Why orthopedic implant companies struggle with developing patient engagement software
Orthopedic Business Review
written by Will Kurtz, M.D.
January 7, 2022
Many orthopedic implant companies (Stryker, Depuy, Zimmer, & Smith Nephew) have developed or are developing patient engagement software to collect patient reported outcome measures (PROMs). Correlating a robot’s intra-operative surgical data with patients’ post-operative PROMs data could increase the situational intelligence of the robot. A smarter robot could improve surgical outcomes, which could attract more surgeons, which could increase data collection, which could increase the robot’s intelligence.
This positive feedback loop could create network effects. An implant company’s early lead in data collection could become insurmountable with one or two implant companies dominating the orthopedic implant market.
IMHO, all orthopedic implant companies are headed for self-imposed and avoidable failure with their patient engagement software. Non-implant patient engagement companies like Patient IQ, Oberd, GetWell, Seamless, Twistle, and ModMed will likely win this patient engagement software market. Let’s look at what these implant companies are doing wrong, what they could do better, and why gaining traction in this patient engagement market is important.
Selling atoms (implants) is different than selling bits (software)
Customer Relations
Selling orthopedic implants is the same as selling any recurring physical product (i.e. tractors to farmers, lumber to construction workers). Orthopedic sales reps spend years building trust with their surgeons by providing good advice and dependable services. Surgeons need their sales reps to get their instruments and implants to the correct facilities at the correct time. If the sales rep is knowledgeable and dependable, then the surgeon will use that sales rep for additional cases. Trusted sales reps can recommend other products (i.e. up sell) to surgeons. Surgeons will consider the sales rep’s suggestions if the rep has built trust with that surgeon. A surgeon’s preferred implant is often determined by the dependability of the sales rep.
Selling software is different. Typically, the COO or CIO of an orthopedic organization will solicit an request for proposal (RFP) from software companies and then schedule virtual meetings and product demos with these software companies. This software sales cycle will last a few months. The sales rep’s relationship with the orthopedic organization is minimal. Servicing the software is considerably less important and consequential than delivering instruments and implants to facilities. The knowledge and dependability of the sales rep is less important. The orthopedic organization selects the software with the best product and pricing and not the best sales rep.
Multi-Tenant and Multi-Home
Surgeons can make their own independent decision about which implant they use. Surgeons in the same group and/or hospital often use different orthopedic implants and sales reps. A surgeon’s implant choice does not impact another surgeon’s implant choice (i.e. multi-tenant). Multi-tenant means you can watch one show on Netflix downstairs while your kids watch another show on Netflix upstairs. Netflix can provide each user with their own unique experience that is independent of other users’ experiences. A hospital can allow a surgeon to use one implant company and another surgeon to use a different implant company.
A surgeon’s implant choice also does not impact that same surgeon’s other implant choices (multi-home). Multi-home means a Uber driver can also be a Lyft driver at the same time. A surgeon can use Zimmer for one case and Depuy for the next case. Multi-homing means switching cost are low and network effects are weak.
Software is different. The COO and/or CIO will make a collective decision about which software program is best and deploy that one application (single home) throughout the whole organization. Orthopedic surgeons are not able to deploy other software applications on their own because the organization can not support multiple applications. The organizational effort to train employees and storing data in different silos make operating multiple software applications unsustainable. Storing PROMs data in different silos prevents the organization from gaining any insights from their PROMs data.
An example of single-tenant would be a single implant vendor contract with a hospital or a TV station’s ability to broadcast only one show per channel. Every surgeon can only use one implant company; every customer can only watch one TV show per channel.
Switching Cost
The switching cost for orthopedic implants is negligible which is why multi-home is so easy. The learning curve to use a different implant system is minimal. Many surgeons will routinely use 3-4 different implant companies in a given day.
The switching cost for patient engagement software is significant. Employees have to be trained on using software. Patient workflows have to be changed. Educational content has to be created and uploaded into the patient engagement software. IT departments have to install the software on servers and deploy it on their devices. The patient data from the legacy software may not transfer over to the new software. For these reasons, once an orthopedic organization deploys a patient engagement software, it is unlikely they will ever switch. Therefore, late entries into the patient engagement software market will have a difficult time gaining traction.
Robotics is both offensive and defensive
In the future, when robotic surgical outcomes are superior to manual instrument outcomes, surgeons will become dependent on these robotic/PROMs systems and unwilling to try other implants (high switching cost, single-home). When surgeons are unwilling to try other implants, the hospitals lose their leverage in negotiating implant prices. Some implant companies with robotics have already demanded premium pricing for their implants because of their loyal surgeons. High switching cost and increased implant average sales price (ASP) are examples of defensive benefits from these robotics/PROMs systems. Convincing new surgeons to become robotic surgeons to successfully market their practice and FOMO (fear of missing out) are examples of how implant companies may use robotics/PROMs as an offensive tacit to attract new surgeons and gain market share.
Innovator’s Dilemma, Counter Positioning
Innovator’s dilemma by Clayton Christensen and counter positioning by Hamilton Helmer both describe why incumbents struggle to innovate because the incumbent must support their existing product lines which often runs counter to their innovation. Orthopedic implant companies are developing patient engagement software to sell more implants. Non-implant software companies only want to sell software and are not distracted by implant sales. Two obvious examples of implant companies prioritizing implant sales over software sales are open implant access and branding.
Open Implant Access
Many implant companies will limit the available implants in their patient engagement software to only their implants. Because the same patient engagement software must be deployed to all surgeons in an organization (single home), restricting implant access in the patient engagement software to just one orthopedic implant company is a non-starter for most orthopedic organizations. Some implant companies say their patient engagement software is agnostic and can accept all implants from all companies. However, when you look at their numbers, nearly all of their patient data involves only their implants. Non-implant companies’ patient engagement software will have an equal proportion of all implants from all companies. Implant companies need to prove that their patient engagement software is truly implant agnostic by actively trying to enroll their competitor’s patients into their patient engagement software.
Branding
Branding is important to any business that expects recurring and referral business from their previous customers. Orthopedic implant companies want to brand the patient engagement software because it may help them sell more implants. Hospitals want to brand the software because it may encourage more patients to use their hospital. Orthopedic surgeons want to brand the software because it may persuade patients to return for future orthopedic care. Sometimes, two entities can co-brand a product when the organizations are completely aligned, but unfortunately, a large, diverse group of orthopedic surgeons will rarely agree on co-branding with one implant company.
Branding ultimately should belong to whomever has the strongest relationship with the patient and pays for the software. Orthopedic organizations frequently will allow another organization (hospitals or implant companies) to pay for the software and receive the branding. An orthopedic surgeon’s brand/reputation is their most important asset and should be strengthened at all times. Therefore, orthopedic organizations need to pay for this software instead of trying to co-brand or allow someone else to control the relationship with their patients. The software should be white-labeled, so the patient believes the software was created by the orthopedic group.
Waterfall vs. Agile Software Development
Three decades ago, software was typically developed through the waterfall method. Just like water going over a waterfall, the first step in a waterfall design process has been completed before the second step can start. Everything happens in series; one after another. Software development for the past 10-20 years has transitioned to the agile method which is similar to the lean start up method. The agile method involves product sprints that develop a minimal viable product (MVP). The steps in the design happen concomitantly in parallel. The MVP product is then released to early customers to get their feedback, and that feedback dictates the future product roadmap. Some steps maybe important and get more attention. Some steps maybe unimportant and get scrapped.
Orthopedic implants will always be developed through the waterfall method because the serious nature of implant designs does not allow for an MVP. Each step must be completed before the next step can begin. The final implant design must be finalized or frozen before beginning the mechanical testing of the implant or designing the instruments. The instruments must be finalized before designing the packaging. The packaging requirements must be finalized before the sterilization needs can be determined. There is little ability to gather customer feedback throughout the design process and/or use any feedback to make significant changes to implant during the design process. The success of the implant system is not known until everything is finished.
The cornerstone of the agile method is customer feedback both before the design process starts and throughout the design process. Since customer feedback during implant design is impossible, implant companies are not accustomed to obtaining customer feedback while designing their software. No one wants to hear that their baby is ugly, so software designers say they need to add one additional feature before soliciting feedback from their unbiased customers. Unfortunately, that one additional feature is rarely what customers want. I, as a consultant for implant companies, have been asked multiple times to offer advice about software after the project is completed. Implant company do not create mockups (MVPs) and solicit opinions from surgeons and/or patients prior to designing their software. Getting customer feedback prior to designing software happens in Silicon Valley but not in Warsaw, Indiana.
A Winning Software Strategy for Implant Companies
First, I have to admit my true purpose for writing this article. I am sharing my ideal vision for an orthopedic platform and app store in hopes that someone will create it. In short, my ideal software platform is a patient facing application that is branded by my group, paid for by my group, and offers my group an app store where we can seamlessly plug in the best software applications for:
Patient onboarding,
Virtual scribing,
Online appointment scheduling,
Patient engagement,
Patient portal/communication,
Reputation management,
Surgical data collection from multiple sources (navigation, robotics, etc.),
and PROMs capturing.
This ideal software platform needs to be an open platform. Third-party software developers need the platform company to offer clear governance and rules that create an equal playing field for all software applications. No one company can deliver the best software applications for all of these use cases. Many orthopedic groups already have some of these applications in their software stack. The platform would need to easily incorporate the orthopedic group’s existing software applications as well as allow the group to select the best applications in other areas.
This platform must offer a software development kit (SDK) and open Application Programming Interface (APIs) to third-party developers. An SDK allows third-party applications to seamlessly integrate with the platform. Open APSIs allows third-party applications to easily read and write to the platform with the customer’s permission. This platform needs to offer third-party applications an equal playing field which means some of these third-party applications may compete with the platform company’s applications.
Microsoft in the 90’s is an example of a successful open platform company. They ensured that 30% of all revenue generated on their platform went to third-party developers. If that percentage was lower than 30%, then they offered perks to attract more third-party developers. If that percentage was higher than 30%, then they would extract more fees from third-party developers. When third-party developers successfully build apps on the platform, then the platform has a meaningful app store that delivers the best software options which attracts more orthopedic customers.
The software platform should function like a customer relationship management (CRM) tool. CRMs (Salesforce, Hubspot, Pipedrive) tracts every communication to customers and segregates customers based on their level of interest, so the business does not send the wrong communication to the wrong customer. The ideal software platform would tract the patients’ treatments and communications in order to personalize future communications. When a patient received physical therapy, they would be asked about their therapy during the check in for their next clinic visit. The software should know that the patient already received a particular knee arthritis educational material and send different educational material after the next visit.
The platform should certify developers to work with the orthopedic organizations to customize and white label the software. Salesforce approves qualified developers to help integrate their third-party applications and customize their platform software. These certified developers could add the best software applications, create a sustainable database architecture, and white label the product, so the patient feels like the application belongs to the orthopedic organization (branding). Of note, Salesforce has an SDK, open APIs, an AppExchange, is a CRM, and certifies developers. Their AppExchange just does not have any relevant orthopedic apps yet.
Implant companies could monetize the patient data that flows through their pipes in ways that a non-implant company could not. Therefore, the implant companies should be able to provide patient engagement software to orthopedic groups at a lower cost than the non-implant companies.
Lastly, implant companies need to stop trying to sell software like they sell implants. They need to target the CIO of orthopedic groups and not rely on their favorite surgeons to adopt their patient engagement software. They need to stop promoting their software at AAOS and AAHKS meetings and start promoting their software at the OrthoForum and AAOE (American Association of Orthopedic Executives) where the CIO and/or COO attend. They need to sell to groups and surgeons who do not use their implants. Whether a surgeon uses their implants or not should be irrelevant to the software sales team.
The Electronic Health Records (EHRs) like Epic, Athena, Cerner, and NexGen will fight to prevent anyone from developing a patient engagement platform. This platform would directly challenge their portals and business model. The EHRs have had ample time to play nice with third-party developers and continue to insist on extracting too much value out of the third-party relationships. The government needs to prevent these EHRs from engaging in their anti-competitive activities to promote a better healthcare delivery system.
Why patient engagement matters for implant companies
In 2012, Facebook secretly installed a free VPN called Onavo on thousands to users phones. With this VPN, they were able to spy on their competitors and used this data successfully to acquire WhatsApp and almost acquire SnapChat.
The strategic advantage for an implant company that controls a patient engagement platform with broad reach is similar. A patient engagement platform could identify when a surgeon was unhappy with their current implant and was likely to switch implants. Targeting that surgeon with a sales call or physician education could be helpful to the implant company that controlled the platform. This patient engagement platform could identify a small orthopedic company with a new successful implant and give the large implant company a competitive advantage in acquiring that smaller company. A patient engagement platform could identify trends in implant utilization and help the platform company allocate resources to future implant designs (i.e. press fit knee replacements, robotics, etc.).
My Predictions
IMHO, the most likely outcome (70% chance) is that this market will remain fragmented with non-implant company winning the majority of the patient engagement market. An orthopedic platform and app store will not likely happen. SalesForce (or Apple) could attract third party developers to build orthopedic apps on their platform and create an orthopedic platform and app store (20% chance). The EHRs (Epic, Athena, etc.) have tried to develop their own app stores, but the EHRs’ high fees make third party developers reluctant to partner with these EHRs. The least likely outcome (10%) is that an orthopedic implant company would offer third party developers enough assurances and value to build applications on the implant company’s platform. An implant company building an orthopedic platform would require a courageous leader within the implant company to give away substantial short term value to third party developers in order to reap a substantial long term advantage over other implant companies.
Thanks for reading this blog and please provide your predictions and thoughts in the comment section below.
