Paul Slosar, MD, spent 28 years as a spine surgeon in the San Francisco Bay Area and nearly as long working the margins of the device industry, doing due diligence, serving as chief medical officer at Titan Spine, watching venture capital pour into iterative improvements on screws, cages and plates. When he and Dutch Rojas, founder of Bliksem Health, co-founded Physicians Capital Fund three years ago, they aimed it somewhere else.
Two of the fund’s three early-stage investments have explicit AI components. None are in devices.
“[The market] is so mature. There’s only five or six companies left on the top, which makes it very difficult. The iterative improvements are not really moving the needle,” Dr. Slosar said during a panel discussion at Becker’s Spine, Orthopedic and ASC Conference.
The premise behind the fund is not anti-device; it is a diagnosis of where the gap has opened. During the growth years of spine and orthopedics, companies like Titan Spine could grow 20% year over year. That window has largely closed, Dr. Slosar said. The gap that remains is operational: revenue cycle, inventory management, scheduling, triage – the back-end mechanics of a surgical practice that have lagged years behind comparable industries.
“We have great stuff. We just can’t get it to people in any manner that makes sense,” Dr. Slosar said. “We’re aiming at things that are operational efficiency tools, things as simple as revenue cycle management, inventory management, scheduling tools, triage tools, platforms that those of us who run businesses and practices spend a lot of time and money on [that have] a lot of inefficiencies. Most other businesses have completely moved past that.”
The investment screen is not efficiency alone. The differentiator is whether a tool can also drive new revenue into a practice, not just reduce cost.
“If you can do efficiency and drive revenue into a practice that didn’t exist – revenue driving is an important part of what we look at,” he said.
At the seed stage, where the fund operates, revenue track records are thin. The underwriting centers on the founders themselves and whether they have subject matter expertise and have built in the space before, rather than technologists arriving from outside the industry.
“The founders, have they done this before? Are they subject matter experts in their area?” said Dr. Slosar. “Because when you’re in a seed investment, they rarely have a big revenue track record with which to lock in on.”
The fund’s structure is also designed to address a barrier that Dr. Slosar described as endemic to physician investing: most surgeons are not in the Bay Area, are not prepared to mortgage a house on a startup bet and have no practical path to learn due diligence while maintaining a clinical practice. Physicians Capital Fund is structured as a vehicle for limited partner physician investors to gain that exposure and contribute clinical input to the companies they back.
Mr. Rojas, who before founding Bliksem Health helped build ambulatory surgery centers across the country, has extended the capital argument to practice economics. He has been constructing captive insurance structures for medical malpractice, property and casualty designed to route physician premium dollars back into the practice.
“It’s your money. How about we build a model where your money gets accreted back to you and it lives on your balance sheet,” Mr. Rojas said.
The operational tools and the capital structures show that private practice in spine and orthopedics is approaching an inflection point rather than a terminal decline.
“I really believe private practice is going to be the next opportunity,” he said.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
