The New Business Model in Orthopedics

Believe it or not, in the future, Orthopedic companies will discount or even give away “medical devices”, in exchange for data.

If you follow me, you know that I have shared with you the software trend in orthopedics. Software continues to infiltrate the industry at an exponential rate. Devices are collecting data and talking to each other.

Let’s look at a new business model that is made possible by this software revolution. 

The New Profit Model

Silicon Valley already figured out that selling data has significant advantages over selling products. It’s hard to wrap your head around how Airbnb and Uber have flipped our thinking about business models. The result is today, the #1 hotel chain in the world doesn’t own any hotel rooms, and the #1 taxi company in the world doesn’t own any cars.   

Orthopedics lags behind other tech industries, however, the shear amount of new connected orthopedic devices and data collection brings new business models within reach today.

Coming to Orthopedics

Fast forward to our beloved industry, orthopedics.  A few clever, fast-movers will exploit the Silicon Valley approach to creating profit in our industry. These entrepreneurs will take the traditional business model of selling tangible products to hospitals, and turn it upside-down.  They will focus on capturing data, not selling products.

I believe that we will see orthopedic-centric companies generate most of their profits from data, not products (implants and disposables and capital equipment). These fast-movers will discount the “medical device” in exchange for the data.  What is the break-even cost of a total joint, cage or arthroscopy? What is the real cost?

To take it further, a few orthopedics startups will even give away the “medical device” in exchange for the data. Ok, Ok, I can hear the pushback while you are reading this.  You are thinking that you cannot discount an implant that cost hundreds of dollars or even a thousand dollars. But you have to change your mindset. What if the free “medical device” is a wearable chip that cost a few dollars?

The key to figuring out these new business models is to reverse engineer the future buyer of the data. The most likely buyer of the orthopedic data is the Payor. Figure out what information these big insurance carriers need to improve their profitability. Payors would buy data in a heartbeat to improve profitability. Think about how valuable would it be for a United Health or an Anthem to answer these questions:

  • What hospital or ASC in Columbus has the most cost effective outcomes for a primary total hip procedure?  
  • What surgeon in Denver has the most cost effective outcomes for ACL reconstruction?  
  • Which procedure has the most cost effective result for 54 year-old male with lumbar stenosis in Chicago?
  • What is the best lumbar fusion procedure for a patient in Phoenix with a given age, activity, and BMI?

The Cost Question

What if a company could compile the data the around a patient from diagnosis to care to recovery? Seamlessly, the cloud would capture the patient diagnosis and pre-op baseline with motion sensors and imaging, then capture the surgery event with costs, then capture the post-op outcomes with images and motion sensors. 

Sensors are well-designed to measure motion and transmit the motion data seamlessly.  And after all…. isn’t orthopedics all about pain-free motion. If you think about it, the entire goal of the musculoskeletal world is pain-free motion.   Orthopedics = motion = sensors. Motion is perfect for disposable sensors.

Imaging (both pre-op and post-op) is another source of data. Image data is already baked into the healthcare system. AI software is now making great strides into image interpretation using algorithms to interpret before and after images.

The Privacy Question

The healthcare system likes to stiff-arm the public with HIPAA concerns at every step in the process to promote the lack of transparency in the system. They create a confusopoly to protect their profits. The patients don’t know any better.

But what if, patients knowingly and actively gave up their rights to medical information in order to receive better care? Much like you give up your privacy to Google or Facebook for the advantages. Heck, 5 million people have already handed over their DNA rights to “23 and Me” for the benefits.

Orthopedics patients will give up these rights also.

“Wear this sensor and you will receive better care.”


Game Over

The first company that collects a critical mass of orthopedics data (diagnosis, pre-op motion, cost and real-time outcomes) will dominate. Insurance companies will readily buy the data.  National healthcare systems will buy the data.  A savvy orthopedic company will do this before Apple or Amazon targets our industry.

What company will be first to leverage the new software profit model in Orthopedics?