Weekly Update

The last four to six weeks has been a crazy period in spine, indicative of the activity and many stories that have surfaced. The posts that we have published have played like a broken record.  For those of you that don't know what a record is, it was made out of vinyl and played on a turntable, think Grand Master Flash.  As many of you know, the medical device industry spends billions of dollars annually in marketing to physicians.  To paraphrase a well known crusader for POD's, "Surgeons are disenchanted with the amount of money spent on sales, marketing, and distribution of acquiring implants, placing the hospitals and the surgeons at a great disadvantage economically. Oh, really?  Don't surgeons have enough of things on their plate to have to worry about this?  A number of surgeons believe that they can and could distribute and sell implants far better than the current business model.  Would we expect otherwise?  These surgeons claim market forces cannot work in this environment, and that the POD model allows them to do their job more efficiently with less cost to the hospital.  Yet the question must be asked, how does one know that the surgeon is offering the best implant for their patient, at the cheapest price possible to the hospital?  Isn't any decision making process subjective?  As Dr. Steinmann, the Rupert Pipkin of all POD's has stated, "Surgeons are most qualified to be at the center of the hub to make these decisions," obviously because they know quality, their case load, and can hire their own product representative.  Yet, doesn't the hospital have greater negotiating power by leveraging volume in comparison to any one surgeon owned POD?  By developing and implementing this business model the question must be asked, "is the surgeon acting as an independent sales representative on behalf of the companies that participate in this model?  This is a question that Orthopedics This Week's Robin Young failed to ask Steinmann during their nine minute You Tube interview in December of 2010.  Would anyone expect otherwise?  Many industry professionals thought they were watching Matt Lauer lob soft-ball questions on the Today show.  "Compelling business model," pleaaaaasssse, give us a break.  Why wasn't Steinmann asked whether he believed that a POD was a shell entity strictly for the purpose of directing remuneration to the physician, cutting out the sales representative?  Tough question, huh Robin?  We would never want you to compromise your integrity, what integrity, or, challenge a surgeon for the love of orthopedics, would we?  The potential exists that they wouldn't subscribe to OTW, not attend one of your meetings, or use stem cells.  Why wasn't Steinmann asked whether he believed that by having a financial stake in the distribution of product, does the potential exist to distort his and his colleagues decison making process?  There is a fundamental flaw in a business model that allows the surgeon to become a partner, or owner, in a medical distributorship.  Hasn't there always been an issue regarding surgeon's getting paid a dividend?  Isn't this the reason that surgeon investors have never taken a dividend, on their capital investment into a start-up spine company? Isn't a POD another way of redirecting and remunerating a surgeon for their ability to control selection of implants sold through this business model?  Regardless whether the POD is saving the hospital money, isn't the POD model redirecting profits to the POD?

The OIG an the DOJ have expressed serious concerns, unfortunately, the government's bark is always louder than its bite when it comes to punishing a potential white collar crime.  Isn't this model providing physicians another method to earn an economic benefit in exchange for ordering their own implants?  By participating in this model, isn't the surgeon nothing more than a paid sales representative?  Based on the anti-kickback statutes,  it can be argued that an investment by a surgeon into a POD is an inducement for the investing surgeon to order specific implants for their patients.  How noble for the Rupert Pipkin's of the industry to argue that they are only concerned with saving the hospital money.  But isn't the real intent of the POD to increase the participating surgeon's profitability?  State of mind, Rupert, state of mind, in addition to intent.  Let's face it, POD's have questionable motives and features at best. If surgeons are disgruntled and believe that the cost of implants continue to escalate while their reimbursements decrease, why don't they go after the hand that feeds them, large corporations?  Because it compromises their ability to leverage their skills in exchange for another method of making money off of the industry.  If surgeons are so concerned about the escalating cost of delivering healthcare, why don't they send out an olive branch and agree to take a cut in their fees for service?  Regardless whether our readers agree to disagree, socialized medicine is only a stone's throw away, and it won't matter whether it is a Democrat or Republican in the the Big House.

On another note, NuVasive reported 14% growth for the quarter.  Now TSB understands that there are some NuVa minions that accuse TSB of being a NuVa basher, actually, TSB likes the people at NuVasive. Just because the powers to be are a bit delusional makes it all the more enjoyable in poking fun at them.  We love all those buzz words like, "speed, laser like focus, a prolific product innovator, etc.."  TSB has to wonder, if one backed out the benefit that NuVa received in the modifications to the accounting rules for how they account for their loaner sets, what would real growth look like?  Contrary to what the oracles of Wall Street say about the stock, it is rather disingenuous to talk about growth when one does not define what is real and what is make believe.  Many of our bloggers have discussed the potential of NuVa being acquire, unfortunately, Alex believes that the stock is worth $50 per share, hopefully, he doesn't believe in the tooth fairy.  If NuVa was going to be acquired, IT WOULD HAVE ALREADY HAPPENED.  So as we start another day, get out there and sell something, because you never know when a POD is going to be coming to your town.