BoneChat call #9 - Phil Sayles - digitizing the last 10 feet of the supply chain in the OR

Uh, we are live with Phil Sales. Uh, Phil, I guess Phil and I met about 4 years ago. Um, you know, a lot of us, we've all been in the operating room. Uh, I didn't even understand this till Phil explained it to me 4 years ago, that there's only one place in the entire world where you cannot scan products in the entire world, and that's the sterile field in the operating room. And nurses are writing down notes and, you know, stickers, and they're trying to figure out what got used, what didn't get used, what got dropped. And he has come up with a, a unique solution that digitizes the last mile, or what Phil talk— talks about as the last 10 feet. Of the supply chain. So I'm going to hand the mic over to Phil and, uh, you know, ask questions as, as they come up. Welcome, Phil.

Thanks, Tiger. Um, and thanks everyone for joining. Um, I, I'll start off a little background. I was a rep for Synthes, uh, when it was Synthes, uh, for about 15 years, and I worked for the CMF division. So we had— cranial maxillofacial has a lot of little stuff, uh, for facial, um, some hand, uh, and thoracic surgery. So a lot of little plates and screws. And excuse me. And I struggled with, um, I had a large territory, so I was not able to go to all my cases. And invariably on the cases, uh, I would, um, show up at the hospital, I'd get a call or wouldn't get a call, and I'd look at the equipment and there was stuff missing all the time. And I'd be like, where'd this stuff get used? Who used it?

When it—

what was it used? And no one really wrote— no one really knew. And it got me to thinking, why, why aren't, why aren't we scanning this stuff, uh, at point of use or point of care, wherever you call. And I, I looked into it and as anyone that's been in an OR knows, it's a, it's a really, uh, uh, it's, it's like planes, trains, and automobiles when you're trying to record— track what's being used in that field. Stuff gets handed back and forth. Stuff gets wasted, stuff gets returned to the tray, and it's a real chaotic process to get all the information on these parts, which, which are either too small or the microprinting's too small to read them, to record them at while they're being used and then transcribe that information into the patient record, which is running over in the corner of the room or 10 feet away on a nurse's cart. It, it's a, it's a multi-step process and it's further exacerbated, the problem's exacerbated by often the information needs to be relayed to purchasing on, on an, on a piece of paper where they type it into the computer. So because the systems often don't talk to each other. So it's, it's a very, very manual, error-prone, laborious process. And I thought that there must be a better way. So my first, my first admission here is that I am a thief. I'm not that bright. But I'm observant and I was able to locate a tech. So the first thing that I did was I looked at other industries. What do other industries, how do they operate? And they all use, as Tiger alluded to, they all use point of use. It's in healthcare, it's called point of care scanning. And they also do something called point of sale, which is when you use something and you scan it, you pay for it. And that, we'll talk about that in a little bit. 'Cause that's gonna come. That's got, that it, some form of that will come because there's a huge payment problem in orthopedics as well. So what I did was I basically stole a concept called shelf tagging, which is used in retail. So everyone's been to the store and gone to bought a product. And if you look at the, at the store shelf, there's a tag on the edge of the shelf underneath the product. And I actually worked in one of these stores and I know that to do inventory, you scan that tag with a scanner and then you count whatever's on the shelf. And the barcode on that shelf tag knows that it's that particular product, say a can of B&M baked beans, uh, at that store. And that's an important, um, piece of information that the retail industry uses, uh, for inventory management. So I basically applied that same concept to orthopedic trays and sets. So as we know, the, the implants themselves are probably never gonna be direct part marked. And that means putting a barcode on the implant because many of the implants are really small, they're highly reflective, and they have irregular surfaces. Think of a 2mm screw. So, and there's, there's millions and millions of these that don't have any markings on them floating around out in the field. So implementing a system, even if you could mark them, would be very difficult given the variability that some have marks and some don't. It would take years and years and years for these to wash out of the system. So the control point that we use is we use the tray. So we put a microchip which is readable by a laser scanning wand that can sterilize via low-temp sterilization, and we mark the tray, either an existing or a, a new tray. We can retrofit it with a microchip that's very, very small and that can withstand up to 300 to 400 sterilization cycles. It's very robust, this chip, and it's light-powered. Um, and when I say it's small, it's about the size of a piece of glitter. And we've exclusively licensed this technology for orthopedic assets, and we basically shelf-tag the trays. So think of a, a, a neuro set that has 3, 4, 5, and 6mm screws each in a row. We put a tag at the head of each row either via an adhesive label or a little peg that replaces one of the screws, which has one of these chips. And each chip has a unique number, just like an RFID tag. And so what we tell our software is when that tag is scanned, it's coming from that tray, a 4mm screw, that asset, 401-234, whatever the number might be. What that allows us to do, and with a scanner that sterilizes, is to go inside the sterile field. And so when the technician uses— hands a screw off, they scan the tag at the head of the row of screws, and now it knows a, a screw was consumed from that tray, uh, which screw it was. And we also associate who the surgeon was, what the account is. All that type of information is associated with it so that we can track these implants in the sterile field via scanning. Point of view scanning. I, I don't know, is that, is that a clear explanation, Tiger? I don't know if there are any questions, if anyone wants to raise their hand at this point.

I'm seeing a lot of nods, yes.

Okay, so, so basically, um, we, we call these, uh, marked smart trays, if you will, scan-ready trays. We branded them as scan-ready. And, uh, we also have licensed a technology from 'Cause the other class of products that are used are labeled products. Think of a hip or a knee, bone cement, suture. Those are put into the field and implanted. And we have an imaging technology from Symmetric Technologies that's, we use a handheld imager that takes a picture of the label. And this was stolen from retail as well, by the way. Instead of trying to find the right barcode on the product, it looks at the label holistically and applies artificial intelligence and OCR, optical character recognition, to read the label like a human would. So if there are 2 or 3 barcodes, it knows what bar— each barcode is, and in one shot, it collects all the data from the label. And as you know, there's a lot of data associated with surgical products, lot number, serial number, expiration date. If it's tissue, there's a donor number. All of that information can be tracked with a picture. You just take a picture. And what we do is we take the information that we scan in the field with our, our laser scanner and this imaging system, handheld imaging system, and we combine it on, uh, a little, uh, small footprint touchscreen data cart. We call it a Tracker that has a 15-inch touchscreen with cloud software. So all of the information collects on the screen as the case progresses. In real time. And, and that's an important step because we collect the data before it's commingled with patient data. We've got a little trick for that. So basically what happens is, is the information is now available. This is, this is very valuable information to the device companies. It's very valuable information to the hospital for their supply chain management. And of course, it's also important for patient quality and patient safety. Accurate patient records. So we can then hand the data off to where it needs to go. The current process of collecting and typing the data into the nurse's station, once it gets behind the HIPAA firewall, it's gone. The data is, is effectively locked up due to HIPAA privacy regulations. So we're, we're not only collecting all the data accurately via scanning, um, we're also distributing the data to where it needs to go and in effect creating a digital supply chain. So right now hospitals and industry have invested billions of dollars in efficiency software for the supply chain analytics, warehouse management. Think of all the delivery and, and optimization tools that they use. But the weakest— a chain is as only as strong as its weakest link. Historically, the medical device industry, the weakest link has been the front link of the chain. As Tiger said, from the front, the front 10 end, 10 feet of that supply chain is entirely manual, error-prone, and cumbersome. That data, it's called GIGO, garbage in, garbage out. That data, bad data tumbles throughout the entire supply chain, costing the US healthcare medical industry billions of dollars in efficiency. It all gets changed by digitizing that front end and affording point of view scanning. And for an example, I just give you the internet or retail. As I said, we always steal from retail. That is by far the most efficient industry supply chain in the, in, in any industry. And basically, If you think of all the, the, as a consumer, all of the advantages that the internet has provided you, or point of view scanning, but at the register where you go do a retail transaction, you get the right cost, you get the right product at the right price. All of that is a, is a function of better data that exists within that industry because of, uh, point of view scanning. The same application can be made for healthcare, and it's not an exaggeration to say that this is going to save and be transformative for the healthcare industry. So that's, that's what we are working on. We have a lot of IP, but then the question comes down to how does this affect a sales rep that's in the industry that really assigns a lot of their value to, to maintaining supply chain function, a lot of, of what this system can do. My position is that it's going to help the sales rep. I did it for 15 years. I ran around like a chicken with my head cut off. I was always being reactive to problems that primarily existed because of the inefficiency of this system that exists right now. I firmly believe that sales reps in the future will be able to leverage this system and what I call digital accounts that use point-of-use, point-of-care scanning to be much more proactive, to be able to pick and choose where they do their selling and be able to effectively spread their time much more efficiently and work more smartly in the field to make sure that they're as effective as they can be and use digital scanning and digital sets and trays as a tool.

Show them, hey Phil, show them that real short video right now just so Sure, everybody can see how darn simple this is.

So this is a— this was taken from University of Vermont. Um, this was a Sinti small frag tray. We did a— our first pilot up there. We, we were able to tag and, and scan implants in the field. So this is scanning a screw. This is basically the only step you would need to do to not only, uh, attach the screw information to the patient record but to send it to purchasing to send it to the device company and collect all the other data around the case. I'll share my screen now.

Uh, there we go.

Can people see this?

Yeah, we see a black box, and here we go.

Yes.

And And that's it. So if you think about all the steps that occur right now, which would be the tech writing the screw number down or having a sales rep there and having them write it on an inventory control sheet, and then bringing that over to the nurse and having the nurse look into the computer and try to find the number. If not, creating a, a ticket for it, taking the copy of that inventory control sheet, bringing it down to purchasing, where they'll type it into the computer, calling the order in at the end of the day and having the implant shipped in the case of trauma implants. All of that goes away with that 1-second episode in the field where the tech scanned it because we can take that data and send it where it needs to go and eliminate all those manual steps. That, that is a, that is transformative for the efficiency of the orthopedic industry, in my opinion.

So here, Mark Maloney asked a question. Does the OR of today know at the end of the case if they're in the black or the red? Is there pricing information in there?

That's contractually bound, so there is no pricing information on there. We can't show the price. That's a great question. I'll be honest with you. We've been asked that by surgeons as well who run ASCs. That want to know the price. They want that. So, but right now we, we need cooperation. We want to be a friend of the device industry, so we will not put price up. Good question, though.

Well, the reason I asked that question, I think it was like 10 or 12 years ago, I was sitting down with Ranjan Sajdev, who was a CEO and founder of EMR company and a practicing orthopedic surgeon up in Bethlehem, Pennsylvania. And he asked me that. He said, do we know at the end of the case? And of course, he— it was a rhetorical question. He knew he did not, and we did not, and many today still do not. And because of that, I've watched the logistics investment community over the last 10 years. I've seen a lot of really smart money go into logistics, to the point where I've deliberately cultivated some pretty high-ranking friends in logistics, even though I'm not in logistics. I'm fascinated by their ability to move pieces, which I can never do. And that's why I asked that question to see if that was— this was maybe the missing link to those ASCs that want to know, did we make money or lose money today?

So that, that's a question of, of— so, so I kind of misread your question, or I misunderstood your question. That's a, that's a function of analytics. And that absolutely can occur. And that's actually one of the biggest benefits that we can offer. So the better data of Sum8 not only benefits the device companies, it also benefits the providers, the ASC or the hospital. And our model is to sell data. So we're charging a small seat license for each tracker at the account to the device companies. But we're actually going to be charging, making most of our money from the data that we capture and analytics as applied to the data. So we take the hospital contract, the master item list for all those products and keep it on our cloud. So when the product is being used, there's— we, we can offer 100% assurance that they're getting their contract price. That's a big problem that they're not sure about right now. But if we have that data and we can import other data, we can do cost analytics that no one else can do. So we plan to offer data analytics that includes price analysis, and basically cost case cost analysis for our system where we can provide this on our portal for a fee to charge for the data.

That's good. All information has value. And if the time comes, if you need to sanitize that data, I have a— my next meeting is with a UC Berkeley scientist that has a new software program that sanitizes and scrubs any image, any piece of document at the point of origin. It's really amazing piece.

Hmm. Well, I, I think there's— so, so we, we, we talk about industry uses of the data that Summit generates. We have people involved with us at that level, at the scientific level, who realize the problem of the, the poor data that comes out of the operating room and the fact that it's often siloed behind, uh, patient firewalls. Um, and they're quite interested in taking that macro data and applying it to outcomes. So the first step is to collect the data, and then what you do with the data, I think there's a tremendous amount of options downstream for improving healthcare itself by using that data to apply to outcomes to sort of measure you know, what are the best processes and practices in the OR? I'm not entirely sure the device company wants that, the device industry, because they sell, to be quite frank, in my opinion, there's different types of products out there. Surgeons use things out of force of habit, and sometimes they're using things that are not as good as other products on the market, but there still are a lot of sales dollars there. So I think that there is some industry resistance to connecting outcomes with products and processes in the OR. But I think eventually that's where it's going to go. And I think that at a very high level benefits medicine. I agree.

That's a really good point. Transparency is— the device companies may fight transparency. That's a really interesting point. So we talked about this before, Phil, that there's multiple customers here. You know, the hospital, ASC, is a buyer of the system and the medical device company helps the medical device company helps the sales rep distributor. It helps. So who do you think is the primary? There's multiple customers that will benefit. Who's the primary beneficiary, you think?

So we've— there's beneficiaries on both sides, right? We've talked about that. We found that the hospital, this is a multi-departmental sale at the hospital trying to push this in. It's, it involves nurses, it involves surgeons, it involves purchasing, it involves OR management, IT, and of course finance. So that's a complex sale. So we've initially targeted, bifurcated the market, Tiger, into basically ASC market, and hospital market. The question is, how do you get to that market? So we're initially targeting small to mid-sized, uh, device companies that have a foothold in the ASC market to introduce the concept of digital sets and trays to them and then leverage their relationship into the ASC market to place the technology where the benefit can be realized by the ASC for no cost initially, but also where downstream that they can benefit from documentation automation as well. So we're taking a baby step approach to the market by going to the small to mid-sized device companies, to the ASCs, particularly surgeon-owned ASCs, where there's a real sharp focus on efficiency and profit margin and a profit motive. So that's our initial 1 to 2 year plan. We're working on some federal grants and with the FDA and NIH to fund studies at hospitals, which will help us and will facilitate us accessing that market downstream. But it's ASCs at first.

Okay.

John's got a question.

Hey, thanks, Tiger. Phil, it's very interesting. My question is just in terms of the development of your product. If you could talk a little bit about how difficult it was to kind of silo your data and keeping it in a usable form before it gets swallowed. That just stood out to me as like, wow, that must have been hard. I wonder what your experience there was and not looking for your kind of your IP secrets, but how did you manage that? And then as a salesperson, keep the hospitals and ASCs comfortable that that was safe silo data.

Sure. So when we first go in, we're not— we are not requiring an integration. So what the system does, however, we do capture the account master item list. So we take the hospital master, we scrub it, and we cleanse it and we enrich it with our partner company Symmetric, who does the imaging. We load it onto the system with pricing as part of their master. And we capture all, everything that's used in the OR, both at the edge of the field and in the field. We have a printer, a Zebra printer, which can print out a listing of the items that are used during surgery with a barcode under each line item. The barcode represents the hospital internal part number for that product line, which can be subsequently scanned into the facility software on a light item base with just the scanner. We are— there's a bit of a gray area here with regard to where does PHI start with regard to what we're collecting. If you look at just the product itself, it has no association with patient healthcare information. There are caveats in the HIPAA regulations which waive the HIPAA regulations for what's considered operational, operationally necessity or necessary information. So we're operating a little under that umbrella now. So we initially go in and we say we can give you a label that you can scan. It's like semi-automation. Full integration we're working on right now, and we're sort of working on where that gray area is with how far we can go before we start treading on what's actually patient information with regard. And it, To be quite frank, as a startup company, we're working through that right now, but it's a great question.

Yeah, very interesting. Thank you for sharing.

Anybody have thoughts on, just since you're hearing this the first time, on what Phil can do to penetrate those ASCs?

Hey Phil, this is, this is Greg Perono. It's nice to see you again.

Um, hey.

Pleasure. It's been a while. I love the idea. I think it goes back to Tiger's question on who the customer is. I mean, is your primary partner the hospital because you're getting the pricing from the hospitals? Or how are you, who's your initial point of entry to get your system into the ORs?

So we're not focused on hospitals right now at all.

So just ASCs?

ASCs. In the ASC market, we're using or we're leveraging small to midsize device companies. So here's an interesting dynamic that we discovered. The small to midsize device companies do not have direct sales reps for the most part.

Yep.

They, they work through networks of distributors. Because of that relationship going through distributors, they don't have as intimate a touch with their customers. And of course, they're sending out all kinds of consigned inventory across the country to a network of distributors who have reps that go in and cover their cases. They have no control over that inventory. They don't know where it is, how it's performing. They don't know which— they have an idea which doctors are using, which of their surgeons are using, but they really, they're blindfolded to how their most valuable investment, which is their field inventory, their plates and screws and implants, are being used in the field. So what we are doing is we're selling the small to midsize device companies on the value of knowing that information. So with our system, when stuff gets scanned, we know which tray it came out of, of obviously what the price was. All that information gets captured, and then we can send that information directly to the device company electronically at the end of the case and also amalgamate the information so that we can, we can have a data portal where they can go in and look at set turns, set location, revenue per set, revenue per surgeon. Um, we can take in their, their cost data, give them, uh, uh, profit per surgeon, profit per set. So they know they can do their field asset allocation much more efficiently and with better data. We don't charge a lot. So basically our model is to charge for that data. We charge a 3%, just like a credit card. We charge a 3% fee for transmitting the order information directly to the device company at the end of the case. So if you can think of it, it's almost like a MasterCard charge, right? So basically they get that information and then they pay for the data. The other thing that we can offer is more of a payment automation system. So basically you're going to have a bill that goes out with the order. You know, it was correct and that can be matched in the system If we're integrated with the ASC, we can auto-match that to create a payment episode, which is much quicker and much faster, eliminating bill-only, if you will.

So I guess that gets to the point of my question is integrating it into the ASC in the ASC management, because you would think that if it's— or I would think, you know, new, first time I'm hearing this, right? If you're having this live in the OR at the ASC and their staff are the ones that are utilizing it, Yes. To scan everything, that they would want to have some ownership. So I guess who's selling it to the ASC leadership? Is it the small device company that's going to the ASC and trying to position your product, or are they putting you in touch? Like, how's that integration?

We've been working in partnership. So basically we go in together to sell the account basically on the benefits of having documentation automation. It's, it's a quality sell. And it's a business efficiency sell for them.

So, so if they— if, if that's mid— midsize orthopedic company places your product, it gets integrated into the ASC, then the ASC wants to use it for other companies and other products. Yes. Are they then putting you in touch with those other companies, or like, how does that tree spread so that you get incorporated into the whole ecosystem of that ASC? And who's getting paid to do that work? Who's like— how are you building that?

So we can support multi-tenancy, Greg. So we can have multiple device companies on the platform. So they typically will use 2 or 3 companies for most of their implants, a larger ASC. So we can put another company or another company, we can put up as many as we need onto the platform. Of course, we keep them separately. We separate. That's multi-tenancy. But basically our bet and this, we're just learning this as we go. So I don't have all the answers, but these are good questions. Our bet is gonna be that the nurses who eliminate all their manual entry— that nurses hate putting stuff in the computer. It's— if you look at studies, it's the thing that they hate more than anything. That they're gonna ask for ScanReady trays. They're— we're trying to develop the brand ScanReady so that the customer, if they're using one set of trays that are scannable and makes life easier for them and eliminates all that data entry, they're gonna ask their subsequent partners, device partners for ScanReady trays, which is a pull to add vendors onto the system.

Okay.

Greg, one of the, I think perhaps, you know, we as salespeople and salespeople who've managed alliance relationships and worked in the trenches, I think one of the things that you're, you know, trying to understand is, where's, is there channel conflict here? Who's gonna like, who doesn't like it? What's gonna, where is it gonna stumble? And so far, there's alignment with everyone. Nobody so far is like, hey, you shouldn't do that. I mean, we talked about pricing earlier. And so, I mean, there's— but that's a bigger issue, a different issue. So far in this ecosystem that Phil's describing, everyone's aligned, which is kind of neat.

No, it's great. I mean, I love it. I just, to me, It seems like right now the primary beneficiary of this system is the hospital in the long run, or the ASC in the long run is the primary beneficiary and the distributors you're getting on board through your process. I'm just trying to understand that system because I, I guess if, if I look at what the endpoint is, you would want to have an ASC that come, becomes reliable on your system. Yeah. And then expects other folks to use it.

That, that's the point. And the hospitals are downstream market for us, Greg. It's just too complex. If we need to get, you know, we need to, we need to get customers initially. So we're at several pilots right now. But the key point is to go to an ASC where they can make a decision and execute on a project like this. At a hospital, it's political. It's a much longer sales cycle, which for our investment partners, they don't want to hear that.

It, and so I guess next question in the OR, I'm sorry to dominate this question, just trying to understand the whole system. If you've got sterile system, sterile product that's getting used in that OR suite as well, just say suture or a, a suture anchor or something that's a sterile kit that might not be scan ready. Are you, do you have capability to scan those sterile products as well just so you can lump everything together?

Yes, we do. We, we have a partnership with a company called Symmetric who has a point of use handheld imaging system. They actually clean all the data for us so that we can effectively scan everything. But this imaging system, so scanning in the OR of those products has been problematic. Some, they're scanning some hips and knees at hospitals. You'll see that, but most of the products are not scanned. The Symmetric solution solves this because it uses imaging. It doesn't look for one barcode and it has a resident clean complete master on the handheld item. On the handheld computer. I'm sorry. So that when you image the label, it parses a clean, complete dataset because it captures all the barcodes, uses intelligence in their software and parses against a clean, complete master item list on that handheld to yield about a 97, 98% hit rate on sterile product imaging. And it collects the full UDI in one shot. So it captures all the barcodes on the item. Okay, we have an API, it reflects on our screen. So when you look at the Tracker screen, you've got a section where all the implants in the field are, are listed that are being scanned, and then it has underneath, uh, a subset of information on all the sterile products that are being scanned, including, you know, lot number, serial, all that stuff gets collected with one step just by taking an image of the product label. So we can— we're the only company in the world, we believe, that can, can can scan everything that's used in the operative or surgical suite.

And Greg, that's where most of the activity has been historically, has been because the sterile products have barcodes and such, you know, people have been, you know, organizations have been doing some scanning, but it's sort of analogous of the ability to mow half your lawn. There's not a tremendous amount of value in that, right? And so to Phil's point, you know, the ability to take it on incomplete is, you know, is that's where the value is.

Yeah, absolutely. That makes sense.

Yeah. So here, question from Mark Mathis. How do you put numbers on the benefits versus the costs?

So That's, that's a great question. For the device company, we, we charge basically 3% of invoice amount. So it's a small fee for the data and we charge a license fee. We've, with our limited exposure to the market, to the device companies we've talked to, they've seen the benefit of a 3% charge on their invoice amount to have better data to more effectively manage their field assets because that's their biggest cost. With the hospitals and the ASCs on the provider side, we have internal data we've generated with 4 New England teaching hospitals which show that there is a fairly significant revenue leak in ORs for charge capture. So we all know the nurses miss things. The nurses don't want to hear that they miss things, but we all— reps know that they miss things all the time. And we've been able to use data analytics to show a 12% leak over a control group of neuro, ortho, and vascular implants. So basically what we did was we went in and we measured what did the hospital record in their EHR for a control group of implants? And then we went over a period of a year. We used unspec codes as a control, as a control for the implants. And then we went in and said, how much did they pay? Purchase orders issued for that control group of implants. And it was a $4 million gap. That was just for a control. So now some of those are covered by capitated bundled costs. Some are not. Some are, some are carve-outs. So it's not, it's not 100% hermetically sealed data, but directionally it shows that there is a large documentation problem in the OR with regard to charge capture leak. The charge capture leak alone provides a fantastic ROI on the system based on what we capture versus what it costs.

So that 12% It's always so there's more product being used than, than is being recorded. It's never the other way around where there's— they're over-recording things. That makes sense. This is almost like shrinkage in retail.

The only way it could happen is if the, if the hospital bought a lot of stuff, like loaded up. That, that this— the data doesn't account for that. But, and there we could, we could do a study on that. But we feel that the data is directionally compelling enough to provide an ROI story that holds water for the hospitals. Again, this will be as we move into hospitals, we're initially focusing on ASCs.

And Tiger, that's kind of a— it's kind of a negative way to look at a, you know, a tool that can save hospitals a lot of money. But you can look in the news and see where, because this is such a loose system with regard to you know, there, there've been, there've been bad reps out there in the past that you can read about, you know what I mean? That have, have done things that they shouldn't.

Everybody knows about the famous Zimmer case in New York where they were, they were stuffing sterile implant in the ceiling tiles.

Yeah.

Yeah. That was AutoSuture.

Okay.

US Surgical. Leon Hirsch.

Yeah. Yeah. That was US Surgical. The, the, the New York case was the distributor doing the case while the surgeon was on the golf course. Surgeon Salesman is the book.

Good book.

I just, I mean, I'll just say that I'm, you know, as I've been working, my history is in the financial services industry prior to this for 25 years where, you know, things are highly regulated and there's not a lot of looseness in what's going on unless you are a high net worth individual and, you know, you. And so the, you know, the, the amount of, um, the amount of looseness in this, in this whole system was just— I was just dazzled, um, to learn. And, um, it's fascinating.

Yeah, we've all been in the operating room. It's total chaos. You know, there's circulating nurses running around with her, with his or her head cut off, and, and the nurse inside the sterile field is getting yelled at. You know, I, I need something fast.

It's, it's crazy.

Yeah. Tiger, thanks a lot. I got 12:45. Phil, great.

Thanks, Mark.

I love what you're doing.

Thanks, Mark. I want to follow up. Take care. Yeah, let— just reach out and we'll, we'll, we'll establish a line of communication. I appreciate that. Thank you.

All right, good. Next question, it actually came from Mark as he's leaving. From a marketing perspective, did you survey—

I got 2 minutes.

No, go ahead. Go for it. Uh, did, did you survey, uh, ASC groups or hospital systems or independents to find interest or value? So what kind of voice of the customer did you do on the front end?

Uh, not much. I was basically, uh, I, I'll be honest with you, I was kind of panicking back in 2018 when I started this because I I was an older guy and I wondered really what my future would be as a device sales rep. So I sort of just hitched it up, grabbed, put my boots on and said, I know this is a problem and set out to— I invested a lot of my own money, a lot of my own money into it to start. I knew the problem was there and I— but I didn't have the resources, time or money to do extensive market research. My market research was just running around like a crazy man trying to fix all the problems that occurred because of poor documentation in the OR. Scratch your own itch.

Is usually a good start.

Yeah.

All right. Thanks, Mark. So Corey asked, has there ever been pushback from the circulating nurse or scrub tech using the system? This will only be as effective as the staff executing the documentation. We all know there's a lot of clock watching and breaks.

Corey, 100%. This was the one area that I completely— I don't want to say I whiffed on it, but that I didn't understand the challenge, which is change management with OR staff. Interesting side note, we're working pretty close with Duke. So we all know that people hate change regardless of whether it's good or bad or they know anything about it. Their reflexive position is, I don't like that, it's new. We don't need that. So we absolutely have seen that, and it's probably our biggest challenge. What lets me sleep a little better at night, not that I sleep much or not that I have much hair on my head, is that we have had— at Duke, they have implemented a system very similar to this in their interventional health, interventional radiology, and cardiology departments. It's a scanning system that works very similar to ours. And so they ran into initial, that inertia of a resistance to change. And after they started using it, the nurse's response was, what took you so long? After they said they hated it and they didn't want it, they said, why did we wait? Because we have, I have numerous study data which shows that the most disliked part of a nurse's job is data entry, which is much more prevalent now with electronic health records. But they don't like sitting in front of the computer typing stuff. I do know that for a fact. And I also know that our system eliminates all of that with regard to implant documentation. So really what it comes down to at the end of the day, and that's a great question, Corey, and it's a challenge, there's no doubt about it. Is that we feel that the norm will adopt to what the nurses like to do. And if they are recording stuff by manually typing it in, they're going to like the automation of just capturing it with one shot. The other piece of that is if we are competing against the nurse playing on their phone because they're not doing the documentation in the first place, We got a tough road to hoe with the nurses in that case. There's no doubt about it. And we're learning that as we move along. But I think eventually it will go our way because nurses don't like to do data entry. And there's a heightened awareness of poor documentation in the OR. And I think actually at the end of the day, I think it's getting to the point where the FDA, because of poor UDI reporting, all of the data surrounding products, I think they're going to do something from a regulatory standpoint eventually. Interesting.

Yeah, Ted's got a question.

Yeah, I just wanted to make a couple of comments. When I first found out about what Phil had developed a couple of years ago, I think when the pandemic was, was hitting, I think, Tiger, you had highlighted it in your, in your blog and it immediately hit me, you know, based on my experience, which is very long on spine, spinal implants, being in complex cases, the problem in the OR, the pain point of manually scratching, you know, writing down the screw, the set screw, the screw, the rod, whatever is being used. And as an executive, you know, leader within companies, especially smaller companies, small to mid-sized companies, the inventory management challenge when you're dealing with a distributor network. And, you know, the, the loss of inventory, the loss of tracking of inventory, and, and the acute challenge of that. So that hit me as like Phil's onto something here. And then thinking further about it, it's clearly solving a problem for the hospital because they're so inefficient in the hospital in recording this data. And just the brief study that Phil did showed that. But there is a, a challenge. I, I talked to another company that has an OR table, a, a special operating room back table. That works with a workflow management system that helps the nurses be much more efficient in these complex orthopedic cases to optimize the process. Their biggest challenge as they were getting, getting set up was the pushback from, from this is different, this is change. And so, you know, I'm going to help Phil and, and Dave, you know, to kind of connect them through my network. You know, I think it'd be great to talk to those guys at Dynamic OR to see how they, they work through that. But ultimately, to be successful for somebody, I believe, yeah, you've got to figure— we've got, you know, figure out for you, um, you know, where's it, where's it going to work best? You know, your, the, the companies with the inventory management system, how do they get it set up in their trays? They've got to, they've got to now implement and put, you know, your little tracker readers, you know, into their, into their trays. Um, that's a cost. And, and how much inventory do they already have that they have to pull back and So you got logistics issues, but, the, and how do you get into these hospitals, ASCs, these networks like SCA, United Hospital, you know, corporations, or, they're all about efficiency and starting at the top and trying to work, work down into the system to figure out from the top down, but also have case studies and a process to help the change management side. You know, I, but to me it's, it's hospitals, ASCs is where we're all going right now. And it's those companies that are just dying, you know, because of the cost of lost inventory and not, and not being able to track that inventory. So that I, I think it's great. It's just, you know, I think there, there needs to be more work on, you know, finding that out, getting those answers and, and developing the value proposition to bring it forward. So that 3% onto every case for the invoice, it's clearly, it's a no-brainer decision for the company. But then really tackling at the hospital level with some of these hospital CFOs to identify their pain points and see, okay, how can we help you do better? Not just from a financial standpoint. Then you talk to the compliance and the quality officer. You know, they can get huge fines if, you know, things aren't being done right in the hospital. Think about the legal, get a lawyer involved and see how they can start scaring people into buying some aid.

And the other thing, just to add on to what you said, Ted, was we think, again, we're a small company. We think that there is a payer interest in this as well, because on the pay side, they're obviously shelling out a lot of money for bundled case payments. And if you're not If you're not practicing cost accounting for your biggest cost center, which is the OR, that necessarily is not good for payers either because you're kind of guessing at what your costs are. It's better for all parties concerned to nail the cost down more delineatively and more granularly so that you're approaching negotiations for reimbursement with the best data possible.

Yeah, John, go ahead.

Uh, hey, thanks, Tiger. Um, Bill, have you guys, uh, ever thought about, um, maybe a baby step? And, and maybe you guys are way beyond this, but let's say, for example, these small, medium startup companies where you could provide this data, the scanning ability to the small company and their distributor networks you know, it's not the ultimate, right? But it's kind of one step along the process where, you know, I can see, and as somebody who's thought about this a lot, of how do you manage this very valuable field inventory? Is there a baby step along the way to provide, you know, the scanning, the software, and the ability where, you know, if there is a salesperson there, they can scan the items used or they can get scanned and then they can get back to the company, and is, would there be, the way I'm thinking about it is I see a lot of value there. And I know, Greg, who's on the call, he's managing a company that has sterilizable inventory that they'll be wanting to keep very close track of. And I just wonder if there's a little baby step or a sidebar there, but maybe not, just wondering.

Well, no, that's actually a great point, John. So we have, so keep in mind that the tracker has a touchscreen. And so we have different modes on the screen in our software, right? So we have a mode that can show just what's been scanned, but we also have a mode that can pull the tray up. And so that if there, there are companies like ImplantBase that provide, uh, uh, tablets with software to enter data in for a sales rep to enter data into a system very similar to our screen, but they're just, they're holding it. It's, it's a cloud-based software where they put the documentation in the screen. We certainly, in the case where there's a rep there and the rep wants to document on the screen what's being used, it's a touch. You just— it's basically simple touch motions. So we have thought about that and people have asked about it. We'll support whatever the customer wants to do. To Corey's point, there's the change management can be difficult with the tech because if there's a rep there, the tech feels like, well, this isn't my job. This is the rep's job to record what's, what's going on. But the problem comes down to when there is not a rep there and then things get all screwed up. So maybe there's a, there's a hybrid where if the rep's there, they can take care of it by recording on the screen what's going on, just, just with touches. And if there's no rep, they could scan. You know, we've, we're going to find that out when we get into the market full scale. We're just doing pilots, right? Limited pilots right now. We've done one complete one at UVM and we're working on 3 more through our device partner. But that's a very good question.

Yeah.

Interesting.

Thank you.

Phil, explain the sort of the free model. I know there's the low end. You can install the system and give them sort of limited data access, right?

Right. So, so We're basically— remember, our model is to work through device companies to small to— their small to midsize ASC customers. So the idea would be to develop scan-ready trays with that customer that they can bring to their ASCs. When I say customer, the device company, and charge them. We charge a small fee per tracker, monthly license, seat license fee for each tracker, and then we charge them the 3% chargeback for the orders which we send over the system. Which is basically at the end of the case, the circulating nurse authorizes on the screen and all the information data goes back to the device company. So we, if it's a $2,000, $3,000 order, we charge them $30, or I'm sorry, $90 for the order. It's 3% of $3,000. But we place the tracker, we tell the ASC it's no cost. So we're going to bring this in with sets and trays that are scan ready. It'll be in your ASC, it'll be in HOR, and it doesn't cost you a thing. We'll We're going to give you a handout, a scannable handout at the end of the case, which you can send down to purchasing. You can put it on the patient record. You can use it for, for whatever document purposes you want. But that's no cost. Now, if you want integration and you want data and analytics on what, how, what your surgeons are doing, what the, what the cost is per case, all of that information, accurate information because it's scanned. The idea is to downstream then charge them some fee for that data as well. But it gives us a flexible model where we can put the system in initially where there's no cost to the ASC.

Yeah, that's, that's nice. And there's a learning—

there's a little potential learning customer. The other potential customer is the tray manufacturers, you know, consider that, you know, they can offer this as a, as a new feature of the tray, you know, for the companies to buy their tray. You don't wanna, you know, you wanna make it, you know, available to any and all because you don't have much of a business if you're just gonna sell the whole thing to one tray manufacturer. But I don't know if you had any conversations with those people, but you know, it's, again, you're solving a problem that starts with incorporating your system into these trays, that then, um, make it much better for the customer, which is the company, but obviously much better in the end for the hospital as well.

Yeah, I, I agree 100%, Ted. So we have talked to one company, um, we— it hasn't progressed far, but yeah, it's a value— it's a value add that they could provide. So they're always looking for differentiation, right? And the interesting thing about our techn— there's two interesting things we haven't talked about with our technology. Number one is when you, when you tag and you map a tray that tray can go anywhere in our system and know what's being used out of the tray. So the tray is basically, as it's delivered, it's ready to go. It does— there's no more steps that need to be done to place it at a customer and start using it wherever. Could go all over the country and be used, and it can relay accurate data. So once the tray is at the manufacturing level, if the tray fabricator can tag and map, because we know what's going to go in the tray, right? The part numbers are all— they're non-static, they're set. That's a service that they could offer. They could charge, you know, if they're charging a dollar for a regular tray, they could say, well, we'll give you a digital tray for $2 and it'll be mapped, it'll be ready to go, and you just deploy it and you've got yourself a digital asset that yields returns for the life of the tray. I, I think that that would be attractive, and it takes something off of our plate with doing the mapping and so forth. It's not a difficult process, it's just, it's just an exercise that needs to be done. The other piece of that which is attractive to the industry is the audit part of inventory audit, which we haven't talked about. So one of the unique features of set mapping is that the tray is not only knows what's being scanned out of it, it knows what's in it. So when you map a tray and you put it in and you fill it with implants and you put it in the field, it knows what's in it. It has a dollar value of what's inside that tray, and it knows there's 8 screws or 10 screws. Now, when a screw get used, it knows there's one less screw. So the audit process for the industry is one of their biggest headaches because that right now a lot of companies are manually going out and counting stuff in the trays because they have no process control over them. Our audits can be done in keystrokes. You can literally just look up what's in a tray and it knows the dollar amount that's in that tray. I think that's a real value come audit time for device companies. I mean, think about the cost savings of having to go out and count everything as opposed to just looking on a screen and a couple keystrokes and you can see the dollar amount of what's in an account for, for their, for their implants.

Totally agree. One comment that I would make— I'm sorry, Ted, go ahead and finish that point.

No, just totally agree. I've been there, done that, and got the rotten t-shirt from inventory audits leading up to a transaction, an M&A transaction. There was like, we were just panicked. And boy, if we had an easy system like this, it'd make it a lot better.

Good point. So Tiger, just to— sort of place a point of emphasis on something that you keyed in earlier on the, you know, the 4-letter word free and the power of free in that model. Yeah. You know, so Phil can be, Phil can be pretty self-deprecating, but he is a smart guy. However, in this particular case, you know, the idea, the idea of this kind of model was this was not a stroke of genius on Phil's part. He got pulled into this. You know, device manufacturers who he's working with are saying, we have an idea, you know, we'll pay you, which is just fabulous news if you want to— if you're thinking about going out and expanding to other device manufacturers, right? That's the kind of reception that you want to get. And a lot of the points that Ted was making and that people have been making is, you know, there's, you know, there's so far we're still looking for someone to say this is a bad idea.

Yeah. Now transparency and data helps everybody, you know.

Mm-hmm.

Yeah.

You know, when you talked about quality control and knowing where assets are, Another thing, I, I know companies like NuVasive, after every surgery, they ship the trays to Memphis for quality control, re-sterilization, and there's a counting process. They have to count everything again and they have to rebuild the set.

It's the same way.

It's the same. Yeah. So I mean, it's like everything goes back and forth to Memphis unnecessarily, really for just quality control. What's, what's in the tray and is it, does it look okay?

So, so to that point, Tiger, we can scan the trays back at, at the facility. You can use scanning software to count what's in the tray. You could put a process control— I, I used to have mandible trays which would ship for— we call them loaners at Cinti's— for, for like a jaw fracture. We, we would end up wiring the patient's jaw shut, so we wouldn't even open the tray. I, I would send it back to Monument to be audited knowing that the tray was the blue wrap was I would ship it in the blue wrap. It wasn't, it wasn't even used. And they would, they would invariably, they would be like, well, you used 3 screws and a plate and 4 drill bits are missing. And they would send me a bill that I, they wanted me to get from the customer. But, but the digital end also applies to SPD, the digital process and software process control with the trays can also be applied to that other piece of the puzzle, which we all know is there, which is restocking and auditing the tray to make sure it's complete. So we can tag instruments if we want. There's a whole— we've focused on the OR, but there's a whole backend for loaners and SPD which could be added to the— which adds to the value of digital trays.

Tiger, another point there, Tiger, is, you know, if a device manufacturer comes up with a a solution for their stuff. Again, now you're mowing— you're not mowing half of your lawn, you're mowing a, you know, just a tiny little piece of it. And so, like, in terms of fiefdoms within all of the different cast of characters that we've been talking about today that, that aren't thrilled about, um, about Sunmate, it's, it's, you know, someone within a device manufacturer who's come up with a solution for the— just that manufacturer. Yeah, and you know what I mean, versus something that's truly of value to, uh, the hospital or the ASC, which is the umbrella solution that can solve it all.

Yeah, it's, it's an agnostic solution. You don't care, you don't care what device manufacturer is in there.

Nope.

Pretty cool. Well, talk of— we're kind of about to wrap, but talk about UDI a little bit. Uh, I mean, there's a law passed that, that hospitals have to know what's inside a patient by, by part number, and they don't. They, they just— they— there's a lot of wires and pins and screws that they have no idea what's in the patient sometimes.

So, um, UDI is a very interesting, uh, concept as applied to non-sterile implants. When I say non-sterile, those are the the plates and screws and the trays. The, um, there's the real world and then there's what the, the regulatory world wants with, in my opinion, with regard to UDI. So what our system can do, what digital trays can do in our system, we can track the UDI to the tray. So think when you get a package of implants to restock a tray at a hospital or an ASC, it's in a very well-labeled package that's inside, but it's not sterile yet. When you take the package— when you take the implant out of the package and you put it in the tray, you lose all the traceability at that point, right? Because you throw the package out, and once it gets into the tray—

yep, load the screws in.

Yeah, yeah.

In the real-world model, the, the primary, um, reason for UDI is patient safety and quality. And for non-sterile implants, once they're put into a patient and the patient has healed and is walking around, they're not going to want a recall at that point because it's going to require surgery and an Easter egg hunt. And there are no UDIs on— there's no, there's no serial number on the implants anyways. Or if there is, you can see my point. They're not going to just go open someone up if they're healthy and walking around.

Yeah.

So the real reason for nonsteriles and sterile packaging is to get it out of the field so it doesn't go into a patient. Right? You want to be able to recall it. So with a non-sterile implant, when the, when the packages come in to restock the tray, we use the— we can use the imaging system to take a picture. So basically, you line the implants up in the packages, you take a picture, it records all the data on those labels, and then you open it and put it into the tray. We've now tracked the UDI to that tray, which is serial number, part number, So if there's a recall, the— what the companies have to do now is take every product out of the field. So say there's a recall on 4mm NeuroScrews, they have to take up— they'll pull every tray, every tray. What we could do is we can, we can say we know exactly which trays this serial number went into. Just take the screws out of those trays.

That's brilliant.

So that's Tracking it to the tray really gets it out of the field, which is the most important thing for patient safety, given the fact that you're not going to take it out of the patient itself. Once it's, once it's in the patient, it doesn't really make— for all intents and purposes, it doesn't make any difference, Tiger. Now, with something that's like a heart monitor or something that has electronics where if it goes haywire, the patient dies, you're going to, you're going to take that out and replace it or fix it. But for something that's a simple product like a plate or a screw, you're going to leave it in the patient. You might want to notify the patient, we're not able to do that, we can't track it to the patient. I don't think you ever will be, but we can offer a solution for removing implants from the field much more efficiently.

Interesting. Thanks for— yeah, thanks for clarifying.

Great question.

Before we wrap, any extra questions?

That's—

all right. Well, oh, yeah, John.

Hey, sorry, I'll be very quick. Just kind of a note for Phil. I don't know if you've seen MedArtis. They have a very unique approach to UDI. I don't know how well it's going to work, but it is interesting where they have a little plastic clip, even on their little tiny screws. I think they call it clip something. And then as those come out, they can track it to that screw. But again, with a system like yours, if you're, if you're able to, you know, scan from that little plastic clip on each screw, I have no idea if that'll work. Just that I just wanted— I'm sure you're aware of it, but kind of interesting.

Yeah, that's, that's a good point, John. And Medtronic has, has played with that too. They call them like little earring tags on the implants. Uh, there's pluses and minuses for for those. But yeah, that's a potential solution as well. Absolutely. What it doesn't do is it doesn't do— there's things it does well and things it doesn't do as well. There's trade-offs for each technology.

And I think to your point on why would they ever go in and remove because a screw got named in some of a, you know, in a recall, if there was no problem, would they go in and mess with it? I think that's a great point. They likely would not unless there was a problem.

Well, the fact that everybody's trying to homegrown the, these solutions, like what Duke, they're doing at Duke and Medardus and Medtronic, everybody's trying to hack their own system is the fact that that tells you there's a big need out there. It's, that's always, it's always a validator when you see other people thinking the same way you are. Well, that's, that's been great, Phil. Thanks for sharing everything. Wow. I think everybody's wheels are turning right now trying to figure, figure out. Yeah.

I appreciate it very much, Tiger. And thank you everyone for, for coming and all the great questions. We've got a ways to go, but it's, we believe it's if not when. And, and at the end of the day, this is to benefit the patient and to benefit medicine. So, there is a, there is a philanthropic bent to what we're trying to do as well.

Yep.

Phil's on Bonchat, so you can reach him. You know, you can email him, call him, Slack him. All right. Thanks, guys. It's a wrap.

Thanks, Tiger.