How the medical supply industry blocks device startups from selling to hospitals • Hacker News Board

Re: How the medical supply industry blocks device startups from selling to hospitals

#71

Post by robomartin » Wed, Apr 25, 2012, 7:29 PM UTC

anigbrowl wrote: post #62

robomartin wrote: post #40

As an entrepreneur I have dedicated most of the last 25 years to doing hardware (read: manufacturing) ventures. Manufacturing in the US is hard, if not impossible, save cases where the ecosystem or nature of the market can support it. Problems one could face include: ip (patents) mine field, government regulations, liability issues, lack of localized supply chains, high labor costs, high insurance costs, high taxes a…

Part of the problem is that we continue to give the keys to the shop to bureaucrats who have zero real-world, business or employed-by-a-non-government-business experience. You really can't expect much from anyone who has lived their entire life within the confines of an ecosystem where personal decisions carry almost no risk. A lot of the time the rules are not made by bureaucrats but by politicians in receipt of lob…

Nope. Read it again. Government rules is what changed the nature of these GPO's from hospital-funded to being funded by kickbacks from the various vendors. That one act alone seems to have triggered a massive shift in power.

Businesses will adapt to the environment they operate within. If they can identify an advantage they will use it. I am not going to blame a business for moving within the existing framework any more than I would blame someone for taking advantage of SEO. In other words, given an environment where you can optimize your website for better search engine results, you do it. And that's fine. The problem is that those making the rules that create the opportunity for optimization are morons who have no clue about what they are doing or are simply corrupt.

Lobbying is a problem, but it is NOT illegal. I fully agree with disallowing it. So long as it isn't, those who can will use it. Again, you use the SEO tools available to you. When something starts to work against you or is no-longer allowed you stop using it.

Something else that needs to change: Government workers cannot be unionized. Why? They form a voting block that can influence the very laws that regulate them as employees of the government. It's as clear a conflict of interest situation as I can imagine. They vote as a block and favor anything that will keep them employed, protect their pensions, etc. The private sector has had to take haircuts for the last several years and suffer the consequences of ill-conceived plans from government. In sharp contrast to this the typical government worker is living in an isolated bubble where they can look forward to retirement while earning 80% to 90% of their pay for the rest of their lives and enjoying an amazing health-care package. Some even got raises. All on our backs.

In the real world the government workforce should have been cut by at least 25% to 50% and their salaries by another 20%+. Lifetime pensions seriously cut down and completely eliminated at some level. If you want to have a nice retirement make the right decisions and invest your money yourself, don't to on my back and my kids backs. This is so broken it's a tragedy.

I mean, see what's happening with the health-care law? They are hiring some 4,000 IRS agents to support it. These people are NEVER going to get fired. They'll probably cost us well in excess of a billion dollars a year in salaries, benefits and support systems.

Re: How the medical supply industry blocks device startups from selling to hospitals

#72

Post by robomartin » Wed, Apr 25, 2012, 7:30 PM UTC

paul wrote: post #67

When people complain about entrepreneurs building social networks instead of curing cancer, they need to understand that this is a big part of the reason. The internet attracts so much innovation in large part because it's very open to innovation. In more regulated/corrupt (the two are closely related) fields, such as health care, there are many barriers to competition that kill innovative new companies. Mobile was a…

Yes!

Re: How the medical supply industry blocks device startups from selling to hospitals

#73

Post by robomartin » Wed, Apr 25, 2012, 7:33 PM UTC

kposehn wrote: post #45

robomartin wrote: post #40

As an entrepreneur I have dedicated most of the last 25 years to doing hardware (read: manufacturing) ventures. Manufacturing in the US is hard, if not impossible, save cases where the ecosystem or nature of the market can support it. Problems one could face include: ip (patents) mine field, government regulations, liability issues, lack of localized supply chains, high labor costs, high insurance costs, high taxes a…

Hah! Very well put in general. We're avoiding the device angle as well, due to the same things you've mentioned.

It's infuriating when you imagine just how much creativity and innovation is being wasted. Time is something you never get back.

Re: How the medical supply industry blocks device startups from selling to hospitals

#74

Post by gscott » Wed, Apr 25, 2012, 7:34 PM UTC

excuse-me wrote: post #4

Almost exactly the same with military equipment. Design a product that saves the lives of front line troops, demo it to the troops and they love it. Then try and sell it to the government and you are told that you have to form a consortium with an established supplier - Boeing/Lockheed-Martin/General Dynamics in the US, Thales/BAe/EADS in europe. Now imagine the sort of deal you are offered as a startup negotiating w…

And if you try to export it the Government can block the sale of any military use equipment. I know a person who developed an external coating for submarines but the US Military didn't want to use it, so he found a (friendly) country that did but was denied the license to sell it.

Re: How the medical supply industry blocks device startups from selling to hospitals

#75

Post by Aloisius » Wed, Apr 25, 2012, 7:39 PM UTC

anigbrowl wrote: post #68

robomartin wrote: post #66

Earlier quoted context omitted.

No,no. Read it again. The government setup the rules that enabled exactly that behavior. If they (government) didn't try to play entrepreneur or investor we'd be far better off. There are cases where government involvement is warranted. I'm with Ron Paul on this one: Get them off our backs, we do and did just fine when they had less hooks into us. This is particularly true with the existence of the Internet. It's pre…

No, in 1986 the government removed rules (forbidding kickbacks) designed to prevent such behavior. In 1996 the government exempted medical supply companies from many antitrust regulations. The facts laid out in the article are diametrically opposed to the point your are trying to make. It's pretty hard for a large company to misbehave today and not pay a serious price for it. for example?

People like to pretend like all government regulation is stifling to innovation, but it is pretty clear that some regulation is necessary for a properly functioning market.

The trick is, how much is too much. There needs to be a very good reason to shield any company from anti-trust regulations and I can't think of a valid one that would apply to medical supply companies.

Re: How the medical supply industry blocks device startups from selling to hospitals

#76

Post by robomartin » Wed, Apr 25, 2012, 7:40 PM UTC

anigbrowl wrote: post #68

robomartin wrote: post #66

Earlier quoted context omitted.

No,no. Read it again. The government setup the rules that enabled exactly that behavior. If they (government) didn't try to play entrepreneur or investor we'd be far better off. There are cases where government involvement is warranted. I'm with Ron Paul on this one: Get them off our backs, we do and did just fine when they had less hooks into us. This is particularly true with the existence of the Internet. It's pre…

No, in 1986 the government removed rules (forbidding kickbacks) designed to prevent such behavior. In 1996 the government exempted medical supply companies from many antitrust regulations. The facts laid out in the article are diametrically opposed to the point your are trying to make. It's pretty hard for a large company to misbehave today and not pay a serious price for it. for example?

I disagree. Here's the relevant section:

Then, in 1986 Congress passed a bill exempting GPOs from the anti-kickback provisions embedded in Medicare law. This meant that instead of collecting membership dues, GPOs could collect “fees”—in other industries they might be called kickbacks or bribes—from suppliers in the form of a share of sales revenue. (For example, in exchange for signing a contract with a given gauze maker, a GPO might get a percentage of whatever the company made selling gauze to members.) The idea was to help struggling hospitals by shifting the burden of funding GPOs’ operations to vendors. To prevent abuse, “fees” of more than 3 percent of sales were supposed to be reported to member hospitals and (upon request) the secretary of health and human services.
But, as with many well-intended laws, the shift had some ground-shaking unintended consequences. Most importantly, it turned the incentives for GPOs upside down. Instead of being tied to the dues paid by members, GPOs’ revenues were now tied to the profits of the suppliers they were supposed to be pressing for lower prices. This created an incentive to cater to the sellers rather than to the buyers—to big companies like Becton Dickinson rather than to member hospitals. Before long, large suppliers began using “fees”—sometimes very generous ones—along with tiered pricing to secure deals that locked GPO members into buying their products. In many cases, hospitals were obliged to buy virtually all of their bandages or scalpels or heart monitors from one company. GPOs also began offering package deals that bundled products together. To get the best price on stethoscopes, a hospital might have to agree to buy everything from pacemakers to cotton balls from the GPO’s preferred vendors. Hospitals went along because they got price breaks, usually in the form of rebates if they met buying quotas.

This situation only grew thornier in 1996, when the Justice Department and the Federal Trade Commission overhauled antitrust rules and granted the organizations protection from antitrust actions, except under “extraordinary circumstances.” Once again, the idea was to help struggling hospitals, this time by allowing the buying groups to grow big enough to negotiate the best deals for their members. But the decision led to a frenzy of consolidation. Within a few years, five GPOs controlled purchasing for 90 percent of the nation’s hospitals, which only amplified the clout of big suppliers.

Government meddling triggered all kinds of mutations that led to the current situation in more ways than one.

Re: How the medical supply industry blocks device startups from selling to hospitals

#77

Post by luser001 » Wed, Apr 25, 2012, 7:48 PM UTC

narrator wrote: post #48

robomartin wrote: post #40

As an entrepreneur I have dedicated most of the last 25 years to doing hardware (read: manufacturing) ventures. Manufacturing in the US is hard, if not impossible, save cases where the ecosystem or nature of the market can support it. Problems one could face include: ip (patents) mine field, government regulations, liability issues, lack of localized supply chains, high labor costs, high insurance costs, high taxes a…

It's not just medical devices. Monks trying to enter the casket making business have run into licensing issues too. http://www.stltoday.com/news/national/article_44747e48-649e-...

Also car manufacturers can't sell directly to consumers.

Re: How the medical supply industry blocks device startups from selling to hospitals

#78

Post by luser001 » Wed, Apr 25, 2012, 7:51 PM UTC

robomartin wrote: post #76

anigbrowl wrote: post #68

Earlier quoted context omitted.

No, in 1986 the government removed rules (forbidding kickbacks) designed to prevent such behavior. In 1996 the government exempted medical supply companies from many antitrust regulations. The facts laid out in the article are diametrically opposed to the point your are trying to make. It's pretty hard for a large company to misbehave today and not pay a serious price for it. for example?

I disagree. Here's the relevant section: Then, in 1986 Congress passed a bill exempting GPOs from the anti-kickback provisions embedded in Medicare law. This meant that instead of collecting membership dues, GPOs could collect “fees”—in other industries they might be called kickbacks or bribes—from suppliers in the form of a share of sales revenue. (For example, in exchange for signing a contract with a given gauze m…

What you generically call "government meddling", I call (more precisely, imho) "corporation-funded, lobbyist-enabled legislative corruption".

Re: How the medical supply industry blocks device startups from selling to hospitals

#79

Post by robomartin » Wed, Apr 25, 2012, 7:51 PM UTC

Symmetry wrote: post #57

robomartin wrote: post #40

As an entrepreneur I have dedicated most of the last 25 years to doing hardware (read: manufacturing) ventures. Manufacturing in the US is hard, if not impossible, save cases where the ecosystem or nature of the market can support it. Problems one could face include: ip (patents) mine field, government regulations, liability issues, lack of localized supply chains, high labor costs, high insurance costs, high taxes a…

I don't think that politicians having real jobs for part of the year would help, particularly. They'd still only have one job, which wouldn't be nearly enough to get the expertise needed to legislate on all the topics that they make laws on. I could talk about how any organization tends to become less tolerant of risk over time. Failures happen and when they do the tendency is to make sure that they are prevented fro…

Well, as you indicated, this isn't a simple problem to solve. The "let them have real jobs" statement is more of a statement of frustration than a real solution.

Maybe there's an angle there. I'll use the example of an MBA degree to illustrate. A friend of mine complete an MBA at Pepperdine. Over dinner I asked him: "What's an MBA good for?". He said "Not a damn thing without context". He got the MBA after over a decade as an engineer. He knew what to do with it and how to apply it to something concrete.

Perhaps rules for government employ could change in that you would be required to have had a career in the private domain for, say, ten years, before even qualifying to apply. And I'm not talking about working at a fast-food joint. Different positions would have different requirements. There's a difference between someone working at the department of motor vehicles vs. the Mayor of a city. I would be OK with DMV workers having five years experience in a non-trivial job (no flipping burgers) but would want a Mayor with a solid twenty years in a position of responsibility in a private enterprise. I don't know if this even makes sense, but we need better people in government than what we are getting. That's probably a huge part of the problem.

Re: How the medical supply industry blocks device startups from selling to hospitals

#80

Post by Retric » Wed, Apr 25, 2012, 7:52 PM UTC

paul wrote: post #67

When people complain about entrepreneurs building social networks instead of curing cancer, they need to understand that this is a big part of the reason. The internet attracts so much innovation in large part because it's very open to innovation. In more regulated/corrupt (the two are closely related) fields, such as health care, there are many barriers to competition that kill innovative new companies. Mobile was a…

Building App's is ridiculously simpler than solving major problems like cancer. Consider the smartest person you ever met could spends their entire life working on a cancer cure with everything they had and chances are they would have saved more lives by donating 10% of their salary to a vaccination program.