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Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:01} Joahn, can you please start with a brief introduction to your background and role at Intuitive?

{audio:0:00:08} I’m Joahn Ginsburg and I started as a sales person at Intuitive Surgical. Before that, my background was in sales at another medical device company. I started out as an area sales manager and within that role, you have a geographic terrain and you are responsible for getting robots into hospitals, however you need to do it. A number of people worked for me and with me, but I was in charge of making sure we sold those robots. I did that for a number of years, had great success and it was a lot of fun. Then I got promoted up the chain and, eventually, was the sales director of the West Coast, where I had sales managers working for me.

{audio:0:00:49} How does the team split between the capital sales team and the clinical sales team?

{audio:0:00:56} You can definitely delineate between the two sales forces. The capital sales team, area sales managers and then the clinical sales team, clinical sales managers, clinical sales reps. The capital sales team, called the area sales managers, are responsible for selling capital equipment. They go to hospitals and sell the actual surgical robots and they are also responsible for upgrading the current systems. They start new programs and then they upgrade systems at current programs. They work very closely with the clinical sales team because, once a robot is installed, the clinical sales team are responsible for making sure that that robot gets utilized. Their job is to get the surgeons, in the hospital, and teach them how to use it, get them on the system, visit their offices. They may say, hey, I see you have a patient coming up Friday; let’s try that on the robot. They are also responsible for introducing new surgical disposable equipment. They are really the boots on the ground, once the system is installed.

{audio:0:02:01} So clinical salespeople are actually working at the hospital and you are managing the territory?

{audio:0:02:06} Yes. Usually, the area sales manager has a couple of hundred miles of geographic terrain and then the clinical sales managers, the clinical sales reps, have a smaller area; maybe four or five hospitals and sometimes 10, depending on the rep. They are responsible for that smaller area and making sure they utilize the robot. They are also support in case there is a doctor that says, I have a big case coming up Friday and would love you in the room to show me your thoughts on a certain technology. Sometimes they are just supporting cases, as well. But really, their role is to grow that current system and to utilize that current robot as much as possible.

{audio:0:02:44} Don’t other companies have similar roles and sales people on the ground in the hospital, almost directly competing to use their equipment for certain procedures?

{audio:0:03:22} The answer is yes. The best way to look at it is to think that there are many people trying to get a surgeon to utilize their equipment. The clinical sales reps for Intuitive are trying to get them to do it on the robot and they are trying to remind them, hey, when you do your cases on the robot, it’s a shorter hospital stay, you can see better, you can visualize better. This patient on Friday looks like a tough case so let’s try the new, single-port trocar, for example. At the same time, there are other reps, such as Stryker, who do minimally invasive surgery, such as laparoscopic surgery. They might be in the surgeon’s ear saying, we have single port now. You don’t have to use a robot. You can use our single-port technology because it is minimally invasive, as well. You’ve been doing laparoscopic surgery for 20 years; let’s just keep it simple and do this laparoscopic case on my equipment.

{audio:0:04:14} Sometimes, you even have two or three reps in the room, for different equipment. For example, the surgeon might say, I want to use the robot, but I want to try the Infravision technology from Stryker. I’m going to do it on the robot, but both of you come into the room. You, Stryker rep, show me how to use your Infravision in here, as well. There is always competition in that room and there is always competition in the territory which is why, for Intuitive, it’s so important to put clinical sales reps in those accounts, so they always have their finger on the pulse and they are keeping the surgeon interested in their technology, as well as getting new surgeons to use the technology.

{audio:0:04:52} Becoming best friends with the surgeons is important?

{audio:0:04:56} It really is. It’s so interesting to see, even since I’ve been in the industry, how it’s changed over time. When I first started, as a Stryker rep, I played so much golf and I went to dinners. It used to be a lot more about pal, buds. In a very good way and, in some ways, a challenging way – it depends on what kind of rep you are – it’s become a little bit less of that because of regulation and you can’t gift surgeons anything anymore. It’s really more about the clinical value and saying, I’m going to be in this case because I’m going to provide you clinical value, not because we’re buds and we play golf on Sunday and let’s keep chatting about what we did last week. It has shifted, even in the last 10 years, from one sales method to another. If you’re a good sales rep, you can shift with it, but it’s a little bit more clinical than it was before.

{audio:0:05:47} Just before we dive into the sales process, how segment the customer between the IDNs or direct to hospital?

{audio:0:06:02} If you are a sales person, trying to sell a robot in a geographic area, in terms of the difference between a large IDN, like a Kaiser or a Sutter and the hospitals in that chain, and a small community hospital, there is some difference, but the way you sell a robot is very similar.

{audio:0:06:20} If I had to boil it down, I would say how you sell a robot is that you get a surgeon in the hospital to believe they cannot do any sort of technology other than the robot, to treat their patients well and you do that with a surgeon that is very important to that hospital. If you do that one thing, get a really important surgeon, where the hospital cannot afford to lose them and you convince them that they need this technology, that’s how you sell a robot. If you look at the second part of that where the hospital says, shoot, we’ve got to buy this because we don’t want to lose this surgeon, if you are working with an IDN or a larger facility, what that means is that you have a longer process. Even if the local hospital says, let’s buy it, but now we have to go through our IDN process, it takes a lot longer than if you’ve got a community hospital that says, okay, we need it for the surgeon; let’s do it now.

{audio:0:07:15} So it always starts at the surgeon and the actual buying process requires the institution?

{audio:0:07:22} Yes. Really, the difference is, for a larger network IDN, it just takes longer and there is more process. But if you do the fundamental thing and convince a surgeon that the hospital cannot afford to lose, that they have to use the technology then you’ve got a deal; it’s just a matter of how long it takes. Very rarely, at the top level of an IDN, a Sutter or Kaiser, do they say, we’ve decided we’re going to negotiate 20 robots and pay. Then hospital X, over in Modesto, we’re going to give you one next month. It doesn’t happen very often; it usually has to come from the hospital.

{audio:0:08:03} Effectively, for the IDN, it always starts at the surgeon and maybe you are dealing with the CEO of the community hospital that actually makes the buying decision but for the IDN, it’s more the C-suite of the IDN?

{audio:0:08:16} Yes. Wherever they are headquartered, that is where they are, ultimately, signing the deal. But if you’ve sold that surgeon, at that local hospital enough, then they will sign the deal and it’s just a matter of time. Sometimes you have to wait a little bit and they will do a bulk purchase. But if you’ve got that local surgeon that matters to that hospital saying, I need a robot and you can either do it here or I go to another hospital, then you’ve got yourself a deal.

{audio:0:08:42} Can we walk through the sales pitch, from start to finish? Let’s say you’re the sales rep and you’re pitching to this new hospital you want to get into, how do you get into that surgeon? What is the process?

{audio:0:08:59} Let’s just start at the very basic part of a pitch for a surgical robot. To level set here, a robot does not walk into a room and start operating. A surgical robot is a piece of technology that a surgeon utilizes. They put their hands in these gloves, they put their eyes into goggles and, suddenly, they can see 3D into the body and there is a separate piece that goes over the patient. They are manipulating the robot with their own hands – the robot is not moving independently – and they’re visualizing with this 3D vision. What they have is a robotic tool that just allows them to do the procedure at a higher level and allows the patient smaller ports, so a better recovery.

{audio:0:09:39} With that in mind, when you step into a territory like I did, when I first started, there were no robots. My process is, I have to find these surgeons that are important and I have to pitch them on robotic surgery. How do you do that? You get creative because often, nowadays, it’s hard to just walk into a hospital and say, can I see somebody; it’s very difficult to do. You can’t walk into an operating room anymore, unless you are invited. So you start at the local doctors’ offices and I would do research on the person I was going to pitch to.

{audio:0:10:12} You would say, this is Dr Hogan. I see that he went to medical school and studied under Dr Roffin. Dr Roffin uses robotic surgery; isn’t that great. I’m going to write a letter that says, hey, I know you studied under Dr Roffin and he’s very into this technology now and he would love for you to learn more about it – get permission from him – can I come by next Tuesday at 10? You find you’re in to be able to see them and it’s usually somebody they respect that uses robotic surgery. There are all sorts of sales tactics that I won’t get into. Some of them I feel are a little bit proprietary to me and if you pay me enough, I’ll tell you. But there are many sales tactics to get in front of that surgeon, for the first time.

{audio:0:10:53} Once you are in front of them, then you start to sell to them. You tell them what it is, you show them a video, you give them a brochure; you’ve got all sorts of tools. The second key piece to do to close is you have to get them to sit on the technology. Nine out of 10 times, for a surgeon who is a good candidate for robotic surgery, if you can get them on a robot, it blows their mind. It is incredible what it can do. If you are a competent, innovative surgeon and you see, suddenly, I have 3D vision and I can move my hands in full articulation, I have to have this. Most of the time, if you can get them to sit on the robot, they’re sold to a certain level. That’s the second piece. Once you’ve closed them for a meeting, you get them.

{audio:0:11:35} When I started, there were no robots in my area so I said, let’s take a road trip. Once again, Dr Roffin is who you studied under; let’s go see him. So you test drive the robot. The third phase of that is to see a case. Sometimes you can collapse all these processes into one visit, sometimes it takes a few weeks; sometimes it takes a couple of months. But the process is, sell them on the technology, get them on a robot, get them in a case and then start the training process. If you’ve found the right target, if you do those three things, learn about it, sit on it and see a case, often they are interested and they are ready.

{audio:0:12:15} Who is, typically, the right target?

{audio:0:12:19} I’d like to think, as a quite successful sales associate at Intuitive, everybody who’s competent is a sales target. Another thing to remember, as a sales person is that you want the right people on your technology too. It’s just a tool; whatever the surgeon’s capability is, is what is going to play out on the robot. You don’t want someone who doesn’t have much practice, isn’t very skilled, maybe only does 20 cases a year. They’re not the right target if they need a lot of practicing on what’s called the simulator; you want somebody who is proficient. Proficient and busy are the first two. If you want to talk about low-hanging fruit, I would like to think I could convince anybody to do robotic surgery but low-hanging fruit are the tech savvies. When you are meeting them you ask them, when was the last time you adopted new technology? If they said, in residency, 10 years ago, it’s going to be a harder sell. They may be a little bit risk averse; they don’t like to introduce new things and they’ve got their habits. But if they said, last week we introduced a new laser technology or a new infrared technology, then you’re thinking, they’re technology savvy and they do a lot of cases. Those are the best.

{audio:0:13:36} Are they typically at the bigger hospitals or the regional or community ones?

{audio:0:13:41} It’s interesting. When I was selling the technology, for me, if you can get a tech savvy, busy, small community hospital surgeon, those are usually the best. They have a lot of responsibility. I’m in this small town and I’m the guy. People come to me to get the best treatment in this town and I’m the cream of the crop here. I should be giving them the type of technology they would get at a UC system. Those are usually the best.

{audio:0:14:18} Then, if you go to a larger teaching hospital or well-renowned hospital – there are a lot of them on the East Coast – there are a lot of surgeons there that want to keep up and that know they don’t want to be behind the curve on new technology. If you get a big player, at a small hospital or somebody at those bigger hospitals, those are the two that really move faster.

{audio:0:14:43} You mentioned that they need to be somewhat experienced. Is there a certain number of procedures that you look for, per year, for the surgeon?

{audio:0:14:50} You can tell, pretty quickly, even by how hard it is to get into their office. If you walk in and they say, we don’t have anyone until one today, that’s probably not a very good sign. But if they are tough to get in front of, that is a good sign. Also, while you are selling to the surgical community, you are also in the hospital with the nursing and administration staff. These go hand in hand. I would pick one day to meet with surgeons and then, the next day, in the same community, I would say, I am going to try and get into Dr X. I knew her in my old job; she will let me on one of her cases and then once I’m in on one of her cases, I can meet some staff. You can ask the staff, who is the busiest surgeon here? You can walk into the OR; you can look on the board. It will say, Dr Kalla, she does 20 cases every single Tuesday, back-to-back; you know that’s a good fit. There’s a lot of ways to find out how busy they are. Usually, the hardest way to find out how busy they are is to ask them. You usually have to ask around them. But it’s pretty well known, even if you knew another rep, in another company, you can ask them and, if you’re friends, they’ll tell you.

{audio:0:16:01} You mentioned the simulator. Typically, do these surgeons already know the machine and have used it in training or in their studying?

{audio:0:16:11} I would say, when I started, seven or eight years ago, it was less common to have seen it already and it was a new technology to them. Nowadays, I think that if they’ve been to residency in the last 10 years, they have definitely seen a robot. But if they are an older surgeon, they might not have. When you are selling them on the technology, it’s really important to give them a test drive. But as they are learning the technology, if you’re going to do the right deal for a hospital that has never had a robot before, you make sure that they have what’s called the simulator. Then every surgeon, who is in that hospital, who is going to use the robot, goes on the simulator. You can say, make sure they’ve done 20 cases on the simulator before they do one on a patient. Make sure there are protocols in place. If they haven’t had a background in robotic surgery, they should practice a lot, before they use the tool.

{audio:0:17:01} Is that a separate sale for the simulator?

{audio:0:17:03} Yes, it’s an add on. I would say that 70% of the robots I sold were with a simulator, because it’s so important for training. The ones that weren’t were really small, local community hospitals that just had X in their budget and couldn’t afford the extra $300,000 to $500,000 for a simulator.

{audio:0:17:23} So the surgeon goes for a test drive; what could or did, typically go wrong there? Why would they not buy it, in that situation?

{audio:0:17:33} If you go to a small town hospital, you find Dr Hogan again and he goes on a test drive and he loves the technology. The only way they wouldn’t love the technology is if you, as a sales rep, didn’t give them a good test drive. For example, if the technology malfunctioned, if you forgot a certain add on to it and you don’t set up the test drive correctly. I don’t know if you’ve ever seen the viral video but there’s a viral video where a surgeon is peeling a grape with a robot. But when you see the video you think, how can you peel a grape? It’s tiny and there’s tiny instrumentation. On my test drives I would say, you’re going to peel a grape. The fact that they could do something that cool and seemingly daunting, right away, sells them on it.

{audio:0:18:25} I think a test drive could go wrong if the surgeon wasn’t the right mark meaning that they weren’t really tech savvy and the whole thought of it overwhelmed them and it took them a while to adjust to seeing 3D and got nervous about it. That would be a poor test drive. I would say, more common, a test drive goes well but it doesn’t go well enough where they’re willing to fight administration. Nowadays, administration has a little bit more power in a hospital. Because of the way reimbursements have gone, it’s harder for a surgeon or doctor to make money without that big umbrella of a hospital helping them and doing a lot of their legwork on the backend. They have a little bit less say in purchases now, than they would have done 20 years ago, where the hospital did whatever they said.

{audio:0:19:13} If you do a test drive and they’re like, this is cool technology, but I’m not going to ask my CEO for $2 million; that’s a lot of money. That’s probably more common and that just means you haven’t sold them enough.

{audio:0:19:24} Is that just because, more broadly, the system or budgets are being pressured, at the hospital level and it makes it harder to purchase a $2m robot?

{audio:0:19:33} Yes, exactly. Medicine is, increasingly, more and more complicated. Litigations are more and more common. If you join a big hospital network and you’re a surgeon or a doctor, and you basically say to the network, hey, take on all my risk and just do all my books for me and I’ll come to work. I know I’m going to make X amount of money a year and, other than that, you’ve got me. That happens more and more. It used to be, I’m going to do all my own book-keeping, I’m going to send in my own reimbursements; you’re lucky I’m at this hospital, because I’m bringing you cases. That dynamic has changed back to the administration saying, we’re covering all these costs for you, we’re doing a lot of the legwork; come to work.

{audio:0:24:24} How do surgeons, typically, get paid?

{audio:0:24:27} For the most part, they’re paid based on case volume. Kaiser is a little bit more salary based so it’s less, hey, pump up the volume. It’s more, as long as you keep up to this volume and see this many patients and meet our threshold, we’ll pay you $500,000 a year. In the large IDNs it’s a little bit more like that. But for the small community hospitals it’s, I saw four patients, I sent in the CPT coding for four patients today; that’s how much money I’m going to make.

{audio:0:25:03} Let’s say it’s $20,000 per procedure, would they be paid a percentage on that or will they just get a salary plus bonus on volume?

{audio:0:25:16} It depends. You can negotiate at any hospital. More common before was, you get paid what you do. What you produce, you get $8,000 for that patient; $2,000 for that one, whatever it is. But if you are part of a large IDN network, that’s a little bit more, okay, as long as you meet this threshold, we’ll pay you this amount. To be fair, most cases get paid based on volume. It’s the surgeon’s incentive to see a lot of patients, to treat a lot of patients.

{audio:0:25:48} If you are a surgeon who is really, really proficient and has been doing surgery for 20 years and is really good at it, that’s when you get the private companies to say, you’re really great at surgery, why don’t you do one day a week and then, another day a week, we’ll pay you a lot of money to give speeches or to host seminars or to work for us. If you get to a certain level of respect in the community, the days are a little bit different and can be less rigorous, if you choose to, if you’re working with a private company.

{audio:0:26:19} When you are pitching to the surgeon, specifically, what exactly is the hook? What is the real selling point?

{audio:0:26:29} I’m so glad you asked that because this is the key to getting a surgeon to really, really want to use the technology and fight for it in the hospital, which means you’ve got yourself a sale or not. This is the trick. The trick is, what we like to call, finding their clinical anchor. All surgeons are different. I’ll give you one example to give you an idea of the overall point I am making. Dr Almed, a general surgeon, who does a lot of laparoscopic colectomies; I’ve changed his name a little for privacy’s sake. One time, 10 years ago, he cut part of the artery and had a huge patient bleed. The patient ended up being fine but it was a huge stay in the hospital, really traumatic for him, traumatic for the hospital, expensive, scary, all of that.

{audio:0:27:22} With this particular surgeon, once you’ve met with him, been in his operating room, learned about what he does and doesn’t do, you’ve learned this one piece of information which means he’s a little bit risk averse but also, he doesn’t ever want to do that again. My way to get him to have a clinical anchor, an anchor that anchors him to the technology, would be to tell him that when you’re on the robot, the 3D vision means that you can see absolutely every artery, every vessel, every single blood capability in there. So, when you’re on the robot, it’s a lot lower risk of cutting something that you shouldn't. In fact, look at these three clinical papers I have, showing you that if you do a lap chole on the robot, you’re 80% less likely to cut an aortic valve.

{audio:0:28:10} This is an example of, I learned about that surgeon enough to understand what really mattered to him and what was in the back of his head, whilst he’s doing surgery, and point out to him what part of our technology fixes that, for him.

{audio:0:28:22} That’s why each individual sell is nuanced to what their clinical anchor is. You’ve got another surgeon who is just really, really busy and all they care about is doing it fast, fast, fast. You have to sell them on the fact that it is much faster on the robot. Yes, turnover between cases might be longer, but then you run two rooms and you go from one room to another and you’re still going to be fast and efficient. It depends on what their clinical anchor is and then you anchor that to a Da Vinci robot anchor.

{audio:0:28:53} When you look at the key selling points, is there one that sticks out to you, that really sells to many surgeons, for these robots?

{audio:0:29:16} I would say there are two. One is the visualization. When you are a surgeon, doing robotic surgery, robotic is just another way to do laparoscopic surgery. What that word means is that you do ports in somebody’s body and then you put instruments in it. Your visualization and your articulation is challenging because you are outside of the patient and you have got instruments in there. It’s hard for a surgeon to really see well because, a lot of times, they are depending on an aide who is holding the scope, which is the camera, the body and the person holding the camera might not be moving it the right way. It’s really challenging to see, in laparoscopic surgery.

{audio:0:29:56} The robot allows the surgeon to have control of the camera and to see 3D. That is a game changer, because not being able to see, when you’re doing something inside somebody’s body, is very scary. The visualization piece of the robot is huge.

{audio:0:30:11} The second most common selling point is, on the patient end, the way the robot enters the body is very, very minimally invasive. After the surgery, you can almost feel no pain. Often, they can do it through one port, through the umbilicus, the belly button. For the patient, when they are done with the surgery, less pain, shorter hospital stay, because they weren’t as invasive and then less blood loss, because the surgeon was able to see so well, that they didn’t hit anything they didn’t want to hit and it was a beautiful, clean procedure.

{audio:0:30:47} If you’ve got that combination of, oh my gosh, I can see so well with this robot and, wow, my patients do so much better and they go home quicker which is money-making for the hospital, and they go home in less pain, which is great for my patients, you’ve got the perfect combination of, I need this technology.

{audio:0:31:04} I guess that vision piece is crucial, in terms of getting them in the test drive, so that they can actually experience that?

{audio:0:31:11} That’s exactly right. It’s really hard to explain it unless you see it, unless you feel it, unless you touch it. It’s kind of like, I imagine, AR/VR. In theory, we all say, that would be cool, but then once you actually put a headset on and you transport yourself to the moon or a museum in France you think, I get it now. It is the same way with robotic surgery. You have to be on the robot to really understand, hence why it’s so important, when you’re selling to a surgeon, that you get them on the robot.

{audio:0:31:48} Just looking at the types of surgeons that really gravitate towards this, you mentioned the highly competent ones that have experience. Is there anything about age, in terms of how physically straining open surgery can be versus the robot?

{audio:0:32:04} Yes, definitely. It’s interesting because there is definitely a sweet spot with a surgeon that has been operating for 20 years, is really good but maybe not super tech savvy. They’ve adopted technology when they’ve had to but they’re never on the forefront. But they’ve been doing surgery well; they use their typical tools, they do it well and they have great outcomes. The ergonomics of laparoscopic surgery, the way your arms always move and you’re always standing up, all of that is really hard on the body. You often have neck pain or back problems later in life.

{audio:0:32:40} When you are on a robot, the first thing that the surgeon notices when they do a test drive is that they come into the room and they sit down. Then they put their arms on a hand rest, they put their hands in a glove and they rest their head like this. You are doing surgery in a very comfortable position. If you’ve been doing it for 20 years and you’re starting to feel aches and pains but you love it and you’re good at it and you’re at your prime, this can elevate and lengthen your career.

{audio:0:33:05} On the flipside, if you are almost at the end of your career, you’ve done 35 years of surgery and you’ve got, maybe, a couple more years, you’re a little less apt to adopt something new because there is a long learning curve. Are you going to do it for your last two years of operating? Maybe, but probably not.

{audio:0:33:22} How long is the learning curve?

{audio:0:33:25} Quick answer, about 20 cases is the rule of thumb, when you are proficient on the robot. It certainly depends on the surgeon; it depends on how often you are on the simulator and it depends on how often you do surgery. The basic consensus is that after 20 cases, you know the technology enough to be really comfortable on it and that’s usually the threshold where you say, okay, you’re ready to run. Five cases is where you should have a proctor, meaning that when you are doing the first five cases, there should be someone in the room, standing over your shoulder, who is an expert surgeon, proctoring you, so they can step in at any point. You should do that for about five cases, once again, depending on the skill set.

{audio:0:34:08} It’s so interesting. I trained a surgeon and it took six months; it probably took about 40 cases for them to finally feel comfortable. They just weren’t very tech savvy. There was another surgeon who didn’t really need a proctor. They could have done it right away. There is a little bit of variance there but the rule of thumb is, after 20 cases, you are proficient enough to be comfortable.

{audio:0:34:29} Let’s say I’m a surgeon and I love the robot; I have to go back to the hospital and pitch it to the institution. How does the hospital management team look at the economics of a $2 million machine?

{audio:0:34:45} That’s where I got whiplash when I first started. I told you the key to selling a robot is to get a surgeon the clinical anchor that needs it; that’s the key. But then you’ve got the administration side. The way we look at it is, there are two ways to help the administration along in this process, to move them along quickly. You look at it as internal pressure and external pressure.

{audio:0:35:10} The internal pressure is the surgeon saying, I need it, I need it, I need it. The external pressure is the market. Let’s say you are in a market with two huge hospitals that compete all the time for the billboards that say, we’re the cutting edge. Or they want to be the go-to in the community where someone says, gosh, I just got diagnosed with cancer; which hospital should I go to? That’s the better one. Each hospital wants to be that name. You can pressure the market in various ways and we’ve got a lot of tools and skillsets; once again, hire me and I can tell you them.

{audio:0:35:10} One example is, let’s say you’ve got another hospital across the way and they’re about to get a robot and they are at the end of their sales process. If you go to the hospital across the street and say, hey, guess what; you’re about to be really outworked in this market. They are going to get the cutting-edge surgery and you are going to look like the hospital that is way behind. Do you want in? How can we help you see this robot? How can we help you see this technology? So there is market pressure.

{audio:0:36:10} There is also a way to say, I’m going to sell this big group of surgeons on the technology and then they are going to go to each hospital and say, which one of you are going to buy us this technology; we need one of you. Then you’ve got the two hospitals pitting against each other, trying to keep that volume. That’s another example of external pressure.

{audio:0:36:28} At the end of the day, the administration will say, okay, how will we make money on this? How can we find the economics on it? This is $2 million. Where are we going to recoup our expenses? They look at a couple of things. Firstly, they look at the cost per case. It’s going to cost $2 million but what about each individual case we are doing? The disposable equipment, the time to turn around the room; all of those individual case cost components. It doesn’t look great for robotic surgery if you just take a glance. They’ve got more tools, oftentimes it takes a little bit longer to turn over the room, but there is a way to make the economics make sense and that’s when you look at the patient side. You say, okay, it’s going to cost you $40 more a case, $100 more a case, but if you look at the patient side, if you roll a patient who just had robotic surgery, into a recovery room, they leave the hospital two days earlier. Their risk of complications are three times less. Each complication could cost $60,000, $100,000, $120,000, per patient. If you look at the data of the outcomes of the patient and what the patient journey is, that’s where you recoup your cost.

{audio:0:37:35} The hospital looks at all the beds in the hospital and they say, if we could open up these rooms two days earlier, that’s really a lot of cost saving. If we can avoid all of these very expensive complications because the technology is better, that’s cost saving. It’s more on the backend where it’s cost saving and where they can recoup their costs.

{audio:0:37:54} There is also the cost of a brand of a hospital. I feel as if I sold less this way but some people sell heavy on this. You want to be the brand name hospital; you want to be the go-to. This is just how surgery is done and, in the future, you need this. You need this for your brand; you need this for the standing in the community. That’s another way to sell it and both in tandem are great, but the cost component is usually on the patient end.

{audio:0:38:20} So you actually really sell to the hospital on the savings, post-surgery, rather than the revenue of the procedures?

{audio:0:38:31} Yes, but let me make a caveat to that. I talked about internal and external pressure. If you look at the internal pressure, if you’ve sold the surgeon the right way, then you’ve got their busiest surgeon in the hospital saying, I have to do my cases on a robot. You don’t have a robot; I have to take 50 cases a month out of here. There are huge cost ramifications for the hospital in that. They don’t want that to happen. So oftentimes you don’t even need to talk about the patient complications and the patient recouping of costs if they are desperate to keep that surgeon at their hospital. Once again, that’s where it comes down to the fundamental, which is selling the surgeon on the technology. Sometimes it’s not, I’m going to make money on my robot but it’s, I’m not going to my lose my surgeons, unless I get a robot.

{audio:0:39:19} That’s where I would say, historically, there has been quite a bit of clash between Intuitive sales reps and administration. They feel a little bullied and they feel a little pressured and they feel as if Intuitive came in and took their surgeon and said, buy it or we’re leaving. That is kind of what happens but I believe and the surgeon believes, it’s because you want to give their patients the best possible outcome. So it’s for the good; it just feels a little aggressive to administration, often.

{audio:0:39:52} Does it actually, net/net, save them money or more profitable than open or lap surgery?

{audio:0:40:02} Definitely more profitable than open surgery, based on the patient outcomes and the patient journey, the post-op. Absolutely, if you do the economics, which every hospital wants you to do; we’ve got this nice spreadsheet. You put in their volumes, you put in their patients and you can make money. It will take a couple of years, but you can make money. Also, you may want to lease it. There are different ways you can finance the technology and then you can upgrade it every couple of years, so you’re not buying a new robot every five years so there are ways you can do cost per case. There are ways that I would advise a hospital to say, let’s make sure that all your surgeons are trained on this instrumentation, so they are not opening 10 instruments in the case. I think I can use this; I think I can use this. Let’s get them to open just three per case, we’ll use them efficiently and we’ll train them how to do that.

{audio:0:40:50} When you give them that model you would say, this is how many procedures you do per year; this is how many can be on the robot. Then you would have a reimbursement revenue per case or per procedure. Then you would have the instrument costs per procedure which, I guess, would be $1,000 to $2,000, which would be the instrument revenue for Intuitive. You mentioned that it takes a couple of years to actually breakeven or start earning money for the hospital?

{audio:0:41:22} We’ve got a nice fancy Excel spreadsheet. You plug in all of their volume; you plug in their typical time per case. Then you plug in our costs, our volume and, at the end, it spits out, this will take you 1.2 years to breakeven. Or, you will make $600,000 on year three. It’s based on data. Here are 24 clinical articles saying, cost per patient, you save this amount in complications, this amount on patient stays. It’s data driven.

{audio:0:41:54} I would also say, when I’m looking at a hospital to sell a robot to, unless there are some particular instances in the market dynamic, if a hospital is not doing 200 procedures or more a year, I probably am not going to try to sell them a robot. If their volume is so low that they are not doing 200 procedures a year, it’s hard to make sense, economically, on purchasing a robot. However, we’re getting more and more to the point where you have to do certain procedures on the robot, such as prostatectomies, for it to even be best in class. For the best patient outcomes, you need one. But if you’re such a small volume hospital, you might want to send those somewhere else.

{audio:0:42:35} How many procedures can you do, over a year or a week, on a machine?

{audio:0:42:43} It depends on how good the team that turns over the robot is. If I had to give you an estimate, I would say about 70 cases a quarter. You want to be doing around 20 cases a month on a robot. If you’re doing more than 70 cases, on one robot, a quarter, you probably should look at getting another robot.

{audio:0:43:04} That’s roughly one per working day?

{audio:0:43:08} I would say, if you’re doing more than two or three a day, on a robot, you probably want another one so that you can be running two rooms, with a robot.

{audio:0:43:20} When looking at the upselling process, let’s say I adopt one machine and the surgeon is loving it. How do you then upsell and add another machine to a customer?

{audio:0:43:38} You use a lot of fundamentals of how you sell an initial robot. A good example would be, I sold a robot to Arkansas hospital and they are doing about 70 cases a quarter. Often, what happens is, two really busy surgeons call up the hospital and say, I’ve got a patient I need to do a colectomy on. I’m open next Tuesday at 10; please put the patient on there. The hospital would say, the robot is already being used on Tuesday at 10, sorry. If that happens enough times, the surgeon gets frustrated, so they go to the administration and say, I need to do this patient on a robot. This is the time that I have and I keep getting kicked off it, over and over; we need another robot. If that dynamic happens enough in a hospital, another robot happens organically.

{audio:0:44:26} Often, there’s a sales rep in the surgeon’s ear saying, hey, I noticed you didn’t do patient X on the robot, on Tuesday. Why not? That would have been a great case. The surgeon would say, I know; I wished I could have, but it was used, so I just did it laparoscopically. We’re reminding them that maybe it’s time to get another robot. Let’s go talk to the CEO. We can push along with that but, often, it happens organically, because once a surgeon is hooked on this robotic technology, it’s hard to go back to the old way, stand over the patient, bug your assistant to move the camera a certain way. It’s tough to go back to that when you are so used to the robotic technology and you want it at your disposal.

{audio:0:45:05} Also, as the types of procedures or the specialties increase, in the hospital – general surgery, gynecology, whatever it may be – that should, obviously, increase the demand?

{audio:0:45:18} Absolutely, yes. It used to be that 90% of our sales, for a year, were new systems. It has got to the point where it’s closer to 50/50 – sometimes even 60/40 – where it’s a new system to a hospital versus a new hospital. The dynamics are changing too. It used to just be prostatectomies, so it used to be just urologists using it. Fast forward another four years, gynecologists were the next ones, with gyn onc, which is gynecology and oncology surgery. Then you’ve got two surgical communities competing for it.

{audio:0:45:53} With general surgery really taking off with colectomies, lap choles, inguinal hernias, now you’ve got three surgical communities competing for that robot, so you need another one and, sometimes, three.

{audio:0:46:07} Just looking at the recent numbers, I think there’s 6,000 machines out there and 1.2, 1.3 million procedures per year which equates, roughly, to what you said; 230 procedures per year which is one per day. Are you saying that it is mainly a scheduling issue at the hospital, with surgeons clashing as to when they can actually use the robot, that drives the upsell of another one, rather than just maxing out utilization?

{audio:0:46:35} Yes. I think, in a perfect world, you would think, I can figure this out. I’ve got this amount of hours in a day; I’ve got this amount of surgeons and this amount of cases. We should be able to figure this out. But that is just not how medicine works; certainly not in the US hospitals. It’s about power dynamics. This is my schedule. I operate on Tuesdays and Thursdays because I have clinic on Friday, I have cases on Wednesday and Monday. I can’t just move my cases. What am I going to do? Saturday at 10? No. That’s when I see my family.

{audio:0:47:07} Also, just the way an OR is run. They have got a lot of stuff going on. They have emergency cases that come in right away. They’ve got the cardiac doctors that demand a certain room, on a certain day. There are so many moving pieces that it’s really hard to make it work to the maximum efficiency possible where, you would think, you just utilize the robot every day. It’s more about the power struggle of when that robot is utilized.

{audio:0:47:33} How do you see the usage and utilization of it changing, as the hospital starts using it more for general surgery?

{audio:0:47:42} Typically, in a hospital, a general surgeon has a lot of clout. This is just a generalization but it’s pretty true in most cases. They have more clout than a urologist and a gynecologist. It has been an interesting dynamic to see because you have these early adopters of the technology – gynecologists and urologists – and they feel it is their robot. Now you have got the technology expanding into general surgery, with really good use cases, and these are powerful surgeons. They say, they just took my Tuesday block, so now I have to move my schedule around to go to Friday. No; we need our own robot on our end. You have got the power dynamics changing in a hospital and, in most cases, the general surgeons get what they want. They’re the busiest; they provide the most income. There are a lot of different peripheral reimbursements that they get on general surgery patients, so they have a lot of clout in the hospital.

{audio:0:48:41} They almost need their own robot?

{audio:0:48:44} Yes. A lot of times, if you’ve sold to a busy general surgeon in a hospital that already has a robot, it’s a matter of time before they get their own robot. It might take a bit of time; it might take a couple of months, but it’s a matter of time, in most cases.

{audio:0:49:00} Let’s say the capital cost is $2 million. How does the negotiation go with the hospital around that capital sale?

Former Area Sales Manager at Intuitive Surgical 

Intuitive Surgical: Selling $2m da Vinci Robots

IDN vs community hospital customer segmentation

What surgeons really care about and how to pitch da Vinci robots

Negotiating with hospital administrations when selling da Vinci’s

Hospital economics when purchasing a da Vinci versus open / lap surgery

How the capital and instrumentation price has changed across generations

Risks from J&J entering and potential pricing pressure