From Base Stealer to Bone Healer: A CFO’s Journey
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You might not think of urgent-care centers, where you can come in off the street for quick treatment of a flu or stomach ache, as retail outfits. After all, they don’t sell clothing, makeup, auto parts, or other actual products the way classical retailers do.
But Justin Irizarry does think of it that way. Irizarry, the co-founder and CFO of OrthoNOW, which touts itself as “the nation’s only network of orthopedic urgent care centers,” feels that location is what makes the firm’s franchise operations akin to retailers. By the end of this year the franchise firm will have sponsored eight centers Florida and two in Georgia, and plans to double that number by the end of 2017.
“It is a retail operation because the centers themselves are located in retail shopping centers or retail locations. You will see an OrthoNOW facility five or six bays down from an anchor tenant. It might be right next door to the grocery store or pharmacy,” the finance chief notes.
“If we’re really trying to make the delivery of expert orthopedic care convenient, then we have to be where people are going naturally. And that’s what pushes it toward a retail model,” he says.
Unlike retailers, however, the centers carry no inventory. Perhaps more significantly, the firm doesn’t face the biggest challenge brick-and-mortar retailers face: online competition from the likes of Amazon. Despite the advances of telemedicine, you can’t get your broken arm set over the internet.
At the time, Irizarry feels his firm is well positioned to compete with generalized urgent care centers. “Urgent care centers are very good for treating a wide range of issues. But one of the issues they are very poor at treating is orthopedic and musculoskeletal injuries: any sort of sprain, strain, break, fracture, concussion, laceration, or tear,” he says.
The reason? “Those sets of injuries require specialist care, and will only get worse over time unless they are cared for correctly the first time around. If you have a bad ankle fracture right now, and you go to the emergency room or urgent care center they will give you ibuprofen, ice, and homework,” he says.
“The homework is that you have to follow up with a specialist when you get home. The time it takes you to see a good orthopedic specialist would be two or three weeks,” Irizarry adds. Because of that time lag, “you’re much more likely to need surgery or something more advanced than just a simple treatment.”
Along with his partner, Dr. Alejandro Badia, a hand surgeon, Irizarry looked at the situation and decided to “disintermediate that process altogether” and build the centers. “We’ll staff them with orthopedic specialists, and the value proposition will be: if you come to us you’ll be in and out in 70 minutes or less, and when you walk out the door you get to go home and do nothing else. You walk out treated.”
Starting a business related to orthopedics also had personal appeal for Irizarry. As a stellar center fielder for Cornell University, he suffered considerable pain as a result of a congenital spinal problem aggravated by the wear and tear of stealing many bases. The existing treatment options didn’t suit his needs, he said in a recent interview with CFO. Edited excerpts from that conversation follow.
What gave you the idea for OrthoNow? Do you have a connection to the health-care industry?
I do. I was initially a Wall Street investment banker at Scott Macon in New York. I left after five years of building a practice in M&A, went to business school, started my own consulting practice, and moved to Miami. One individual I met through the Cornell Club of South Florida was Dr. Alejandro Badia, a world-renowned hand surgeon. And he had envisioned this idea of OrthoNOW and had actually started the first center, which is in Doral, Florida. We started working together in an arrangement in which I brought the business expertise and he brought the clinical expertise. We perfected the local model and in 2013 started the network model, which is basically a franchise system.
Does your sports background have anything to do with your interest in orthopedics?
I played four years of college baseball at Cornell and have a congenital spine problem called spinal stenosis. I could never get relief from it, and the world of orthopedics was always very scary to me. It’s sort of a big word if you don’t know what it is. And so I ended up playing in pain, 60 games a year. I wish I had had a concept like this in which I could have just gone and gotten worked on in a friendly, non-threatening atmosphere. That was absolutely part of the draw for me. I should mention that in the centers, patients aren’t just being treated for fractures or back injuries but are also rehabbing or “pre-habbing.” We have a number of therapies for athletes that are going to play four baseball games in the next week and want their muscles loosened up or their bodies stretched out.
What position did you play?
I was a centerfielder for Cornell, batting leadoff. My biggest asset on the baseball field was my speed. I will humbly say that I had freakish speed. My job was to get on base, whichever way I could. Then I would be a very aggressive base runner. I’d steal second a lot, steal third, steal home, and then cover a lot of ground in the outfield. In my junior year I set a record at Cornell for most stolen bases, with 40 or 41 in a 55- or 60-game season. I also hit above .300 as a lead-off guy. We would play two doubleheaders on the weekend, and there could be another two doubleheaders during the week. So we could play a total of eight games in a span of seven days. And that’s all while you’re trying to keep up with academics.
You must have experienced a lot of pain stealing all those bases while you have stenosis.
I played in a lot of pain. Spinal stenosis is a narrowing of the vertebrae, the canals that all the nerves run through. They would get inflamed with a lot of rotation. If you think about how you use your body in baseball it’s almost all rotation: When you throw the ball, hit the ball, run there’s a lot of sort of left-right force that’s being generated.
Do you use your firm’s urgent care centers to treat your condition?
I do. I’m actually a patient at one of the OrthoNOW centers down here in Miami, where I’m also a part owner. I eat my own cooking, or my own dog food, as some people say.
Granting that you don’t sell things online, what role does electronic media play in your business?
It’s actually very complementary. We have a mobile application that allows patients to tell us what their injury is, take a photograph of it, and let their local center know that they’re on the way. Let’s say you sprained your ankle playing soccer. You pick up the phone, and you’re able to locate and contact the nearest OrthoNOW. Then we will have an Uber car come and pick you up right at the soccer field and take you to the nearest OrthoNOW center. The center is waiting for your arrival when you walk in the door.
We also do online consultations, using telemedicine to talk with patients that might be 50 miles away from the nearest center. With the high-definition available on an iPhone, you can say, “OK, move your hand this way. Does it hurt? Move your hand that way, does it hurt?” You can make diagnoses based on that interaction and actually save the person some time in so doing.
Is telemedicine a significant source of revenue for you?
Absolutely, because we can and we do charge for consultations. But it also allows us to expand the addressable market. That’s because if you can triage or at least get an initial reading of a patient’s problem by telemedicine, you can reach a lot more people than if they were all in your waiting room. You don’t have that physical constraint.
Sports-medicine doctors can make a whole lot of money on their own. Why would you work in an urgent care situation?
If you’re a surgeon, whether it’s a sports-medicine surgeon or an orthopedic surgeon, all you want to do is surgery. That’s where you are most valuable to the patient and why you went to school and paid your dues. About 17% of patients that walk through our centers need surgery. The draw for a sports-medicine doctor or an orthopedic surgeon is that they get to do more surgery on the patients that they’re seeing. It’s a great patient feeder for them for surgery. It doesn’t replace their job, it just gives them more of what they want to do and more of what they are well compensated to do.
What’s your labor model?
When you walk into a center the person you will most likely see is called a mid-level provider, either a physician’s assistant (PA) or a nurse practitioner. But those PA’s or nurse practitioners, who work full-time, have specific experience and training in orthopedics. Those PA’s or practitioners report up or are supervised by a sports medicine doctor or an orthopedic surgeon. That doesn’t require the orthopedic surgeon or sports medicine doctor to be on staff full time. We use telemedicine for consultation. The PA and the supervising physician are constantly in contact.
Finally, as the CFO, what keeps you up at night — other than your back?
One of the things that frustrates me the most as the CFO is what I consider to be a lack of appreciation by insurance companies for the actual value that we deliver. Urgent care is largely an insurance business. You can come to us with any sort of insurance and we’ll see you. But if you have a fracture and you go to the emergency room, and your insurance pays $1,800 and then you have to go to an orthopedic surgeon and have surgery, the bill is astronomical. If you come to us and you’re treated the first time around your insurance company would pay us a fraction of that. And one of the things that frustrates me is that sometimes the insurance company gives us a hard time about paying you for your visit or doesn’t pay us what I see as a fair rate. And that’s my biggest frustration as the CFO.