By Jason Kraus
I joined Langer Biomechanics toward the end of 1979. I believe the orthotic industry was about halfway through the first of 3 distinct periods in its evolution: the development phase. The science, education, and product development work of that era created a level of utilization by clinicians that forever altered the previous use of “arch supports” and replaced it with a predictable and repeatable treatment option built upon comprehensive assessment, correlative prescription writing, and appropriate dispensing protocols.
This early phase was foundational in nature and its successful rollout was responsible for the development of curricula in all podiatry, orthotic and prosthetic, physical therapy, and ultimately chiropractic educational institutions. During this time new materials were identified, tested, and used in design and manufacturing. Central fabrication facilities began springing up in response to the demand by a marketplace that was intellectually curious and open and welcoming to new conservative modalities that seemed to provide patients with consistent symptom relief with little or no adverse effects.
In the late 1980s and into the 1990s, insurers were beginning to roll back either their coverage or reimbursement rates for functional foot orthotics. This led to a discreet second phase: the ambivalent phase. During this time, practitioners began feeling the financial and managerial burdens of managed care and other cost-shifting schemes. The result was an inability or unwillingness to spend the necessary time for comprehensive biomechanical assessments. This, in turn, led to a lowering of technical standards for providers and orthotic companies. The quality of foot impressions and the laboratory adherence to manufacturing best practices became inconsistent.
In time, surgery and hospital privileges became common for podiatry. Its national associations, educational institutions, and other groups determined that the ongoing development of surgical skills was key to the new podiatric focus. Rather than layering these new competencies onto their robust knowledge of the orthopedic management of lower extremity ailments, it seemed more of a replacement than an expansion of skills. The effect of this diminished training of podiatrists in the use of orthotic solutions helped to facilitate a broader multidisciplinary dispensing universe. This may have benefitted patients, who now had more provider options, but it marked the beginning of a new and challenging phase for the central fabrication industry: the commoditization phase.
With diminished training, reimbursement, and understanding of biomechanics, the predictable lowering of standards took hold and the willingness to support the labs that continued to invest in product and professional development waned. The average selling prices of centrally fabricated foot orthotics today is roughly the same as it was in 1995. This is not adjusted for inflation, but rather in absolute terms. Obviously, the lab’s expenses, particularly their labor costs, have risen steadily during this 25-year period. While it is true that there were advances in automated manufacturing and 3D scanning, largely producers tried to fill in their financial gaps by diminishing the custom nature of their processes and reducing investments in research and development and their historic support of educational and other professional development efforts. In some labs, there was not even enough profit to provide medical insurance to staff members. Providers began pushing for cheaper rather than better. Quite simply a race to the bottom.
As providers are rebounding from the devastating impact of COVID-19, I believe that we are at yet another inflection point. Today, there are consequential changes taking place in the central fabrication space for lower extremity orthotics. It is too soon to say whether these changes will mark the beginning of the next phase. However, when you consider the potential impact that these changes may have, its likely that orthotics and the companies that produce them will be forever changed. Consider, for example, how little technology has been deployed in the industry to this point. There are many processes, both in the laboratory and in the clinic, that have not changed in 50 years. There are few parallels in other industries. In most parts of our daily lives, we have embraced and enjoyed the conveniences and efficiencies enabled by technology. The foot orthotic industry has had limited access to technologies, materials, and equipment that would have enabled groundbreaking functional designs, end-to-end digital solutions, and improved service capabilities. The investments required to deliver these benefits are substantial and the operating margins of most central fabricators have been too diminished to justify these investments.
This is suddenly changing, with new innovative companies coming into the space with the intention of disrupting a staid and somewhat stale industry. Additive manufacturing (3D printing) and its unlimited design potential will begin to unlock the innovation vault in orthotics. Large, well-resourced tech companies and other new companies are being built from the ground up with digital tools, providing the lab and the clinic opportunities for improved operations and outcomes. These companies are not only creating ways for clinicians to design previously unimaginable functional component orthotics but are doing it in simple and intuitive ways. Better orthotics that are easy to design. The result will likely help to create improved outcomes and enhanced patient adherence and satisfaction.
Changing also are the tools that are needed in the clinical environment to efficiently manage this important component of practice. Laboratories are gearing up with a menu of digital tools that reduce staff costs, provide higher levels of patient service, generate greater referrals for practitioners, and more. Labs that are not able to retool for this changing set of requirements will be diminished. There are many small labs that are getting out of the business as a result of retirement, acquisitions, or insolvency. Simultaneously there are new entrants that range from publicly traded tech companies, venture-backed consolidators, and others. Ultimately, the success of these newer disruptors will almost completely depend on whether healthcare providers will be able to separate value from price and reward these innovators with commercial support. This will mean adopting their new tools, supporting pricing that fairly rewards the companies that bring these innovations to life, and helping to move the industry into the next phase: the renaissance phase. Stay tuned.
Jason Kraus is Founder and Managing Director of Starflower Row Advisors in Riverhead, New York. He previously served as chief revenue and strategy officer at Orthotic Holdings Inc. (OHI) and was president and chief operating officer of Langer Biomechanics.