Founded in November 2014, reLink Medical is the latest project (and ninth company) of A. Ray Dalton, founder, executive chairman, and former CEO of PartsSource, the third-party medical device parts supplier. Designed to manage the next stage of the medical equipment life cycle, the online platform models itself as a hybrid of Craigslist and eBay. The site lets hospitals list and sell their excess medical devices one unit at a time, monetizing unused equipment, saving on storage costs, and stimulating the secondary parts market for future buyers. Although the pilot version is already in use, reLink’s official marketplace goes live to the public on March 15 at relinkmedicalequipment.com. 24×7 recently spoke with Dalton about the impact of the Affordable Care Act, taming the “Wild West” secondary parts market, and how he created a solution for a problem nobody could solve.
24×7: How did you get the idea for reLink Medical?
Dalton: After President Obama announced the Affordable Care Act (ACA) [in 2009], by 2010 the desire for new medical devices had almost completely dried up. Hospitals didn’t want to make the investment in new equipment without understanding what reimbursement was going to be like or the impact on their particular institution. They began to keep their equipment longer and buy fewer new devices. That meant there were fewer trade-ins, which meant that there were fewer secondary devices available to the marketplace. That’s where the reLink solution came in. Every hospital is storing excess and overstock parts—they’ll buy a dozen of something and use two or three, or buy 300 PM kits and use 200 of them. The idea was to re-link those devices to the marketplace, where they could be monetized for the hospital and also be made available to self-servers who are looking for secondary parts options for their medical devices.
In my eight prior companies, I’ve always tried to figure out, first of all, what [the problem is]. Has anyone tried to solve it inside the medical industry, or outside the industry? I then take the best practices and model those to create a company for our industry. You take Craigslist, where you can list devices; eBay, where you can “buy now” or “make offer”; and Kelley Blue Book, where it predicts in advance what a car is worth and what it will sell for. ReLink knits those platforms together to create a marketplace for our buyers, our customers, and our sellers.
24×7: How did hospitals dispose of their old equipment in the past? What has changed?
Dalton: When hospitals stopped buying new equipment, they started buying other hospitals. They now needed only one MRI machine in each hospital instead of two or three, because they now have multiple locations in a local marketplace. Statistics say that there are 10 medical devices for every licensed bed in the United States. There are about 1.2 million licensed beds. You need about seven devices per bed, so hospitals are about 20% to 25% overequipped today.
Before we came up with our equipment disposition software, they would store it all up in a warehouse. Some hospitals have even leased out old Kmart buildings. Or they’ll have a broker try to hustle it for them, but about 75% of all brokered deals never close on the original terms because the broker doesn’t buy the equipment. If time runs out, he just says, “sorry,” and it becomes the problem of the hospital. The current equipment-disposition marketplace is chaotic and disorganized. There are two big players in the marketplace—Centurion Service Group and BidMed out of Chicago—but they do whole-hospital auctions and large-scale dispositions. Nobody has solved the problem for the hospital that wants to get rid of one or two devices at a time. The greatest value a hospital is going to receive from a device is while it’s still installed and working. ReLink helps hospitals monetize it while it has the greatest value.
24×7: How does your platform work?
Dalton: Our platform is much like Craigslist and eBay combined. A hospital logs on to relinkmedicalequipment.com. They can click “sell” or “buy.” They list their own equipment, they set their own price, and they pay a minimal listing fee.
As soon as a hospital lists equipment, an email is sent to notify people who’ve indicated they’re looking for certain devices. They’ll be able to log on and either click “buy now,” or click the “make offer” button. If they buy now, they enter the credit card information or purchase order number, and reLink manages that process for the hospital. We collect the money, we arrange for the buyer to view the unit before it’s deinstalled, we arrange the deinstallation, and we hold the money until the buyer picks it up and agrees that it’s what they paid for. We then distribute the money to the seller. If they make an offer, the buyer will enter their terms, and reLink electronically communicates to the hospital that we have an offer and a deposit. Today, this is all done verbally. There’s no digital record.
24×7: Do you make any guarantees as to the working order of the equipment listed?
Dalton: The customer that is listing the equipment on the site lists the condition. There are very narrow bands. They do a cosmetic rating and a quality rating. We review that, and the buyer is aware of the condition. Our listing allows for information from serial number and date of purchase to age of the tube and condition of the unit. Then it’s up to the buyer to validate, either through a site visit or through Skype or FaceTime, and to submit any questions they have. We hold the money in the middle. If the buyer gets the device and it doesn’t have the manuals or Bucky trays, reLink acts as the mediator between the buyer and the lister. If the seller has misrepresented information, we have a digital record of that information and who actually put in the listing.
The problem with the market today is that there’s no structure around it. It’s sort of like the Wild West. People list things inaccurately. They say they’re going to buy equipment and don’t. ReLink manages the entire process and maintains a digital record of it, playing referee in the middle.
24×7: What services do you offer for customers who don’t want to bother with listing and selling their own equipment?
Dalton: Our inventory specialist will fly to your facility and do it for you. We charge $1,500 for the first day and $750 for every subsequent day. This fee comes out of the proceeds when the device sells, so there’s no upfront cost to the seller. We take pictures, do the listings, and look up the manufacture dates. We review that with the seller, and then it is listed in the marketplace. If you say you don’t want your people involved in site visits, reLink will send one of our inventory specialists to demo the equipment just like a real estate agent would.
24×7: What potential do you see for this platform to help change the perception of biomedical departments as a cost department?
Dalton: It’s significant. We give biomedical departments four payment options: parts credits that help them reduce their budgets, training equipment credits so they can get training for their people, test equipment credits, or cash. Today, very few have chosen cash because they want to use the money to reduce their operating budget. ReLink acts as an escrow agent on their behalf.
24×7: Given your business model, how would your company be affected if Congress repeals part of the ACA?
Dalton: Even if the ACA gets repealed, we are not going back to the healthcare we had in 2008. You cannot unwind some of the changes that have been put into place. Hospitals, like all businesses, have a certain degree of waste that is always occurring. What we are doing is calling out the waste, recognizing it as waste, and repurposing the hospital’s unused but valuable assets back into the marketplace. Clinical engineering departments, even prior to the ACA, bought things they didn’t need, didn’t use, or bought too many of something and didn’t use all of them. That is going to continue to happen. I think people have gotten into the mind-set of being as fiscally responsible as possible, and that is not going to change. Hospitals are figuring out how to make more money with fewer devices—but they don’t know what to do with their excess devices! ReLink helps them reposition these devices into the marketplace and make some money from them.
24×7: How big an impact could this untapped capital have on a hospital’s bottom line?
Dalton: We think that for a 100- to 200-bed hospital, it’s $250,000 to $300,000 per year. For a 500-bed hospital, it is a half million to a million dollars per year. It is a big number. The bigger the hospital, the more devices they have, and the less time they have taken to manage and maximize the disposition of those devices. There are a lot of devices sitting in corners and stuck in closets that today are not monetized because there was no effective solution. Hospitals are storing these devices and paying for storage units. They have to get rid of them because by regulatory rules, they cannot have out-of-service devices in an active patient area. With reLink, they monetize the devices and eliminate the cost of managing and storing, as well as the risk of having devices that are classified as out-of-service show up. The real dollars are significantly higher than just the monetary return on the device itself.
24×7: What are your plans for the year ahead?
Dalton: ReLink is already expanding. Today, we have five employees. We think that will be eight to 10 people by the end of the year. Volume is picking up very nicely. We are having a blast. I think there is a pent-up demand, and we are excited to come up with a solution. 24×7
Jenny Lower is managing editor of 24×7 magazine. Contact her at [email protected].