BoneChat Call #4 - Dr David Kay - the new standard, save money, reduce labor, improve outcomes.

Let's do it.

All right. That's fine.

All right. Well, thanks. Uh, so Dr. David Kay is with us today and let me, let me get a quick background. Um, so he's been a BoneChat member for a long time and he's been sitting quietly in the background and he sent me a note that said, um, in a nice way, uh, you guys are living in a filtered world where you think you can kind of develop a, a new widget and hospitals and ASCs are gonna actually use it and buy it. And he said, I wanna show, the BoneChat team a different perspective and also tell them what's going on, in ASC hospital world. So David is a, he's a startup founder with Helix that had a very successful exit. He's also a surgeon obviously, and he owned a US ASC and now he owns a hospital. So he's seen all sides. So I'd ask David to give a brief overview and then we're gonna open it up for questions. So bring your questions. How do I sell my thing into a hospital or ASC? How do I, you know, how do I become more sellable? Take it away, David.

Sure. So first off, thank you very much, Tiger, for allowing me to do this. Basically what I like to do is, you know, title this Lessons Learned from My Career to Date. My career is not over. It's just kind of changing as everybody changes. And I think the primary thrust of this discussion is really about changing the process. So let me go to what I mean by an example of changing the process. Does everybody remember when the laws changed that you could turn right on red? You're still driving a car, but you got to turn right on a red light. Wow. All of a sudden the driving experience changed and everybody got it. How about roundabouts? Same thing. Roundabouts change the process, don't really change what you do, but they've changed the process and they've, you know, people's lives are being saved by doing something relatively simple. And if you're going to do anything on an innovation scale, you've got to change the process in a positive way. So let me kind of run through my background. I'll do it pretty quickly. It's hard to, I guess, go through 30+ years of life here. But so I did a foot and ankle fellowship back in '87. Why feet? Nobody was doing that at the time, but I went, geez, everybody's got 2 feet, 2 ankles, 10 toes, and nobody knows what the hell to do with them. So it might be a good idea to get into this. So I was in really kind of the first group that really did formal fellowships.. And, um, when I got out, I started doing both academic and, uh, private practice. Quite a bit of, uh, trauma work, uh, diabetic work, reconstructive work. We had very little. We had basic AO screws, small frag set, uh, cannulated screws. That was it. And that just wasn't satisfactory. Um, uh, so I learned how to do Elazarovs, went off to LECO, first experience, started talking to the other guys at the meeting, other docs at the meeting. They all got paid for by their reps, not me. Hmm. Went back. That's a little odd. Why is it all these other guys are getting paid for? So if you're going to do something, you better be consistent across the board. Then I started talking to other reps when it came to LSR. I was saying, if you ever put together one of those frames, it's a lot of work. I had to put together all my frames and everybody's telling me, no, my reps put together my frames. I'm like, I got a terrible rep who's making a fortune off of me. This is not good. So something to think about.

Okay.

If you want to irritate a, a, a doc, that's one way to irritate a doc. But I started looking at, you know, what's so different about this frame. And I started doing quite a bit of research, very basic science. I was clinical advisor to a lot of BME grad students. One is Randy Taken, who most of you know of. He was, worked with me on Project One where we did three-dimensional modeling of the first ray. For a bone osteotomy, all mathematical modeling. And big take home from that, the centroidal axis, or basically the first ray, first metatarsal, is different in everybody. So this idea of one operation for everybody is not a good idea. There's a lot of anatomic variability. So take homework from there. Next is we analyze the Ilizarov frame, and there are two things very unusual about the frame compared to every other type of fixation device, whether internal, external fixation. We had pins out of plane and the device trampling. And I worked with a lot of other grad students looking at fixation and pins out of plane made a lot of sense, but all of our hardware didn't do that, didn't allow for it. And that was the genesis of what became Ortho Helix, of creating more anatomically designed and contoured plates and screws with screws out of plane. There was more to it than that, but that's really where it came from, was the work that I did in the lab. Another, so working with the grad students, one little side, one of the projects I worked on, it was actually a PhD candidate. She finished her PhD. She came to me and said, gee, I'm interested in prosthetics. I said, well, you know, they're not attached to the body, right? They need to be attached to the bone. So that was her PhD and that got me the label of totally crazy. We had a terrible time getting that published because at the time nobody was doing this, except if you look today, there's the OPRA implant, which is a peg that's put into a femur or tibia where a prosthesis is now attached. So maybe not quite so crazy. I also started working in a wound center and learned a lot in the wound center. So we did a lot of clinical studies. Learn how to do FDA approval studies. We did a, a neat little study looking at peripheral blood flow during dialysis. Something wasn't right. We had a horrible time recruiting it. This is no more painful than taking your blood pressure for somebody who's sitting in a chair for 4 hours, 3 days a week. And I got nothing else to do, but recruiting was awful. So if you're gonna do a clinical study, you better plan for it. It's gonna take a lot longer than you think, and it's gonna cost a lot more than you think. So that's a real important take-home because you need clinical studies to prove what you're doing. So when you, when you budget for that, when you're budgeting time, money, be very, very careful. Recruitment's just very difficult. I also became an editor and reviewer for JBJS Core Foot and Ankle International. I was doing podium work, both US and international side. But the wound center was probably one of the more interesting early lessons, light bulb moment. So I'm doing diabetic work, I'm looking for the plastics guy and the vascular guy. I'm going, this is terrible, this is stupid. We're not working together. We're working on the same patient, basically the same problem. We don't work together. So I said, we gotta organize, change the process. We went to one place, created a wound center. At the time there weren't wound centers. And it was a multi-specialty wound center. So we had orthopedics, vascular, plastics. We had a podorthist, orthotist, and prosthetist in the office with us. ID, eventually HBO, and we had dermatology as well. Then I said, you know, look, it, it's a real hassle to get these people here. Why don't we start using internet? And this was 15 years ago, so internet was not too developed, but we actually got everything set up all ready to roll. We had a nurse there, at the ECFs, because basically when you ask somebody to come in who's in a wheel— who's in a wheelchair or a gurney, that's an ambulance trip that's not paid for. That's $600, $1,000 somebody's paying for to transport that person. How good do you think your compliance is going to be? Not very good. So that was the reason for doing it. All set already. And then our malpractice carrier said, we're not covering that. So guess what? It killed it. Take-home point: you better think about all kinds of things that are going to scuttle what you're going to do. And that was one of them. And that was something that you probably wouldn't even consider. You know, is there insurance coverage for what you're doing? Is there payment? Are you going to get paid for what you're doing? So again, lesson learned. There's always obstacles. That you're not even considering. So back to Ortho Helix, that got started. It was very difficult. Again, no internet, no data. Foot and ankle was like, what? What's that? I went to every single company. Nobody was interested. They were nice to me, but nobody was interested. And then finally got things going. Richard Allen, who is one of the founders of RTI, helped me get this up and going. I had no model, no mentors. We had VC investment, but they were rookies too at this. We had very early on an FDA recall. It resulted in a down round. I had that experience. That is awful. That is horrible. Do not ever have a down round. I cannot emphasize that one enough. And that's through more planning. But sometimes things happen and it's just an awful time. We had a lot of experience in management, engineering, quality. Again, we had some quality issues early on, but in 2011, we actually got named top 100 in the country for quality, and we were in the grouping with Intel. So that was a big resurrection, and I learned how critically important quality is. Most boring thing there is to do and one of the most critical things to do. You've got to make sure your products work. And about the same time, 2010, I had a conversation saying whoever controls bunion surgery controls foot and ankle. And it's a big space. And I think that that little crystal ball look is born to be pretty accurate. Then around 2012, we had a discussion, do we do a Series D and really blow this thing up? We were growing 35% a year and the decision was made because we had VC investment. It's time to get out. Let's go get our money. And so we actually had an auction that was orchestrated. We had Zimmer Tournier, Smith Nephew, and Orthofix, at the table. It started at $100 million. You weren't going to get to the table and both Stryker and Wright bowed out. And then we went through our auction. And what was really kind of fun is we went to the same restaurant over a period of 2 weeks. And so everybody got to know us there and said, "Hey, how you doing?" And so of course everybody knew it was an auction. And then we did the deal. It was a combination of cash, stock, and earnout. I would say avoid an earnout if at all possible because you have no control over the earnout. Earnout. So it sounds good, but you have no control over an earnout. Then I got put in a 3-year non-compete and they put me in a corner and didn't talk to me. And that really irritated me a lot. So I'm like, I said, I have the next generation. And that was our strategy all along, out-generation everybody because we knew we were going to get copied, which is what happened, but out-generation them. So guess what? I'm still sitting on that generation because nobody's done it yet. So I came up with, let's get together some of my friends, let's go solve some problems. We created something called Extremity Development Company, which is a parent for what is now turned into Rubber City Bracing with a commercialized ankle brace that's dramatically different from anything else out there. And then Surgical Targeted Solutions, which is a handheld navigation unit, which is completely different from any other robot that's out there, navigation system. Completely different. Um, I use my wound center side, um, to create company number 3, which is now called Resivant, and we're getting ready for FDA submission on a new skin adhesive. It has different material characteristics than any other skin adhesive that's currently on the market. Very, very different. Um, I've said before that our, our products were, um, copied, and I had the pleasure of going through a 7-hour deposition with Kirkland Ellis attorney asking me lots and lots of questions for a patent litigation suit. Again, this is public information against Paragon 28. So when I say the designs we had have been copied, yeah, they've been copied. Then the next slide, the hospital ownership. Prior to 2008, we, our group, owned an ASC, and in 2008 we were able to convert that into an actual hospital. Orthopedic and plastic surgeons at the time, about 25. Now we're 55. So we actually own the building, we own the taxpayer ID, we have a hospital outpatient department and about 18 offices. We have a pretty vigorous VAC. We're paying for it. Why would we do? For the vast majority of things, we work on capitation. So guess what? A primary knee, this is all we're paying. We're not going to pay anymore. Doesn't make a difference who's— whose it is. I will tell you that today it is very different from 2018. 2018, we're making a lot of money. Right now, it's a real struggle. It is a real struggle. And we don't have endowments. We're not a nonprofit. We're for-profit. Finding people for floor work, sterile processing, anesthesia, scrub techs. Or nurses. I mean, it's just incredible. We got a lot of administrative people because of all the rules, but we don't have the people actually we need to do the work. So one thing—

what changed? What changed since 2018?

Well, pandemic. I mean, people just quit, right? That was one. And number two, EHR. When we had to institute all the things you have to do in the EHR, Especially think about that. The auditors, they're running around, they're doing this, they're doing that. You know what they're doing now? They're checking boxes, they're scanning stuff, they're doing this, they're doing— they're not paying attention to what we're doing. They're too busy doing stuff, stuff that probably doesn't even need to be done, but it's being mandated or we think it is. So I've said that some of the impediments and drivers are interpretation of regulations. Than the actual regulation. And oftentimes, because everybody is so risk-averse, there's a lot of overinterpretation. So if you've got a new product and you come in and you ask everybody to learn about 500 new things, they're going to go, no, I'm not doing it because I can't do it. I'm on overload already. I'm going to walk out the door. We had nurses quit. I mean, they just walked out. They said, I can't do this anymore. And if you notice, you know, it, it hasn't really improved. And then we had to deal with all kinds of travelers. Travelers are there for 12 weeks. They don't really care. They're picking up a fat paycheck, you know, 3 times what they're making when they didn't travel and they don't really care. So the, the dance partners that you have, remember surgery is a dance and you have to have everybody dancing and the orchestra playing and Everybody's working together and not so much anymore. It's just a struggle because people are so diverted, so much in overload with all kinds of nonsense. So that's, I think that's the big thing. And then maybe the last thing, again, I'm running through a lot of years of my life here fast. Talk to you about KOLs. You know, how do you, you know, everybody, oh, I gotta get, I gotta get this cutter. I gotta get this guy up on the podium. Well, how do you really know what they're like? Because, well, you may, some people may not like this. It's just kind of like salespeople tend to overinflate. Well, so do a lot of surgeons. Oh, I do 150 of those cases a year. The reality is I might do 15. Oh, I do this. Yeah, you better go really find out what they do. And several of them know how to juice the system and juice it in a way that gives you a, slice of what your product is not really going to encounter. They know, they know how to do things, you know. So when you pay for somebody for a KOL, you got to know how to evaluate them. Are you getting a really good person or are you getting somebody who is difficult? I'll give you an example. We had somebody on a design team, they never said a word, not a word. And it got to the point of saying, okay, you're off the team because you didn't contribute and you're not going to be getting royalties. Now I want you to think about that. You're a startup. Now you tell somebody who's going to be using it they're no longer on the design team. And guess what happened? He went off completely. And because— and he made no contribution. I mean, not a word. I can't begin to tell you the number of calls. And you didn't make a contribution, so we can't. Pay you, you didn't do anything. Because if we pay you, that's a big problem too. Yeah, especially if we're paying you to. Yeah. So it— yes, it's a very slippery slope. So I covered a whole bunch of things, but I think at the end of the day, what I want everybody to think about is process. What did you do? Did you improve the process or did you just add another layer or multiple layers to the process?

Got it.

No, it was—

what a great overview. Yeah, I was talking to a trauma startup today and, and I told them, you gotta simplify the system, you know, before you even get to market. You've gotta, you gotta make it so easy that a resident or fellow can do the case, cuz they may be the only ones around middle of the night.

Well, not only that, how easy is it gonna be for the sterile processing to take care of things, right? What are you doing with it? You know, who's touching this? And are you making their lives easier or are you making their lives more complicated? Because if you're not considering every single person who's touching this, then you're going to miss something. And that miss could be the no that kills you.

Got it. Got it. So I know Andrea is Or, or Anthony, well, Anthony, I know you're in the stealth mode, but you will be selling eventually.

Yeah.

What, what question would you have?

Yeah. So, you know, I've been in a couple of startups and, you know, one of 'em in particular reimbursement, you know, for the product and, and I guess for the physician was, was one of the biggest bugbears that kind of, you know, doomed me, you know, as a sales director. Uh, did you encounter anything in that regard about your pro— you know, that product getting paid for? No, no, that was, that was not a problem with, um, with it. I mean, we, we fell under Trauma and it was Trauma plates and screws. So, uh, with Ortho Helix, no, not really. With the adhesive, not really. With a handheld robot, I mean, robots are not paid for. We can't put something in that the facility, whether it's an ASC or a hospital, you don't get paid more to use a robot. That is eaten up in the bundles. Remember, we're paid in joints and more and more and more surgeries. Through bundles and it just eats away at the bundle and, you know, you eat away at it enough, then guess what? There's no money left and you're not going to go there. I mean, I see products coming in and you can find out what we get paid. It's published, you know, for, for certain procedures. And we go, okay, so that's going to cost $8,000 and we get paid $5,800 just for the implants. That doesn't include paying everybody in the room. And the room use. And so it's like, that's a non-starter. So yeah, you, you've gotta look at the reimbursement side on anything that you do. And it's not just for a surgeon, it's also for the facility. And ju— just remember there's a headline yesterday, 90,000 physicians are employed by Optum. 90,000. There's like 1.3 million physicians in the country. So, you know, you're, we're starting to get close to 10% of docs are employed by optum. And we know that over 70% are employed. So guess who the master is? The employer. And that's who you've got to satisfy, right? Fascinating. You know, docs are paid by relative value units. How much work did you do? Mm-hmm. Are the employed docs— if you're not, and even if we're employed, because we're paid by relative value units. I mean, I'll tell you, my, my, what I'm paid today is like $33 per RVU. And 15, 20 years ago was like $36. So in dollar numbers, yeah, it's lower. In real dollars, it's like 50% of what I got paid 20 years ago. So what does that mean? I'm paid on piecework. And if I'm paid on piecework, I want to get it done fast and I want to get it done right. Mm-hmm.

So what, what's an example of a product that has process problems maybe historically, and then a new version or a new company or a new, an improvement in that area? I mean, I, I, what goes to my head is disposable surgical kits. Showing up all over the place.

Yeah. So, so disposable surgical kits have both good and bad to it. In our HOPD in the hospital, we've got phenomenal sterilization. But again, who's gonna do the washing? I'll tell you, the, the instruments are pretty garbage that are disposable. The screwdrivers don't fit well on the screw. Well, why is that important? So I, I got a patient in probably about 5 months ago. Who had surgery done elsewhere. And I looked at the screws that were put in his heel and I saw all these chunks of metal, little metal flakes all over the place. I went, those screw heads are stripped. Wow. Not gonna be my gift to have to deal with taking out a stripped screw. So when the screwdrivers don't fit right, putting in the screws or the instrumentation doesn't fit right, it wobbles around and trying to remove it. And I hate to disappoint everybody, but guess what? Things fail and have to be removed. All the time. So you better plan for removal. I, I mean, trying to get 'em out, especially let's say, so you're gonna use titanium and a screwdriver that's off a little bit, you deform the head and now you can't take the screw out, or you can, but it's just a nightmare to get 'em out. Wow. So that, that's the problem that I see with the disposables, that the instruments, they're not good. And that fit needs to be really good, especially for the screws. Or if you're put, putting a rod in, you don't wanna strip the threads. Otherwise you're not getting it out without a lot of trouble.

Yeah. So they're in for your products, but what's the benefit side of, of, I mean, what does it eliminate for your staff?

Well, what, what it, so the part of the problem too is the way I see it is the way that the instruments are put together, are they following the sequence of the process? You know, surgery is a disassembly reassembly. You know, we're taking something apart, we're putting it back together again. So do we follow a sequence of step 1, 2, 3, 4, 5, and the instruments are laid out 1, 2, 3, 4, 5, or is it 1, 5, 2, God, where's 3? I don't know. You know, where's it at? Is it in a logical sequence? Because a lot of times, granted, I'm in an orthopedic hospital, That's what the nurses are used to. That's what the scrub techs are used to. But you go to a general hospital and it's like, you know, gee, doctor, I've never done this before. I do OB/GYN. Great, okay, that's wonderful. So it needs to be simplified for them even at that level. Just having it sterile isn't necessarily a huge help unless the process, again, has been very clearly thought out.

So what would you do if you're a startup today and you wanna launch a new foot and ankle system, a new spine system, a new total joint? What would you do? How would you think it from kind of first principles?

Principle number one, what problem are you solving? It's not about technology, it's about the problem. So what problem are you gonna solve? The one problem that I see repeatedly is, oh, we have a new bone graft material. Oh, this is gonna do that. It's a new, Okay. How are you gonna prove that works any better? Recent study just got published, and despite all of the different products we have available on fusion rates in the foot and ankle, the average fusion is 78%. That's 22% of the time it's not fusing. Wow. 22% failure. That's high. And we've got all kinds of stuff out there. Do you think your magic is gonna be better than anybody else's magic? Probably not. And that's how you're gonna prove it. It's going to take thousands of cases comparative. And I just told you how hard it is to recruit people and it's horrible now post-COVID. Oh my God. Trying to recruit anybody for anything is really hard, really, really difficult. So if you're going to— if what problem are you solving? Are you going to solve a process problem? Okay, great. That's important. But now you got to sell people on the process problem. Remember, everybody likes something shiny and new, but what problem are you solving? And it's, and it's great if somebody else is paying for it, but if you're paying for it and if you go to ASCs, who owns ASCs? Surgeons. That, right. They're paying for it. Yeah. So you, they're gonna pay real close attention to all that, you know, what they're paying for. And, and sometimes what they're paying is sometimes more important than necessarily the results, especially when you look and go, Well, it's a screw, screw, screw, screw. You know, how different is it? And can you really prove it's any different? Easy in, big deal. What's it cost? You know, and that's the thing is you've— it's a very difficult line to find of how do you capture intellectual property? Because yes, you need intellectual property as a protection and If you get lucky enough to have an acquisition, yes, you're going to need that. That should not be the primary focus, but you're going to need it. So how do you capture that? How do you stay in a regulatory path that's not going to kill you with time and money or both? Because by the time you get approved, the ship has sailed long, long ago and somebody else has figured out an easier way to solve it than you did. How do you come in with something that isn't gonna be totally disruptive to everybody? If you're gonna train a surgeon, here's what you've gotta do. First off, you gotta find somebody who's interested. Okay, so I gotta show it to you. I gotta train you on it. Hey, would you please go to the VAT committee for me? Okay. 9 months later, can we go over that again? Because it's been 10 months since I did this and I kind of wanna do it again. So you're going to train them twice at least. And it's, it's again, think about all of the roadblocks in the process.

Yeah. David, it's Joe Hage. I, I do a lot of these and you're a very gifted presenter. I know you know that, but I wanted to acknowledge it because of the technical stuff. I would ask if you could go If you see where panelists are and you could make me the host again, there are some other folks who've joined the call that I'd like to be able to promote as well.

And in the meantime, panelists, let's see, where do I do for that?

You may hit participants first and then no, no, just, yeah, no, just listen to your panelists. And if you click on my name, Joe Hage, yep, you'll see more. You can make me, yes, please make host. Okay.

You're the host. All right, got it.

Yeah, we're gonna let 5 or 6—

Mike Donahue asks, is there an advantage for an ASC to outsource their sterilization services?

Good question. Um, yeah, that, that's actually a question that came up, uh, probably about 5 years ago. There's somebody local who wanted to create effectively a sterilization business for ASCs, you know, regional. He ended up not doing it because it was— the logistics were just going to be too difficult. It is a real issue because a lot of ASCs don't have much in the way of sterilization. So I mentioned we built a hospital, and as we made one change in the plans, we were looking at the plans for the OR and we only had one. So we had the, the latest and greatest from Steris, you know, the big bus sterilization for the nighttime things. But we only had one small autoclave and, and we have 12 ORs and we said, wow, we gotta have two. We gotta have two of 'em. Yeah, we gotta have two, two little autoclaves because if there's two rooms and somebody drops something, We're going to need a second one. So that was the only change we made. That was it. That cost us an extra $150,000 because we had to change some plumbing around too. But we had to do that. But that's a big expense. Now, out of $100 million, that's not a huge deal. But that was actually— we felt as surgeons, this is when surgeons call us both administrators, we probably never would have done that. We said we got, we really need two because things do hit the floor. And that's part of the problem with the pre-sterilized units, you know, that the peel pack units like you're talking about and asking about. It's also a problem with not having an autoclave. Things fall on the floor. Screwdriver falls on the floor. That's kind of a big deal. The one implant you got, it's on the floor. Oh, okay, that's a big deal. Sometimes the scrub techs drop 'em. And, and this idea of peel pack screws. So if I do, let's say an ankle fracture, I might have 12, 14 screws. That's 12, 14 baton passes from one non-sterile over to a sterile table, over, pass over to the OR table. So you got two, you know, danger zones where something can fall and hit the floor. And of course, you know, first one, you're patient. Second one, okay. 10th one, would you please gimme the damn screw? Yeah. You know, you're waiting and waiting and waiting and waiting and you just get tired of waiting. And remember, OR time is $150 a minute. So you're really saving money for the institution. Maybe not. Interesting.

So David, you spoke earlier about failure rates in screws and—

Yeah.

I'd ask Alyssa to— I'm asking you to unmute because if I'm not mistaken, Alyssa, this is the foundation of your company.

Correct. Apologies, guys. I have Scott here with me. Scott invited me up to an investor meeting up in Kansas City and we were gonna surprise everyone together. So great to see you guys. David, thank you for sharing. Yeah, both Scott and I are actually in the bone mineral density discussions and placing screws and preventing backouts and revisions and so on and so forth. I'm not a big advocate for spine surgery in the ASC setting. I just don't think that we have enough backup plans in place for spine surgery in the ASC setting. But Dr. Kaye, I'd be interested in your thoughts on that.

Yeah. So, this is a daily occurrence. ACDF, so anterior spine, you know, fusion, even some single or double-level spine. The insurance companies go, we're, we're going to not cover this as an inpatient. It's an outpatient procedure. They move them to outpatient procedures. So we have no say in it. It's the insurance company calling the shots. And last peer-to-peer I did, it's called Peer-to-Peer. That's very tongue-in-cheek. I said, and this is, so this is a great story. So surgery scheduled 3 months prior, the day before the surgery, oh, it's been canceled unless you do a peer-to-peer. Okay, great. So I do the peer-to-peer and I go, what kind of surgeon are you? You know, this is after I do my explanation. It goes, and he goes, well, I'm a surgeon. I said, well, what kind? I said, OB-GYN. Said, so you didn't understand anything I just told you, huh? And of course he canceled it and it took another month to get it on. So think how disruptive that was to the patient. We know cancellations within 24 hours cost us close to $2,000. Think about that. I, I know the numbers. Again, this is something most people are very insulated from. Most surgeons don't know because they're employed, and I'm not even sure all the institutions know what cancellations like that cost. But that's the reality is, so I would agree with you, most of these people are better off being done in, um, hospital setting. But, and the reason they're doing it is they don't pay as much if you do it as an outpatient versus an inpatient. That's it. It's just, it's cost savings. It's not a quality issue, it's cost. So that's just the reality of what we have going on in our world.

Thanks for sharing. I appreciate it.

Yeah. Yeah. That's, it, it's probably really depressing everything I'm telling you, but You know, it's— there's ways around a lot of this and good ways around it. I mean, there really are, but it's not— they're not easy. They're not going to be the easy, hey, I'm just going to do the same thing everybody else has done over and over again. I mean, you're going to— you've really— again, you've got to think about the process. You've got to think about everybody who touches it. Are you making everybody's life easier? I mean, I— if you want to sell something, come in with, lead with, we're gonna make your life easier and we're gonna save you money and we're gonna improve your outcomes. Wow. You win. I'm seriously, you're gonna win.

Yep. Without modifying surgical technique and cost too.

Yep. Yeah. Yeah. Yeah.

Yeah.

Well, we're, we're, we're, we're gonna improve the surgical technique because we're gonna make it easier for you. We're gonna cut it down from 50 steps to 30 steps. Okay, fantastic, because we've changed the process. That, that's how, that's what you've got to think about. It's not if your technology, whatever that technology is, if you're not doing that, you're not really going to have any impact. You're just going to be one in a crowd and then you're going to talk about price and that's not where you want to go. Unless you, you've just outsourced to another country and you're getting things made, you know, bare bones. And then what surgeons will say to you is, I don't trust this stuff. Where was it made? Because if it fails, are you gonna be there with me to, to explain that to the patient? Probably not. So I'm gonna be left holding the bag. So I'm gonna use this because I trust them. That was one of the things with Ortho Helix is, my academic side, my podium side came to a roaring halt. Ford said I can't go up on the podium anymore unless it's for something completely different because of credibility. So the credibility issue was really, really important and staying true and staying trustworthy, really, really important.

Reminds me of persons of a certain age will Perhaps remember the refrain, you can't get fired choosing IBM. Yeah, you can now, but you know.

Yeah, you're right, right.

Yep. So where, David, where do you place, where's the bar for reducing steps, reducing labor, simplifying, and where's the bar for better outcomes or equal outcomes? To the current product?

So if you're going to have equal outcomes, then you better be lower cost. Okay. And but the thing is, let's talk about lower cost. This is where there's a lot of simple thinking going in. So if you ask somebody who's financially very savvy, they're going to want to know about the total cost, not just the line item cost. The problem is you're going to be dealing with materials managers who are paid in bonus based upon line item costs. Hey, look at— I say I saved the OR X amount because we went to this, whereas an insurer may go, well, what's the total cost? Bouncebacks, problems. A great example, decision was made at one of the hospitals we worked in to go to a very inexpensive suture. So here are the problems. The nylon suture would break and wounds would dehisce because the suture would actually break. The suture lengths were shorter, the needles were dull, the needles would bend. Uh, the microneedles, the suture which was wedged on would fall off. One of my partners used— went through 10 10-0 sutures, and those are very expensive because the suture kept falling off the needle. And then the miracle happened. So here's the miracle. Every single surgeon agreed. I want you guys to think about that. When have you ever seen every single surgeon in an entire hospital agree on any one thing? And it was, you got to get rid of this stuff. And it was only to save $50,000 a year out of, you know, something that's generating hundreds of millions. So, you know, if somebody made this crazy line item decision and that's where the sell process comes in, you've got to look at what is the total cost of care. And that's what you've got to sell on. You're going to have to, you know, do an end around that materials manager who's just more concerned about what's that single line item cost. So am I answering the questions okay? Perfect.

Yeah, I'm the only one unmuted right now.

Perfect. Okay.

Okay. Yeah. So what I hear is that if you have a better, completely better technology then you can't really add steps or you can't really make the process more complicated, but you maybe could get a little more price for that. If you have a me too kind of product, you've gotta dramatically lower cost and lower the process steps.

Yeah.

I mean, if you're just doing a swap, that's not gonna happen. So why is, doesn't that happen? So Stryker, I'll pick on Stryker just because they're easy and everybody knows who they are. They have a lot of contracting clout. So does J&J. Okay. They are selling all kinds of stuff from dressings to this to that. I mean, you know, they might be selling 1,000 things to the hospital. And if they see you coming in and they consider you a threat, they might drop the price on your one item or raise on something else and end up neutral just to keep you out. Plus, they're going to go, look, this falls under our contracting of a single vendor. A lot of hospitals are single vendor because they think they're saving money. The reality is they're not. It's like GPOs. You think you're saving money, you're really not. GPOs have no incentive to drop prices because they get a percentage of the sale price. So they'll drop prices a little bit, but not that much. They're almost like a PBM, which is— everybody now knows what a PBM does and how they work, and they're a huge problem. Yeah, it, it's, it's, you, you've, you have to, and you actually have to be able to show that you're from real data that yeah, you are doing something different, whether it's again, saving money or improved outcomes. You, and that, that's the big problem with a lot of the surgeries. It might take years before you know what your actual outcome's gonna be. So how are you gonna prove it? It's, it's worse than the vac death valley. Or you're just sitting and waiting around. You know, we, you know, Tiger, you and I talked about, I mean, hip replacements are lasting 23, 25 years. How are you gonna prove you're better?

Yeah. And, and I don't know, by the time, you know, the answer, the product's off the market, you can't get it anyway. Oh yeah.

Yeah. Yeah. I mean, it's, it's, it's really, really hard to do that. So now you're down to price.

Yeah. Price. Or maybe you can, you can, there's certain things you can measure early like dislocations and hips or, Inferior, you know, less infection. You know, there's some things you can get in the first few months, right? That are early outcomes.

So, so let, let's go to, so let me address that one again. The, the, the behind the scenes discussion, metal on metal hips. Remember when they came out? Everybody remembers when they came out and everybody knows they failed like crazy. Well, but let's think about the FDA process they went through. You know, they had to run those things through 10 million cycles. They had to look for all kinds of things, right? And they, because they were put in in a very specific way. So how do you think they were actually put in a little different? I talked to some of my partners who'd done, you know, and looked at 'em and said, yeah, because the heads were smaller, the cup position was changed for more coverage to prevent dislocation. What do you think happened when it was put in differently from the recommended way to put it in? You got edge loading, you got abnormal wear, you got the ions, you got a big mess on your hands. So when it gets out in the wild, be prepared for the wild. Be, be, be prepared.

Think about how it can be used wrongly.

Yep. Oh yeah. Yeah. So I don't know if, if anybody even knew about this. You know, if this even has been discussed, I mean, what, why did this happen? Well, that's one of the reasons it happened.

David, Colleen asks, any advice on how to best go about getting on contract at a facility?

It may actually be impossible because of the single vendor. I'm really, because of the single vendor. First off, you're going to have to give away a certain number. You're going to have to— the, the initials are going to have to be free, pure free, just to get it in the door, to get people to try it. And then you're going to have to continue to be very persistent. And you've got to show initially that you're saving that facility money. You've got to show that. If you, if you can't do that, you're not getting anywhere. And it doesn't make any difference how good the results are. Yeah. Let, let me give you another example on how a lot of the hospital systems think. So I mentioned that we have this real little handheld navigation unit. One, one of the things about it is cut down on radiation to surgeons. Do you really think the hospitals care about, care that much about how much radiation I get not really, they don't care. It's happened at certain institutions, particularly with interventional cardiologists. They don't even bother wearing their badges because they're way over the limit and some have died from radiation exposure. Wow. Hospitals don't really care. I hate being so, you know, matter of fact about it, but that's just the reality. It's just not, it's just not that much of a concern to them, which is really sad. I mean, it's really sad. But, you know, there's a— if you want to make a list on the problems in healthcare, the misalignment between administrations and physicians is definitely probably in the top 5. They are very misaligned. Well, So I don't know if I answered the question to you, but you've got to be incredibly persistent and you're going to have to wait because remember, if you're going to break a contract, cause them to break a contract to move something out, there better be a pretty good reason because they will squawk like crazy. One of my early experiences, this is a hospital out in California, we were really getting going on our implants and the Synthes rep was actually going in the night before and damaging the sterile trays so that they couldn't be used.

Oh, wow. That's a lawsuit if nothing else. Wow. That's incredible.

Yeah. Yeah. Yeah. That, that actually happened. He got caught. Wow.

And it was, yeah, just instead of, so incentives are so big, people do stupid stuff.

Yeah. Yeah. I, I, again, I, I try to— what I've experienced, this is, you know, part of what I'm trying to convey.

Um, what, how would a company— so a company's trying to get on contract, like Colleen says, how would you, how do you prove that your thing is cheaper overall? I mean, do you have to Do you have to measure OR time? You measure the labor, bringing product in and out, sterilization. Now, how do you prove it when you're a device, a medical device company?

I, I would say everything you, where you can go in, again, I mentioned we have a skin adhesive and this has actually been very well worked out for the non-invasive closures that the typical time savings is about 9 minutes. Again, you go 9 minutes. Okay. So, Well, 9 minutes at, say, $150 a minute, that's a lot of money that they're not even thinking about. There's a lot of additional costs that they don't even think about because they're just, well, that's just what we do. But so it's telling a story and telling a story in a convincing way with real facts that actually will get people to change. I mean, changing from current practice is very, very difficult, even if current practice isn't very good. I'll go back to the roundabout, you know, how many people still stop at the roundabouts and don't go, you know, follow through. And, you know, they work great when everybody knows what to do, but not everybody's going to know what to do. So it's the same sort of thing magnified in the operating room or in hospital setting. ASCs a little less, but that's because they, you know, they're more physician-owned. Some aren't, some are joint with hospitals, and the problem with those is they start running more like hospitals than ASCs.

So on your wound care product, so what is the base? You're reducing 9 minutes. What's the baseline or control that you're comparing that to?

Sutures and staples. Okay. Yeah. We know staples have increased infection rate. Then if you look at some of the other dressings like a negative pressure wound dressing, and this was just published showing that they were with direct anterior approach for hip replacement. There are actually more problems with a negative pressure wound management and those are very expensive. There, there was actually more infections with those than with using Prineo. Wow. Which is DermaBond's product or which is J&J's product. So yeah, but there's other elements to, to, to it. Again, I'm not gonna get into the chemistry until we get the FDA release.

Interesting. So less cost, less steps, less complications, less, just less, less, you know, like Mark V talked about a few weeks ago, less— yes, less friction for the customer.

Absolutely. You know, I completely agree with what he was saying and I would definitely agree with him as far as the funding goes, because the people have gotten very savvy. You know, they're— it's like it's just another same thing as everybody else. So how are you going to sell this? You know, and that's really what it comes down to. I'll never forget. When I started Ortho Helix, you know, really proud of all the stuff we did. And Lawrence Ferry, who was on our board, and Lawrence was one of the, he was the original CFO for Danek. He came through and he just looked at me and said, it's about sales, you know, in his very thick Southern drawl, you know, it's about, and I've never forgotten that. And that has been basically my byline now that everything is about sales, sales support, sales, having a product that can be sold. And that's what you've got to think about. Who's going to sell this thing? Why are they going to sell it? Okay. If it's really cheap and they're going to make $10, why are they going to invest in $10 for a sale? They're not. On the other hand, if they're going to make— if the salesperson is going to make $5,000, it's probably priced so high nobody can afford it. So, you know, you've got to figure out how are you going to sell this? How are you going to commercialize this product? And you do that before you start working on the technology. You know, you want to create a business case.

Yeah.

Yeah.

And yeah, I'm an engineer.

25 years ago.

Yeah, go ahead.

No. Yeah. 25 years ago, I couldn't have told you what a business case was. Now I know what a business case is.

Yeah. Well, it's different world when you're making a payroll.

Uh-huh.

Yeah. I'm an engineer and I was, I learned, it took me a while to learn, but if you don't have sales, you don't have a company. I mean, there's, You can invent all the stuff you want, it doesn't really matter. It's gotta be sellable. Do we have a question, Joe, from Vinay?

Vinay, you can take yourself off mute and ask.

Oh, thanks. Dr. K, I would like to hear your thoughts on the impact of GLP-1 drugs. Yeah. So I've seen some of the— what's been in the press and I've seen what's been on the Slack bone chat. Everything brings something good and everything brings something bad. We just don't really know what all the bad is going to be with the GLP-1. Part of the bad right now is coverage. They're expensive. They're very expensive. So how far-reaching are they going to be? I don't know. Are, are they gonna get to, you know, if you think about the less advantaged populations, obesity is much greater, much, much greater. Are they gonna be able to afford it? Is that gonna be something covered by Medicaid? Probably not. Will they have an impact, positive impact? Probably. But remember, obesity is not the only cause of arthritis. Again, in my world, let's say doing ankle replacements, which is a tiny percentage of all joint replacements, it's not really related to obesity. It's, they're usually post-traumatic. It's a little different joint than the other joints. Shoulders, why would that be an obesity issue? A lot of shoulder replacements being done. So it's, it's probably gonna have an impact and it's probably gonna be a very positive impact. These are gonna have less diabetic issues. And we know diabetics have a tremendous wound complication and infection rates following joint replacements, higher failure rate with obese patients. So it's, I don't think it's a bad thing and we'll accommodate to it. Just, you know, remember, let's talk about the offset. Our population's getting older. So, you know, those aren't gonna change aging unless there's a new drug that comes out that stops aging. You know, that's still gonna continue. Interesting.

Interesting. Yeah, it seems to be a wave of GLP-1 usage. People were learning about it. You know, I, what I, every time I go to total joint surgery, the person on the table is a little heavy. You know, and I'm thinking if, you know, 10% of those don't show up, then there could be 10% less procedures.

I don't know.

I, I, again, when I started in practice, I was, you know, I mentioned I did a lot of diabetic work. So what does diabetic work mean? I was doing a lot of amputations. I mean, I was averaging a below-knee or above-knee amputation a week. One a week. Toes, I can't even begin to tell you the number that I take off weekly. And with improved diabetic management, that just plummeted. Absolutely plummeted. Wow. So, you know, that, that's, that's, you know, that, that's, I, I view that as a pretty positive thing. And I see the comment about the lymphoma.

Yeah.

Either side of it. It's, yeah. Well, yeah, I, I mean, I just, there, there's just a lot of misalignment. Interesting. And you've gotta get by that and you better understand that there's misalignment. You might have surgeons going, this is fantastic, this is great. And then their employer goes, we're not paying for it. And the insurance companies go, we're not paying for it. So, okay, what do you do now? It, you know, you've, you just gotta know that going into it that, you know, what, what's happening. The whole thing issue, like on robotics and navigation, I mean, there's no upcode or additional code that you can use if you use a robot or navigation. So you're gonna ask a hospital, go drop half a million or more on a robot that you can't really prove works better. Now the spine ones for screw placement, those are actually looking pretty good. That's different than the joints. And that's a whole nother discussion.

Yeah. Yeah. Well, unfortunately I think we're running outta time, so we should probably wrap. It's been a solid hour. We may have to do round 2 and we'll figure out the video next Thursday so everybody will, okay. We'll see each other. Really appreciate your time, David. It's been, it's been great. And thanks for sharing, thanks for sharing a point of view that's rarely heard in medical device world.

Yeah. Yeah. Thanks. Again, I don't, you know, say this to be the naysayer, but if you're gonna go into this work, you, you really need to understand the good, the bad, and the ugly. I mean, you just need to, you, you can't just be a Pollyanna and think, oh my God, this is such a great idea, such a wonderful product. And when the, then the reality is gonna happen and it's gonna happen eventually. So you just plan for it.

Yeah. Yeah. All right.

Well, thanks. So thank, thank you.

Yeah. Thanks again.

Been great. Okay. Thank you, David. Thanks. Thanks, Joe. Thanks, Tiger.

See you, Bone Chatters.