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Business Observer Friday, Sep. 13, 2019 2 months ago

Bone deep: Orthopedic specialists go all-in on creative solutions

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Fostering disruptive technology, especially in medicine, can be hazardous to growth. A St. Petersburg firm defies the odds with a cohesive, control-the-variables strategy.
by: Brian Hartz Tampa Bay Editor

Orthopedic surgeons deal with a wide range of work-related injuries, many of which are routine: broken hips, bad ankles, bum knees and so on.

But when Tampa Bay area ironworker Robert Smith came to St. Petersburg-based Alexander Orthopaedic Associates with a completely crushed, mangled middle finger, surgeon and co-owner Dr. Daniel Penello had to get creative with the treatment. The complexity of Smith’s injury — which rendered his finger, with little skeletal support, virtually useless — required a special type of artificial bone implant that didn’t exist.

Penello studied the problem for five months. His solution? A 3D-printed finger bone implant, made of surgical-grade metal, that would allow Smith, 38, to regain full use of his finger and hand and return to his job. The alternatives were grim: Try to live with the disfigurement by wearing a splint, or have the finger amputated.

“The patient had a unique problem, and the practice went above and beyond to create a custom solution for him,” Penello says. “3D printing is what allowed us to meet his needs.”

Penello operated on Smith on May 30, and the procedure was a success. Smith is in post-op physical therapy, with plans to go back to work within a few months.

Local iron worker Robert Smith had his middle finger crushed and mangled in a workplace accident, but he's on his way to a full recovery thanks to Alexander Orthopaedic Associates in St. Petersburg. Courtesy photo.

Vladimir Alexander, who founded Alexander Orthopaedic Associates in 2002, says Penello’s approach broke new ground for a finger procedure. (Colleague and co-owner Dr. Adam Perler previously used 3D-printed material to partially replace an ankle joint — another cutting-edge achievement in orthopedics.)

“It’s unique; there aren’t a lot of groups that would do it,” Alexander says. “We’re early adopters of this technology and this approach.”

But is that approach — and being an industry disrupter, which requires pouring time, energy and resources into attempting to do things that have never been done — a good strategy for an established company that already has a steady, growing business model? Wouldn’t it be better to let university medical school researchers tackle the big ideas?

Alexander, 50, says unequivocally the firm's approach works. 

“This gives us the opportunity for leaders in thought, like these guys,” he says, pointing to Penello, 43, and Perler, 45, “to take a unique problem and say, ‘OK, we have a modality with which to treat this. We can do it as a one-off.’ But as the one-offs get more popular, of course the price will get driven down because that’s a natural business tendency.”

A DIFFERENT VISION

Alexander began his career with a different St. Pete practice. He left, saying he “wanted things done a certain way.” He envisioned a patient-centric clinic that would prioritize the best solutions and outcomes for customers over the needs of the practice.

“I found that it would be best to start de novo, and so that’s what I did,” he says. “The key piece is superb and superior patient care, providing that in a manner that always keeps the patient at the center of the entire experience. I always felt that if I did a great job for our patients, the success of the practice and the business would come secondarily.”

“From a business perspective, educating the public and your referral sources is key to growing your market.” Daniel Penello, orthopedic surgeon at Alexander Orthopaedic Associates in St. Petersburg

Penello, who trained at the prestigious Cleveland Clinic, joined the practice in 2010, and Perler, a foot-and-ankle expert from Indianapolis, followed in 2015. The privately held company has seven physicians and about 80 employees spread across its three locations in St. Pete, Largo and Trinity, the latter of which just opened in August.

Alexander declines to disclose the firm’s gross annual revenue but says it’s been on the upswing, growing 10-15% in both 2016 and 2017 and 24% last year.

He attributes the recent surge to growing appreciation for the clinic’s “one-stop shop” approach to orthopedic care. “We have the full vertical system,” he says. “We have MRI on site. We have X-ray on site. You need physical therapy? You can do it here. You need a brace or a splint? You can get it here. Got a prescription? Our pharmacy can dispense the medicine for you. You need surgery? Come upstairs to our surgery center.”

Helping patients get better as quickly and expeditiously as possible is a challenge, Alexander says — one that doesn’t get addressed as much as it should in orthopedics. People who are injured on the job are often breadwinners for a family and don’t want the delays associated with being shuttled back and forth between various service providers.

“We designed the business in such a manner, vertically integrated, so that we can provide all of these services,” he says. “But for a revenue model, it’s wonderful for us because we can control everything. And from the patient experience perspective, it’s as efficient as it gets.”

Revenue control fosters a wide range of revenue streams, from major medical insurance and workers’ comp plans to auto insurers. “You have to be well-diversified, without relying on one payer,” Alexander says.

The advantages of being an independent practice, Penello adds, “can’t be overstated. We control every aspect of the practice and virtually every aspect of the patient experience.”

The doctors say diversification is also a major strength in an era when insurers increasingly look to work with health care providers that produce better patient outcomes. Known as value-based care, it can result in reduced reimbursements for specialist clinics including Alexander Orthopaedic Associates, compared to the more traditional fee-for-service payment model. 

“The landscape changes very quickly,” Penello says. “If you become complacent, the next thing you know, the world has changed around you, and you’re no longer competitive. Reimbursements are being driven down while costs for everything are going up. It costs more to insure our employees. It costs more to service our computers, to service our MRI machines, and insurance companies want to pay us less. It's a constant battle.”

IN THE BUSINESS, ON THE BUSINESS

Although Alexander’s father, Alan, works as the practice manager, the three principals are responsible for business decisions in addition to their medical duties.

“If you want a successful business, the doctor cannot be just the doctor,” Alexander says, explaining his approach to running the clinic. “We’re involved in everything.”

One of the areas to which Alexander, Penello and Perler devote much of their time and attention is hiring. Their hiring philosophy for doctors, they say, prioritizes innovation and the utmost attention to patient care, and instead of going through the HR department, qualified candidates go through the doctors themselves.

“You hire people who are like you,” Alexander says. “And then we all sit down and hire other people. The physicians here are always hired by the previous core group of physicians who are already here. We grow like-minded people to do like-minded things.”

Marketing is another area of the business the doctors themselves work in — and on — directly. When he first joined the firm, Penello would spend one day per week calling on primary care clinics in an effort to not only market himself and Alexander Orthopaedic Associates but also to bring general physicians up to speed on the latest developments in orthopedics.

“I told them what I could do, and many of them were unaware that you could actually replace finger joints,” he says. “From a business perspective, educating the public and your referral sources is key to growing your market. But truly the best advertisement is good results.”

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