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Operational improvements are no longer optional for orthopedic companies as they face increasing cost pressures and shrinking margins. There is enormous waste in the system, especially around instrument management.
Reducing waste directly strengthens margins, but it also improves clinical performance. Surgeons benefit from instruments that are properly maintained, sharp, not overused and consistently available. Ultimately, these operational gains don’t just save money. They also have the potential to improve patient outcomes.
But from the OEM perspective, there are a lot of moving parts to manage.
“A decade ago, instrument trays didn’t move around nearly as much as they do today. The shift from primarily hospital-based procedures to a growing volume of ASC cases has changed everything,” said Yeshwanth Pulijala, CEO of Scalpel AI, which offers an AI-driven platform that automates tray validations. “Many ASCs simply don’t have the space to handle consigned instrumentation. Trays are constantly cycling in and out of facilities. The logistics have become far more complex and difficult to manage.”
That dynamic has increased interest among OEMs for a smarter, more reliable way to track trays. Companies need a way to verify not only that the correct tray is in transit, but that every instrument inside is accounted for and in good working order.
“We’re heading toward a world of connected surgical intelligence, during which tray data could move faster than the trays themselves,” Pulijala said. “An OEM or distributor could validate a tray before it ships and send that validation report directly to the hospital to provide documentation that confirms the contents are correct.
“If that capability exists in other sectors like the automative and airline industries, it can exist in orthopedics.”
Scalpel AI is continually building and strengthening its data set based on machine learning models to strengthen the connection between OEMs and surgical facilities.
“We’re expanding our instrument library, refining our models and pushing toward a future where OEMs and hospitals work in concert rather than operating in isolated data silos,” Pulijala said. “In an ideal world, multiple OEMs and a network of hospitals would share validated data, so we don’t have to layer on redundant checks throughout the instrument validation process.”
Scalpel AI has talked to numerous orthopedic OEMs that are working toward incorporating instrument tray tracking technology into their product portfolios. Some of the smaller OEMs are increasingly interested in instrument tray validation technology.
Many are exploring how it can integrate into their product lines. Although some are still in the early stages of their business development, they recognize its potential and are eager to assess the ROI.
“Their mindset is, ‘We’d rather be ahead of this movement than behind it,’” he said.
Real-time Feedback
The inaugural Medical Device Operations Challenge was held in November in Memphis to engage orthopedic OEMs and fledgling startups in identifying and solving real-world industry-wide challenges.
Device manufacturers with U.S. headquarters in the Memphis area shared their pain points, which were passed on to startups that were invited to submit proposed solutions. Up to 15 teams were chosen to receive individualized guidance from the participating OEMs — Smith+Nephew, Medtronic and MicroPort, among others — to strengthen and refine their concepts.
The OEM reps identified six technologies that they believed had the most potential to address their greatest challenges, including field inventory tracking software that would help them understand how instruments are used and managed before, during and after transit to surgical facilities.
“Orthopedic companies rarely collaborate. That’s one of the reasons we created this event,” said Olaf Schulz, Director of Venture Development and Zeroto510 at Epicenter, which launched the Operations Challenge. “They’re competitors in many areas, and while they’ve engaged with the startup community before, it’s mostly been at a superficial level. We wanted to connect startups with the legacy orthopedic community in a meaningful way.”
During the Operations Challenge’s workshop, the six semifinalists presented their ideas to OEM executives and product development professionals.
“A big part of the program’s success came from engaging experts from each company. They took on a small additional role, reviewing applications and helping vet the startups more closely,” Schulz said. “That created real collaboration. Companies were openly comparing notes during impactful dialogue.”
Schulz said OEMs often struggle to locate instrumentation in the field, track down missing kits and understand which items are used during procedures in real time.
“One of the key statistics we heard about is that 20% to 30% of surgeries are currently performed in ASCs, and that number is expected to rise to around 60% in the next few years,” Schulz said. “ASCs don’t have the same instrument reprocessing and storage capacity as hospitals, so selecting only the most relevant instruments becomes critical.”
When the difficulty of instrument tracking was presented to the startup community, Shultz and his team discovered that many of the firms were already working on solutions.
Another major issue involves managing large instrumentation kits. Items are frequently removed, misplaced or reassembled incorrectly in sterile processing. It’s a constant headache for orthopedic reps who open trays and discover that essential tools are missing.
“Most of the large orthopedic companies already use some form of RFID tracking on their instrument sets, allowing them to track a tray’s location at any given time,” Schulz. “But it doesn’t tell them whether the kit is complete, an instrument is broken or whether a tool has been overused. That’s where the real disconnect lies. What companies really want to know is whether their instrument kits are complete before and after sterile processing.”
Because of that mindset, OEMs maintain multiple backup kits, and the market still hasn’t sorted out who should be accountable for tracking the completeness of the trays.
From a hospital’s perspective, there’s little incentive to invest in systems that primarily help a device company manage its inventory. And with several tracking technologies on the market already, hospitals are wondering how many they’d need to install to satisfy the needs of different OEM suppliers.
Hospital implementation therefore remains a major barrier to widespread adoption of instrument tracking technology.
“From an operational standpoint, the real question becomes: How do OEMs implement this technology inside a hospital? How do they integrate it into existing workflows?” Schulz asked. “That’s the next frontier.”
A company might have a great tracking technology that an OEM wants to buy and implement, but the challenge is figuring out how it can be deployed in a hospital environment in a way that’s practical, scalable and genuinely useful. As it turns out, several startups are already on the case.
