Tuesday, March 23, 2010

It's a New Day, A New Way, and Only Time Will Tell

Today, the POTUS officially signed the Healthcare Reform Bill of 2010, though the bill has to survive an arduous process within the Senate before its finality. The last few years have exemplified the best and worst of America. Somewhere along the way we lost our moral compass, and it's just not issues pertaining to healthcare. It involves total disregard for rules and regulations. We have become an entitlement society that simply cries; "that shouldn't have to apply to me." Many questions have been asked about how this bill will affect our industry or the medical device industry in general. Unlike some CEO, TSB does not have to prognosticate because the spirit of a true entrepreneur will always prevail. As successful as the last ten years have been in spine, it has also led to irrational exuberance, delusional thought and schemes not only amongst executive management, but also the rank and file of this industry. One has to wonder was it really about enhancing the quality of patient care with emerging technologies, or, was it about the deal? Why would anyone invest in some of the start-up or emerging companies that glut the market with products and continue to flounder in "Otherworld" if they didn't believe that there was an opportunity for a windfall?

Yet, hope springs eternal. Based on the climate within the investment community, it is apparent that the days of investing into companies with traditional hardware is coming to an abrupt halt. As was stated in a previous blog, peripheral spine technologies/real innovation is the wave of the future. The companies that continue to slog along bringing out their me too products will eventually crawl to a grinding halt for one reason or another, whether it be lack of capital and sales, market forces driving down the cost of implants and biologics, or just surgeon consultant attrition. The subculture companies that exist to create cheap and quick products, i.e. inter-body devices and pedicle screws, while playing roulette will be limited to local markets or local surgeons. But who will want to buy them? Besides, these ventures are about a quick profit rather than long-term viability, and then it will be on to the next new thing.

If the last few days of stock market activity is a barometer of things to come, the insurance and device companies stand to benefit from this reform. Contrary to opinion, when one door closes another one opens. There will be more people with healthcare coverage, people with pre-existing conditions will not be denied, and young adults up to the age of 26 will be able to be covered under their parents insurance plan. You don't need to argue with TSB just look at the demographics, numbers don't lie. One way or another, those of us that have insurance end up footing the cost, just think about it, there have been greater increases in healthcare insurance over the last few months than over the last few years, and we didn't even have a healthcare bill. There is no question that a government mandate on insurance with a penalty is an infringement on individual rights, but if we were willing to spend hundreds of trillions of dollars (thank you fellow reader) on the two wars without a financial analysis and stood by while Wall Street was bailed out, why do we behave so irrationally when it comes to healthcare? As I have argued, there is a difference between having a right to basic healthcare versus the privilege to pick and choose. For those that argue that it is a fundamental threat to free market enterprise, personal freedom, and innovation, this will likely separate the innovators from the imitators.

Let's be realistic, if the industry is going to be taxed 2.3% per annum beginning in 2013 who will carry the brunt of this tax? Will it be the start-up or early growth stage company, or, will it be the Spine Cartel and major medical device companies? Besides, how many of these large companies actually have the creativity and wherewithal to organically develop emerging technologies? Retrospectively, most of their new products have been acquired rather than developed organically, along with the fact that they have exhibited a poor ability to integrate some of these acquisitions without complete chaos (just look at what Medtronic did). Look at Stryker, NuVasive, Synthes, DePuy, Medtronic, and Zimmer, what have they produced in comparison to a entrepreneurial venture? Not much. The definition of innovation is introducing new things, not buying new things that were developed by entrepreneurs so that you can acquire greater market share. There is a major difference between being a manager of a big company and an entrepreneur. One minimizes risk to maximize profits, while the other relishes risk.

In closing, most of us don't really know how this is going to effect or affect the industry at the end of the day, because until all the final details are hammered out, it's your word against mine. It's funny how all the people in the industry that espouse that change is good are the people that are having the toughest time accepting the fact that either this legislation will succeed or it will fail and only time will tell, because as the late, late, late, Lowell George from Little Feat said, "Time Loves a Hero."


  1. It appears that health care reform will be good and bad for the industry. Although the 2.3% tax will squeeze margins and force efficiencies, this should not be a deal-breaker. The supposed addition of 30 million newly insured however should help the industry - it makes sense that the newly insured would be more willing to have surgery if they don't have to pay out of pocket. Ultimately it is difficult to say how this will all turn out for the industry once all the dust settles.

  2. Excuse me for being confused, but I thought that the health of Americans WAS our business.

    This first step towards health-care reform is a step in that direction - nobody in their right mind could possibly oppose it.

    If they oppose it, its because they are ignorant or dishonest - which is worse coming from a doctor I don't know...

  3. What scares me about the way Republicans and TEA party people are acting about this basic human issue of helping others is - what will they do when they realize they have to pay steadily increasing taxes to repay our debt to China?

    If these losers are ready to get violent against elected politicians over a domestic agenda that was clearly favored at the polls when Obama was elected - what will they do when they realize that their beloved Republican heroes have sold their future earnings to Chinese consumers who have been lending us all of our money for the past decade?

  4. My cousin Anonymous above, "If these losers are ready to get violent...." remember, it was Mr. O's buddy Ayer's that blew up the Pentagon etc. I object to your classing anyone opposed to Mr. O's programs as "losers."

    Entreprenuers will be the ones that continue to pull the rest of the world out of this mess. The added taxes on devices, added taxes on dividend income, are across the board and will just be reflected in the final cost to the consumer. More "hide the bologna" by the politicians. Until the Fair Tax is enacted (may have a chance after November 2012) all of these hidden taxes won't be revealed - but just think, these types of taxes exhist in everything you buy now. Remove them and we can compete with anyone in the world, again. 8 months from now we will have a voice again. Neuter sounds good to me at that time.

  5. As the late great Yogi Berra espoused:

    "I hate to make predictions..... especially about the future."

  6. Clearly favored at the polls? Are you deaf, dumb, and blind? This was opposed by the majority in just about every poll. What the left fails to realize is that most Republicans are for healthcare reform...just not this version that was forced down the American people's throat.

    Putting the unconstitutional component aside, the new 32 million potential patients are going to find it awfully hard to find surgeons to treat them. Unless you're coming through the ER, nowhere is it mandated that surgeons have to take these new Medicaid patients...which is already the most used and abused payor. Surgeons I talk with are already catering their practice to the private pay sector. While family practitioners will receive the subsidies from this bill, specialists will suffer and the number of specialists will decline. Hello rationed care!!