean, to be honest with you, are one of our biggest customers, you know, their bill kind of teeters around $35,000, but they're doing 160 cases a month.

Wow.

Got it.

Yes. Asher's got a comment or question.

Yeah, I was gonna say, just to chime in anecdotally, we ran the math when we signed on with OrthoX, they saved is like half a million dollars for year one. So I mean, it's, it's, it's a lot of money for an early stage startup.

How you doing, Oscar?

Wow.

Hey, Tony.

Great endorsement there. Wow. And so that you take that working capital and you can put it back into new product development or sales or whatever.

Parties.

Yeah. Yeah. Parties.

Yeah.

Parties.

But then think about the amount of time and energy that the leadership team has to spend on setting something up. Right. And so that's that. You don't know, like, what that actual cost is. So, you know, cost of, you know, avoidance isn't even really factored into that unless, you know what I mean? And so you're, you know, as a, as a CEO or the sales leader or whomever it is, knowing that all you have to do is send in an email to get your stuff to show up. You don't have to worry about the building. You don't have to worry about pest control. You don't have to worry about, you know, having the fire company come out and check. You don't have to worry about an inventory management platform. All those things that, that become very, you know, weigh down, you know, commercialization, they're all taken for it. It's latchkey. It's built in. So that, that's the advantage we have.

So that's where—

Tony, I have a question as well. So we're actually going through an audit right now. So you, do you have auditors come through for these other companies? And federal, state, you know, we're in California.

Okay. Yeah. So we had— we've actually been audited by the FDA for cause from a company that we are partners with. And they came in and they found zero defects. We get audited because of our 13485 every 2 years. I think actually because of our last audit, we're on a 3-year cycle. We just got audited last year, um, and passed with I think 3 or 4 minor, minor findings. You know, they're always going to find something, that's what their jobs are, but it always just makes us better. Um, and then one of the really kind of things that separates us from other companies is the fact that we use Surgio Health to track all your implants and instruments. So we track it down to lots, okay? So all your implants are tracked to lots, and if If your platform and your quality system requires us to track your instruments to the lot code, we're— we have the ability to do that in Surgio Health. But the difference of it is, is that, that inventory platform is— it's your account, not my account. So at any given time, any one of your team can sign on and, and see your inventory, your sales, see everything that goes on. So you have full visibility. That's the difference. We set ourselves apart from the, the other companies that do this by giving you 100% full visibility. And if you ever were to grow up to be a big boy company and you wanted to start your own operations and you wanted to, to do your own thing, one, you can take that platform, move it over to your, your newfound operation and start up and start running it. And to be honest with you, if you paid me a couple extra bucks, I would come in and do some consulting to help train your people on how to use the system. That's the concept of where we set it up. We We founded the company with the idea that companies would grow up and kind of be big boy companies, but we haven't gotten to a threshold yet to where anybody wants to leave us. And so that's kind of the, the neat part about it is why if you're at $8, $10, $12, $20 million and we're still supporting you flawlessly and we can do it at a cheaper rate than you can, then why would you wanna leave? Like that, it just doesn't make sense. But we're more than willing to help you transition out at the end of the day.

Is there a specific account rep? So I'm just thinking, you know, one of my guys calling in and saying, okay, I need to talk to, to Tony or I need to talk to whoever, right?

Yeah. So we have 8 employees and everyone is assigned to a very one specific person. And then there's always a backup trained, but then everyone is trained across the board. So we'll rotate that backup person so that there's always multiple people trained on every account. And to be honest with you, I go train on accounts also. So I will go down and become very familiar because, you know, if something were to happen and, you know, I, I built the system, I better know how to use the system. So, um, in that sense of it. So everyone here is, is, you know, very well aware of what goes on. And on top of that, um, We built Surgio with a lot of little caveats in it, a lot of little, um, what I call sticky notes, so that the tribal knowledge doesn't get held with inside of a person, it gets held with inside of your platform. So you have a Dr. Jones's set and they need an extra retractor or they need an extra whatever reamer, it's built in that says, okay, every time you schedule this case, Dr. Jones needs an extra And we can track that as we put it in the system and validate that. So we built that in to where there's, you know, explanation points on the platform that says, hey, you need to go read this before you do this. And so it's that tribal knowledge that bites you, to be honest with you. Right. And we still have some of it. I'm not going to lie. When an account guy becomes an expert at an account, he's an expert, right?. And so we've saved, I think we've probably saved 2 or 3 different companies that were struggling logistically and allowed them to grow. I have 3 or 4 examples to where once we took over logistically, their inventory, their sales have doubled since. And they'll, they'll flat out say there is because we can get our stuff on a timely manner.

Right. And what's the deadline for an East Coast delivery? But he's gonna slip the shipment.

We have to have it like 3:30, 4 o'clock Arizona time. So what is that, 7 o'clock East Coast time?

Yeah.

And we have asked, so we also have, um, a national contract with a national, uh, courier company that can reach any part of the United States on every holiday. They have yet to fail other than in a, in a really ridiculous blizzard last year. They just weren't able to get there. They're able to deliver same day. So it's next flight out and deliver door-to-door.

Okay, one last question. Sorry to come into your discussion. Um, so the data that comes out of your system, does that come like in a CSV file so we can enter it into like our QuickBooks or to our financial system?

Is that—

Yeah, so that's a good transition for me. I'll go to OrthoBooks. So OrthoBooks was founded to, to do that. Okay, so we, in a lot of the companies that we do business with, we are also their accounting group. Okay, so then we'll do invoicing for them, we'll do their, we'll do their books for them, you know, we'll deposit the money in the bank, write commission checks, we'll do all of that for them. But to your point, you have full access to the data, so you don't— you can go look at it and you can go download it, CSV, Excel. We can even build an API if you really need to and, and that's what you want to do. But a lot of times there's some there's some cost associated with that. And as a startup, there's no reason to outlay that cash when the amount of time you're going to spend swivel— I call it swivel chairing— swivel chair from Sergio to your accounting software, the ROI on it is just not enough to do the API. So that's where, like, my fault is this, as I'm brutally honest, when it comes to certain things. And I look at everything is, okay, well, you want this done. Well, what's the ROI on that, right? So you're going to invest this, is it this in it? But are you ever going to spend that amount of money when to, to, for this to be an advantage for you, right? And we built the software package that way also. Like people like, well, I want RFID tags on everything and all my instruments and in every one of my tubs. And then I would say, well, you just doubled the cost on your implant because of the tracking. There's no ROI on it. And so that's where I become— I'm that guy sometimes. You know, I'm just— the way it goes.

One last question. Sorry.

Collections.

You're invoicing. Do you have a collections department as well?

Yeah, we'll do collections. But what we do is we demand that you provide us an SOP and typically we'll reach out to your sales leaders because a hospital, Okay, I've got way too much experience at this. So a hospital could be a key account and you could have a key surgeon there and they could be struggling financially. And you don't want me sending a demand letter or cutoff letter or cash only letter without talking to the distributor and/or the sales leader first. Okay. And so it has to be a team approach and it has to like, like, because if not, I could screw up one of your biggest accounts. And you could lose $1 million in revenue. And we're very cautious because we view ourselves as partners. And so there'll be a very large discussion before we go out and put a demand letter out, put someone on cash hold or put them on hold or not ship them implants. But yes, the answer to your question is yes. But there is a whole bunch that, like, color that has to go along with that.

Okay.

But it is something that's possible, right?

Yes, sir.

Okay.

Thank you. Collection. So, Tom, what do you do for warehousing fulfillment right now?

We have our own little warehouse. It's not a big warehouse. Products, you know, these products are pretty small and we have one logistics person at this point. Our volumes, you know, that's really all we need at this, at this stage. But we are, you know, rapidly growing. And so I can see this making a lot of sense for us because we're gonna have to scale not so much on the physical plant, but on the human capital. Right.

At some point.

So, yeah, so a lot of the companies that I've brought on and started are in the same spot you are, Tom. So what happens is they have one operations person and they're responsible for demand planning and, and contract manufacturing, and then they're responsible for logistics and, and that. And so what happens is that job becomes overwhelming for them. Right? And something's gotta fail. And typically, it's the inventory management piece of it. So they lose visibility of your inventory, or they— that starts to become a struggle. And then that's where you run into that. So when I deal with companies that, that are in this problem, and I can point to 3 different companies that we've done this with, I, I always just say, you know what? Repurpose that person to do you know, kind of the demand planning, the manufacturing side of it. Let us handle the logistics and the operations portion of it. That way you don't have to hire that, fire that person. You repurpose the person, right? You don't have to go out and find a bigger warehouse or bigger office and then do all the shelving and everything else at that point in time. That's typically where we end up. And we're able to solve that problem.

So, so again, I guess I keep coming with the questions, guys, so tell me to shut up.

Um, keep going.

You deal with any public companies?

What do you mean public? Like publicly traded?

Publicly traded? Yeah.

Okay.

Yeah. And the flow, if I were to ship this directly from the, the, um, sterility, the, the company does all of our, um, sterility, we can do that just direct?

Yep.

Just directly to you?

Okay.

Yeah, you just ship it into us, then we'll inventory it. We validate that everything's there. We'll put it on the shelf, make it available. We're able to handle recalls. We're able to handle any type of holds, disposal, you know, all of that. We work based on your instructions, right? So if you say don't release it, it doesn't get released. If you say put it in hold, put it in hold. If you say return it back to the contract manufacturer, we'll return it back to contract. So again, we mirror your SOPs. And so I have a quality person, I have a quality consultant. And so what we do is, is we'll bring in your SOPs, we'll train on them and move forward with that.

Okay, great.

Thank you. Tony, did I hear you, you take dirty instrument trays back and you clean them and inspect them? Okay. No, that's, that's—

I will not take dirty, but if I get a dirty tray, I have a process to handle it. First off, I yell at someone. No, that's not, just kidding. So we have a process for, you know, fixing that problem that comes in. And then we would have a conversation with the distributor in the hospital saying, hey, listen, we got a dirty tray back, but we're able to clean it, get it back to what we call debrisless, and then send it back out. So that's when we use RASOPs.

Yeah, it's probably, probably the exception.

I think we've got— I know that we've had 3 instruments come back in 6 years.

Wow.

And they're all cannulated. You pull them out, you know what I mean?

And yeah, yeah, they're cannulated. Stuff is always dirty.

Cannulated, and it's not a big deal. We get stuff with like cement on it or other things, we'll scrape off the bio burden, make sure it's clean, and we'll, we'll go through the washing procedure to make sure that one— and it didn't contaminate anything, but we'll do the full inspection on it.

Do you handle like loaner fees? Is that part of the OrthoBook? So if, you know, some companies charge a distributor if they are holding on to an instrument too long and they're not turning cases, um, is it basically a rent, I guess, an instrument rent?

Yeah, we, we don't— we haven't had someone ask us to do it, but it's built into where we would be able to do it because of the way Surgio Health, as you can see here, is in front of you. The case management portion of it, we will— we track it as a national loaner, and then we would track to see if it comes back on time and the aging of it. So we have all the data that is needed, and we can dump that into OrthoBooks, and then that could be— if you've engaged OrthoBooks, that would be part of the commissions portion of it, or any type of calculation of financial management. Yeah, that's awesome.

So, you know, you know, I got another question and I don't know exactly how to ask this, but most companies are rely on distributors to, you know, once it's out in the field to get it, you know, get it to surgery. And, but what they find is they lose control of the inventory. So I remember going through audits at Wright Medical and we literally, the distributor lost 50% of the inventory. Just disappeared. It's because they were horse trading with other distributors and it was not transparent. Do you guys, how do you get around that when it's out in the field? I guess disposable implants is one thing, you know, sterile pack, but you know, autoclave trays is probably a harder problem.

Yes.

So any instrument or instrument tray or implant that's sent out into the field is obviously tracked. Right? So we have pictures, we have bill of materials. So they're all built into the Surgio Health platform. Okay, so if a distributor was to, let's say, request a consignment— so you authorized a consignment to it— we would take pictures of the consignment, catch it as in a case that we've assigned those instruments to them, and we transfer the instruments and implants to them, right? And then anytime that they did a case, we— that, that and an item is billed out, it's automatically updated. So the inventory is automatically updated with inside of Surgio Health. So at any given time, that in those instruments and implants should be their actual inventory. And that's one of the reasons why I beg startups to say, hey, don't try to do this on your own for the first year and a half until your one inventory person gets overwhelmed and then starts losing track of your inventory in the field, and then you have to dump it into us and we clean it up. I've done this at least 4 times. Okay, so we say let us track it from the beginning because we'll know where it is all the time. And then when you want to do your yearly cycle count, we'll do a virtual cycle count for them. So we know what we've sent them. We have pictures of what we sent them. We have a consignment— hopefully you executed a consignment agreement with them showing what they were consigned, right? And that's within this. And we hold that in the system also. And then we'll do a virtual count, say, hey, take pictures of your trays for us and we'll validate that the instruments are there. And then if you really wanted us to, we can send someone out and do an onsite cycle count for you. So that's how we kind of control that portion of it. And what about HIPAA?

Oh, I'm sorry, I cut somebody off.

I'm sorry. No, Tom, go ahead, Tom.

What about HIPAA? Because these, these, sometimes these scrub POs come in and it's got a patient's name and all that stuff.

If the hospital sends me a patient name, all I can do is make sure I don't put it in the system and record the name, right? I can, you know what I mean? If it was scanned in or provided, there's nothing I can do about that. We are HIPAA compliant. Sergio Health is HIPAA compliant. But if we get one by mistake, there's not a ton we can do about it, right? We just try to stop it there. And then not perpetuate the problem.

Okay, Tom, I think most companies get around that by just using patient initials, is my understanding.

Yeah, the thing about those scrub— the scrubs a lot of times are the patient sticker. So, you know, some of the facilities have that patient's name, um, you know, some of them are coded, um, but that's that. So we'll get that, we'll get our, our scrub PO or scrub bill in patient sticker there, you know, that obviously has all the implants and stuff that were used or the tissue or whatever. But I don't, you know, again, for this to be super efficient for us is that that scrub bill would go directly to, to your company. And then, you know, so we, we won't know exactly what was sent. You know, obviously we would want to keep, have access to that as well. But I just know what we go through from these distributors.

You know, you never get them all the time.

Yes.

Something to your point. Yeah. So the bill sheet comes to us or what you call the scrub or, you know, it comes to us and typically goes to whoever's the customer service person at the company so that they, you know, if we're not managing your accounting software, right, you want to get a portion of it, you'd want to get that. So it gets sent to a specific email. Typically it's company@orthoex.com, whatever the name of the company is, we establish that for you and then you're able to reconcile. So if we're doing it, we'll reconcile Surgio versus your, your accounting software so that you know that every billing that's represented in Surgio is represented in your accounting software and vice versa. So you could cross-reference them. Yeah.

One last question that crossed my mind. You deal with every hospital basically, right, between all these different companies. So do you keep current because you're invoicing, so you keep the current materials management or whoever it is that you invoice so that that record's kept up, right?

Yes. So that inside of Surgio Health, on top of all this is a light CRM. So every hospital, every surgeon and every distributor has contact information. You know, you can build out all of that information so that it's there., right? And so it's not in a Rolodex or in a file or wherever. Right, right. So it's all built in in that contact information. And then, like I said before, your Surgio Health account with us is actually your account. You're granting us access to it.

Yeah.

So if you were ever to fire us, you take your Surgio data with you.

Mm-hmm. Okay, great.

And the account, to be honest with you, you just take us off the account. Right. You pay Surgio directly.

Okay. Hey Tony, curious, what CRM software do you guys use?

We use Surgio Health. There's a light CRM built in.

Oh, got it. Okay. You have your own little database. Okay. Yeah.

Yeah.

Got it. And Mark's up.

So Anthony, first of all I gotta say is, you know, go Army, beat Navy.

No, no, absolutely not. I'll start with that. Yeah, that's fair enough though.

I, I think you have it backwards too, Mark.

Sorry.

Really? Yeah.

Okay.

Yeah, that's, that's normal. Um, but speaking of somebody who owns a compliance company, most companies, uh, give compliance kind of lip service, and especially medical device companies. And so if you get if you get something with PHI on it, do you scrub it or do you just keep it safe?

It's safe. I don't, we don't, unless the company wants us to scrub it. So if we were to get something, let's just say a bill sheet and they, they want no PHI on it, right? They asked us to, we don't need PHI. Like we don't do anything with it. It's garbage to us.

No, it's a univers— it's a, it's a universal problem. Uh, because it, it always boils down to the lowest common denominator, which is a rep and a scrub tech in a room somewhere, and they don't care. They just want to get the case done, go home, or they want to get paid. So if you're ever interested, there is, um, a UC Berkeley, uh, engineer in Utah that I, that I help a lot who has a software program that will completely scrub at the point of origin any document or image or video. So in other words, if you ever, if you ever find yourself in a situation in which, you know, somebody sent you a scrub sheet and had it named Tiger Woods, I mean, that's the only time anybody cares is when it's somebody famous. But if you ever want to scrub that, let me know and I'll, I'll introduce, I'll introduce you to her.

Absolutely.

I'll actually, I'll mention that to Sergio because Sergio, I think it's a good idea. To— and it's pretty cheap to do it. So the other— only other thing I'll say is that inventory management— this— listening to this program today has been like what, what the VA calls prolonged exposure therapy for me. This is a very traumatic subject for, you know, for any startup guy, uh, also anybody who's ever been a distributor. I've had 3 very hard divorces from companies based on inventory. And they— it's just a nightmare. So, yep. How do you stack up with something like Global? Global in Atlanta? They don't—

they do mean GMLX, the same Hunter Fleetwood and all those guys. Yeah. So I keep— I compete directly, friendly with them. Right. So we were all both at Stryker together.

And it's Gordon's group, right?

Yeah, Gordon Ford. So we, we're friendly, to be honest with you. He'll refer business to me. I'll, you know, if something were— I'll send him. I know the platform. I know GMLX's platform like the back of my hand. I know WebOps because I used it for 12 years, you know what I mean? And so fully versed in what they do. I don't have anything negative to say about them, but the difference between us and them is I believe we're more startup friendly. We're more intricate. We're more, you know, we, we have the, a little bit more focus on the needs of the company that is, is trying to grow because we're part of an incubator, right? And so going back to our original slide, like, this is our whole portfolio. The, like, we designed a group that helps companies grow their business. And run their business. That's what it's part of. And so that mindset of that startup mindset that sets us apart where they have Stryker, right? They have Stryker Trauma, they have Stryker Spine. They're, they're linked to Stryker, right? So if you're competing any with any product that goes with Stryker, they have it in their building. We're agnostic. And so that kind of sets, separates us from GMLX. I don't have anything bad to say about them.

Of course.

No, I was just curious.

I was just curious because I'm in Atlanta and, but, you know, I know the guys behind your organization too, and Josh and everybody.

So that's cool.

Yeah.

Yeah, I like it.

Thanks.

No problem. Asher, did you have a comment?

Yeah, I did. I was going to comment on our experience with GMLX, but I realize this is being recorded, so I'm going to bite my tongue.

Good idea.

We can turn it off right now if you want. We can, we can, I can cut it right here and, uh, we go unplug anytime we want. But either way, your choice. So what, what third party, uh, are there third party providers that you guys partner with, Tony, that gives you extra capabilities? You know, you mentioned FedEx, UPS, but Yeah.

And I have a couple courier companies that I do business with. And then I use Dawah Medical. So most of the companies on the, on the call here are probably US-based. But as you can see, I have 16 European clients. And so instead of building out my quality system to be a national importer, I use a company called Dawah Medical because they're experts at it. Okay. They, they manage over 80 to 100 companies. And so whenever we're taking imports in, they'll clear the commercial invoice for us. They'll deal with the brokerage. They deal with all of that. They do with all the FDA reporting.

Right.

So if there's a, if there's an adverse event and, you know, you need help, the European company needs help with the reporting, they'll do it all for us. But most US-based companies have their own quality management group. That will handle that, excuse me, and we'll work with them. But a lot of the European companies, obviously there's, there's a gap. And so we use Dahua. That's one of the third-party vendors we use on a regular basis. But I think you've covered every, all the companies that we do business with. FedEx, UPS, you know, DTH is our courier company. We have contracts with Southwest, Delta, United, American, You know, so all of them.

Well, and do the US, do the US clients sell in Europe and do the European clients sell in the US?

All the European clients sell in the US. I don't believe I have any US clients that sell in Europe. One maybe. But I do have a partner in Europe. They actually, I, I did a call with them 6 o'clock this morning with a company that wants to come to the US. They do exactly what we do. Um, and they had their, their product line, their service line mirrors. And then there's also a consulting group that we know that will do what the MedTech Incubator will do. So the incubator portion of it that the MedTech Intel, OSP Advisors, there's a company over there that will do the exact same thing. Um, and then there's a, a, a company that does the, uh, Ortho-X portion of it and the OrthoBooks. It kind of—

they're mirrored.

We have like a business relationship with them, so we do co-selling for each other.

So you, so you manage the customs?

Yeah, yeah, we deal with all the customs and all of that. We pay— so we'll pay the brokerage fee, the— and, you know, deal with customs getting in. To the US and out if we need to, and then we just pass that through.

Got it. And you guys provide reporting on terms. So how, you know, how often an instrument is used?

Yeah, we do have— we have an inventory report that will show you par levels for all your inventory as needed. And then we also have Then we can also produce all kinds of terms reports because the data is, um, all with inside of Surgio. So we can tell you how many times a tray's gone out, how many times it's been assigned to a case. We can do all of that. So that's something that most startup companies don't have visibility of. And we do recommendations. I'll do recommendations. Like I said, when I got on the call, I'm brutally honest. So I'll tell you if your baby's ugly, um, just based on experience because that would, that's what a good partner should do, to be honest with you. I'll tell you if there's a better way to ship something, you know what I mean? Or if there's a better configuration just based on experience.

So. Got it. So you could tell a startup that you need to build more instrument sets because this implant's being used more than that implant. Yep. Yeah. Yeah. Got it. Asher?

Yeah, I promise I'm not paid by, by Tony at all, but He actually helped us design our implant kits. We have sterile-packed implants come, you know, prefixed cartons. So he helped us, you know, guide us through the process of designing the kits and make sure that they're not only ergonomic for our reps, but they're actually really cost-effective for us to ship FedEx. And then figure out what's the best way to, you know, do we ship 3 trays in one giant Uline tote or individual totes for each set? So it was super helpful that we would've had to spend, you know, hundreds of dollars in consulting to hire someone to actually help us with that.

Interesting. Thank you.

I appreciate that.

All right. Tony, have you— there's a startup in this space called QMed Innovations. I think they're out of Canada, but if you ever— they— anyway, look at it offline, but it's QMed Innovations. They actually put a— they attach a sensor onto every reusable metal instrument tray. And it's got a battery inside and it pings once a day to a cell tower anywhere in the world. And it provides the— I interviewed Vic Nunes, the CEO, on my podcast. Anyway, the medical device client has a dashboard where they can see where all their inventory is on a daily basis. Do you guys have any sensors like that or is it just—

We can incorporate any sensor that, that any company would want. And I think we've talked about this and I, I think I alluded to this earlier. So in Surgio Health, we built an RFID platform for it that we could track instrument trace with inside of a hospital because it's also a hospital platform. So I have extensive knowledge. I'm, I know the, the, the Smaid CEO really well. And there's other, a couple other platforms like QMed that do this. I will always argue this is if you're going to employ me, right, I better know where your stuff is. Okay. And so what's the ROI? What are you going to get out of it and what is your fear? Right. We've lost one tray in 6 years and it was because FedEx dumped it out of the box. And so unless the, you know what I mean? And so the, the risk and the reward, the ROI on that, you have to ask yourself, what, what is the significant ROI on that, right? And so as a startup, I don't think you want to invest your capital in something of that nature. Now, some of these bigger companies, the Strikers, and, and, you know, they may want to do it because they want— because they're struggling with the, just the number of movement. But it, it all depends on how much it's, you know, how big of a problem that becomes.

Yeah. Ortho X has got enough visibility where it's probably not needed for startup. Go ahead, Mark.

Yeah, I mean, I think, you know, because of my own experiences with inventory is always like the eternal monster in the attic, literally going back to the military. I've always admired the profession and have made several really good friends at the PhD level in the last 10 years. And I was wondering if you could refer— could recommend which university system in the United States currently offers the best professional international logistics program, like for example, telematics, which is a— I know a doctoral program that's being offered overseas which combines big data analytics, logistics technology, communication technology, transportation technology, all wrapped under one roof. And I would imagine that you're familiar with that.

To be honest with you, I would be lying if I said I was. I don't. So I'm not familiar with all of that portion of it. Okay. So yeah, most of mine is, is, you know, all obviously my experience comes from FedEx and UPS and, and then Stryker.

They're, they're, they're pretty damn good at it. Okay.

Thanks.

Yeah.

So, and when I came to the medical device, really quick caveat and then I'll move on. I left FedEx where we would manage fractions of pennies. Okay. So every day as a senior manager, you had to— you had to do an analysis of your operation. And what your operation cost. Right? And so now we were managing down to fractions of pennies per package. Right? And you had to answer to it if you were over budget. When I got to Stryker and I got into the medical device industry, I was appalled because we were managing $1,000 bills. And so then, you know, over the years, I got it down to $100 bills, and then I made a company out of it. You know what I mean?

To where—

Yeah. You know, now we have visibility of that operational cost. And so that insight, you know, and one of the things we learned, I learned at Stryker is, is standardization, you know what I mean? And that's a hard thing to do in the medical device industry, but that's what we've done. Interesting.

Well, I tell you what, speaking as a former aviator, standardization saves lives and does, that is the number one quality control thing that you can control.

Yeah.

You have to be able to do 85, 90% of what you're doing without think, you know, like it has to be well-oiled so that you can handle the 15% chaos.

Got it.

Thanks. Yeah. So we're, we're kind of coming up with the top of the hour and I asked Tony earlier before we got started, kind of what ask he would have of, uh, bone chatters. You know, you want to ask questions, maybe what other services are needed?

Yeah, you know, as you know, I think my statement to you was we have this medtech incubator and we've got, you know, obviously you can see each one of the, the lines of service that we have. What's missing? Like, like what else do startups need that, that isn't being answered by, by the portfolio that we presented?

So does the, does the OSP advisors, do they do new product development? Like take concepts to turn into products?

That's the other side of the fence. No, we stay away from that side.

Got it. That, I mean, that's one. Here, Asher's got an answer.

Yeah, I think we've actually talked about this a little bit with Josh. I mean, I think a lot of the backend support of setting up the corporate infrastructure. So, you know, everything from like how your board should be structured, raising capital to avoid issues with, you know, hospitals seeing a surgeon on your cath table, um, you know, any kind of registrations you have to do with, you know, local city, states, or federal governments just to make sure that you can actually operate as a medical device company. Um, maybe not getting into patent law, but just having like a couple patent lawyers, you know, who you can refer out to just so that effectively outside of the product development side, you guys can kind of support you know, every aspect of building that early stage startup.

Yeah.

Yeah. Most of that we got covered, right now. So that's kind of all falls under that corporate structure. And I think we saved a couple companies, you know, quite a bit of effort by helping with that corporate structure. So that's one of the things that falls under that medtech incubator. But the lawyer thing, the patent lawyer, that would be one.

Yeah. I mean, the common thread where all startups struggle when they reach commercialization is How do you build a sales force? You know, when you have 5 employees or 10 employees and you've gotta start selling around the country, how do you build a sales force? And we, we had this topic on BoneChat many weeks ago. That's a really hard one. And then the other one beyond that is the value analysis committees that everybody's struggling with. Yeah.

Yeah. We actually, I was the, the call I was on, right? Or the meeting I was on right before I jumped on this call. That was the topic, right? And so the topic was for a new startup company coming to the US to get in groundwork, right? So we know it's 6, 9, 12, 15 months to get on a VAT committee, get through a VAT committee to get on pricing, right? You know that. So how do you go about generating revenue, right? So you have to find KOLs that are not really attached. You got to go out into the rural areas. You know, there's certain things you've got to do right, to work around and work within the system so that you can start generating sales while you're waiting to get on some of these, these contract pricing.

So you seek out shorter sales processes on purpose for cash flow.

Yeah.

Yeah. And then that's where the— that's obviously honestly where the medtech intel comes into play because then they can identify, you know, what product lines are being sold at what hospitals and what surgeons are doing particular cases in particular markets. And so now you can identify your You know, where you're gonna go find a, a distributor in a market because there's a, there's a surgeon that, you know, can use your product because he, you know, the environment's perfect for him and he has control cuz it's a smaller market.

Yeah. Yeah. Well, this has been really good. Dennis, do you have anything? You've been quiet. All right. He's good. All right. Let's just, let's appreciate it. We're at the top of the hour. Yeah. This has been, I just learned a lot. I got a full education, Andy.

Thank you very much.

Oh, you're welcome. I mean, I can't imagine if you're a startup and you're commercializing something in 12 months, I can't imagine why you wouldn't use a service like this. I couldn't either.

I might be taking advantage of it. That's why I was listening.

Yeah, yeah.

I appreciate it.

I think Tom and Tom Kender is certainly interested too. He's, he's CEO of, uh, Subchondral Solutions. Sell it. He ships little tiny implant boxes around all over the country.

Yes.

All right.

Well, thanks. Thanks, Tony. This is great.

Yeah, I appreciate it.

Come on.

I appreciate the time. I appreciate all the questions too.

So, yeah. Yeah. Good discussion.

Thanks.

Have a great one, guys.