Chloe Alpert learned about the enormous problem of waste in the healthcare system in 2016 during a conversation with someone she met at a party. The man had started a nonprofit that collected donated medical supplies to ship to hospitals and clinics in the developing world.
He told her that the value of the donated goods was “spectacular.” She said it immediately intrigued her because “one of the number one rules in business is to go where the money is.”
Red flags and research
“That kind of set off some red flags,” she added. For the donations to be coming in at such a high value, something’s off.”
She wanted to know more. So, she got his number and took him to lunch the next day, interrogating him “deposition style” for six hours
Alpert spent the next year “trying to go upstream in the supply chain to understand why this is happening.” Why,” she wondered, “are millions of dollars worth of things being donated by hospitals?
After rigorous research into all aspects of the medical equipment and supplies supply chain, she concluded that “materials management and equipment life cycle management in healthcare [are] very reactionary…and under-resourced. And there really aren’t a lot of innovative technology solutions” being applied to the problem.
Doing the math
Alpert became aware that a lot of healthcare literature touts that waste in healthcare is valued at $765 billion. But, she says, that is comprised of a lot of different things. It’s not just wasted equipment and supplies but also wasted procedures, over-billing, wasted time, and a host of other things.
She discovered she couldn’t readily find out how much of the waste was due to discarding still good medical equipment and supplies. So, her team decided to do its own study.
She says “that it literally came down to just doing the math. …We got a light critical inventory list for an OR. We understood the skews and we got the average lifespan of every piece of equipment. Then we got the primary and secondary market values.”
Next, they did Fermi estimates around the average number of ORs, the number of hospitals, clinics, ambulatory surgery centers, and average equipment life cycle.
They found that for 2018, the refurbished medical equipment market is an ~$8.8 billion market.
A company is born
Alpert launched Medinas Health with co-founders Tim Growney, Jesse Avshalomov, Romy Seth on August 1, 2017. They wanted to offer an entirely new approach to an old problem: a digital platform that could help healthcare organizations safely buy and sell preowned medical equipment and supplies. It would be something like an eBay for hospitals.
Alpert describes Medinas and what they have created as a “market network” not just a marketplace. This is because they “actually have a whole suite of inventory management and process management software that is connected to their marketplace.
Medinas’ platform has introduced efficiency into what was an inefficient process. And, they have created transparency that helps everyone at every step of the process understand the details of the transactions. This she says, has created a “trust layer.”
Alpert stresses that it is not as simple as just offering the equipment and accepting an online bid. Through their inventory and process management software, Medinas facilitates every detail from selling to making sure equipment works after it arrives.
A born entrepreneur
Alpert may be new to health care but she is not new to creating and running a business. Although she is under thirty-years-old, Medinas is her third C Corporation and fifth business. It runs in the family she told me. Her mother is also an entrepreneur.
While still in college, Alpert started a jewelry supply chain and manufacturing company. She suggests the supply chain problems healthcare faces are similar to the jewelry business. “The sale of high-value gemstones, from a brokering perspective, is very similar to brokering a secondary MRI machine.”
After three years of profitability, however, “the company failed miserably. I made every mistake you could possibly make.” But, she says, “I’m super fortunate that I got to make those mistakes at age 21.”
She went on to form two more businesses, one selling soap and the other related to marketing campaigns, both of which were successful.
The healthcare connection
I wondered aloud how someone with a degree in art history and business experience in retail could end up founding a company that is way into the weeds of hospital management.
She said one her co-founders, Tim Growney, is an engineer who comes from a family of healthcare professionals including physicians and hospital staff.
After working on computer-guided orthopedic laser surgery in robotics during college, he decided to skip medical school. Instead, he wanted to use his engineering skills to solve healthcare problems. The medical people in Tim’s family ended up participating in some of their initial user interviews.
Alpert says that Medinas is a “group of technologists marrying 40 years of equipment management experience, with 40 years of software engineering experience.” That has led to the creation of efficient tools to expedite management at every stage of the hospital equipment supply chain.
How does Medinas work?
Medinas establishes relationships with all of the stakeholders in the medical equipment and supplies redistribution supply chain. That includes:
- Hospitals that want to sell still good equipment so they can use the money to purchase newer models
- Hospitals, usually smaller ones, that want to acquire equipment but cannot afford to buy it new
- Manufacturers that want to be sure their re-sold equipment is properly maintained (Medinas helps them get the service contract to do the work)
- Brokers who used to be the main intermediary between buyers and sellers but struggled with supply, prompt reliable payment and access to reliable buyers.
They even see a role for non-profits, like MedShare (I am on their Western Regional Council) that make still good equipment available on demand to hospitals and clinics around the world.
Currently, Medinas encourages its customers to donate unsellable equipment to them. But Alpert envisions that one day these non-profits may be on the Medinas platform as well.
What does Medinas provide?
Medinas provides more than just a digital marketplace. They also provide
- Inventory management software
- A database that informs the current value of a hospital’s equipment. (Unlike cars, there isn’t an “accurate blue book for the secondary market.”)
- Ratings on the reliability of buyers and sellers (similar to Amazon)
- Onsite consulting to get set up with the platform and tools
Right now, all of this is free to their customers. Medinas wants the whole process to be as transparent as possible. And, they want to make transactions safe for sellers and buyers, assuring timely full payment and delivery of working equipment.
Transparency and trust
Sellers can use the platform to determine which of the bidders has a good reputation.
And, buyers know that Medinas will stand behind the sale of the product. As an example, Alpert relates that in the early days of the company, a refurbisher sold a C-arm to a customer but it was broken in transit.
Medinas ended up fronting the costs for a new one. They used this negative experience to tighten up their install site checklists. Alpert says “it was really a great learning experience for us.”
Alpert stresses that Medinas wants to be the “trust layer” in the medical equipment resale supply chain. By making buying and selling less risky for all stakeholders, she believes they can convert the current unregulated, “wild west” marketplace into one where increasingly more healthcare organizations will turn to Medinas as a safe and trusted marketplace for used equipment and supplies.
Once the equipment and supplies are placed into the inventory management system, the owner of the equipment can understand and manage the actual value of equipment in the secondary market using the Medinas’ database.
Medinas constantly “runs linear regressions on the data sets to be able to give a hospital the most real-time picture of the actual value of a specific asset.”
This allows organizations to figure out whether they should sell now, hold on to, or donate equipment. The database also informs the selling price – or it should. Alpert states
“You should able to tell from our database whether you’re going to get 25% more on the secondary market, which would give you the budget to put towards the new equipment you want to buy.”
The Medinas data set also allows push-back against a hospital CFO who might suggest an unrealistic price for equipment. Although hospitals might want to use a straight-line depreciation model to set the price, it really comes down to what the market is willing to pay.
Something for the manufacturers
I raised the issue of equipment manufacturers having concerns that Medinas facilitates sales of their used equipment to customers that might otherwise have bought new equipment from them. It is unclear whether this is a realistic concern, however, since many buyers, particularly from under-resourced facilities in the U.S. and abroad, may simply forgo purchasing the equipment altogether
Instead, Medinas decided to approach manufacturers directly to offer to give them a return via an opportunity to sell service contracts with the named end buyers. This can translate into significant revenue as the size of the secondary market is quite large.
It also allows limited participation by the manufacturers who don’t have to hold title to the equipment – a circumstance which involves significant regulatory oversight by the FDA.
What about the brokers?
One might think brokers would not like Medinas. Aren’t they taking business away?
Alpert says otherwise: brokers have become clients. Medinas helps connect them to high-quality supply, which she says they’re desperate for, and helps the brokers get paid.
Medinas serves as the vendor set up in the hospital payment system, not the broker. They guarantee the hospital and broker get paid. They handle the escrow, take on the liability and risk. It works because brokers need money to run the business and they get paid on time.
As with hospitals, Medinas gives brokers tools to run their business. They are able to manage the entire sales process via Medinas’ online project management check box.
What are they selling?
Medinas transactions are primarily surgical and imaging equipment such as MRI machines, C arms, defibrillators, sterilizers, even DaVinci bots. But they also resell unused supplies, such as cartons of gloves, if the opportunity presents itself.
Most of their current sellers are in the US and Canada. Their buyers are from all over the world. During their first 11 months of being live, they have worked with twelve hospitals and hundreds of buyers.
They have completed about 1500 transactions so far. And, their sales topped $16,000 in their first month.
Medinas is hiring more engineers, more account executives and customer service agents to just focus on guaranteeing that every transaction meets a gold standard. They started with three employees and now have 18. They began with $1 million in capital and now have $5 million.
How does Medinas make money?
Alpert says that Medinas Health is a for-profit company with a nonprofit mission. They earn money by negotiating “a flat commission on every transaction, on the liquidations in the secondary market” with material sold through their platform.
All of the logistics are also handled on their software. With aligned incentives, according to Alpert, “We only make money when the hospital makes money.”
Medinas’ innovative solution to addressing a major, longstanding problem in healthcare combined with results in equipment redistribution has attracted attention and garnered awards. This includes major awards that come with significant prize money.
Medinas Health just took home the top prize of $1 million from the second annual Creator Global Finals, a major global initiative established by WeWork, which recognizes and rewards creators of the world. The awards are across industries and for organizations at different stages. Medinas won for Business Venture category among tens of thousands of initial applicants.
They also won the top prize ($360,000) in the San Francisco regional competition of the WeWork Creator Awards. And, a $500,000 prize from the Forbes’ Change the World Competition for early age entrepreneurs under the age of 30.
Medinas has an opportunity to help hospitals make much smarter procurement and selling decisions. This will completely redefine equipment lifecycle management as a category in healthcare. A part of this is also creating a “sharing economy” in healthcare that many would agree is desperately needed in the US.
“We can reduce waste – beyond a physical asset perspective – but also time, administrative and process waste. It all figures into the $765 billion number that everybody talks about” Alpert states. “If I can take your time and make it more efficient -that’s kind of my grand vision for Medinas.”
I ended my interview by asking Alpert where she sees the company in 10 years. She does have a 10-year plan (of course) but she also told me:
“I think we have the potential to make a real impact and significant change. That’s what I’m going to dedicate the next twenty to thirty years of my life to, at the very least.”
Of course, that’s a lot of years to dedicate to anything, especially for a millennial. But I, for one, hope she does it. My assessment is the result of 30 years of listening to everyone in healthcare whine about the need to “squeeze the waste out.” It is quite refreshing to talk to someone who is actually trying to do it.
More by this author: Ada Health Adds Swahili to Expand its Global Reach
Many thanks to healthcare communication and public affairs consultant, Leslie Rose, for her expert assistance in the preparation of this story.
Patricia Salber, MD, MBA
Patricia Salber, MD, MBA is the Founder. CEO, and Editor-in-Chief of The Doctor Weighs In (TDWI). Founded in 2005 as a single-author blog, it has evolved into a multi-authored, multi-media health information site with a global audience. She has worked hard to ensure that TDWI is a trusted resource for health information on a wide variety of health topics. Moreover, Dr. Salber is widely acknowledged as an important contributor to the health information space, including having been honored by LinkedIn as one of ten Top Voices in Healthcare in both 2017 and 2018.
Dr. Salber has a long list of peer-reviewed publications as well as publications in trade and popular press. She has published two books, the latest being “Connected Health: Improving Care, Safety, and Efficiency with Wearables and IoT solutions. She has hosted podcasts and video interviews with many well-known healthcare experts and innovators. Spreading the word about health and healthcare innovation is her passion.
She attended the University of California Berkeley for her undergraduate and graduate studies and UC San Francisco for medical school, internal medicine residency, and endocrine fellowship. She also completed a Pew Fellowship in Health Policy at the affiliated Institute for Health Policy Studies. She earned an MBA with a health focus at the University of California Irvine.
She joined Kaiser Permanente (KP)where she practiced emergency medicine as a board-certified internist and emergency physician before moving into administration. She served as the first Physician Director for National Accounts at the Permanente Federation. And, also served as the lead on a dedicated Kaiser Permanente-General Motors team to help GM with its managed care strategy. GM was the largest private purchaser of healthcare in the world at that time. After leaving KP, she worked as a physician executive in a number of health plans, including serving as EVP and Chief Medical Officer at Universal American.
She consults and/or advises a wide variety of organizations including digital start-ups such as CliniOps, My Safety Nest, and Doctor Base (acquired). She currently consults with Duty First Consulting as well as Faegre, Drinker, Biddle, and Reath, LLP.
Pat serves on the Board of Trustees of MedShare, a global humanitarian organization. She chairs the organization’s Development Committee and she also chairs MedShare's Western Regional Council.
Dr. Salber is married and lives with her husband and dog in beautiful Marin County in California. She has three grown children and two granddaughters with whom she loves to travel.