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The pandemic’s Delta variant surged during the third quarter of 2021, creating a greater-than-expected impact on orthopedic surgeries. While those trends improved early in the fourth quarter, global supply chain issues and staffing shortages are likely to persist into 2022. While we’ve sampled executives from select orthopedic companies like DePuy Synthes, Stryker and Zimmer Biomet, these obstacles impact every player in the market to varying degrees.
Staffing Shortages Impacting Orthopedic Surgery Volumes
Talk of hospital staffing shortages ramped up in the third quarter. Hospital staff continue to contend with COVID exposure and overall fatigue from the pandemic. Additionally, others decided to leave their jobs instead of complying with the federal government’s mandatory COVID vaccination for healthcare workers. Premiere, one of the largest group purchasing organizations, released data in October that noted 30% of staff in emergency, ICU and nursing departments turned over in the last year, an increase from 18% from the year before. The same study said hospitals are paying $24 billion more for labor amid the COVID pandemic due to overtime pay and agency-based staffing.
“Typically, cases are rescheduled in 4 to 6 weeks. Recently, that range has been wider as we are seeing up to 20 weeks between the original date and reschedule date. We believe the delays in wider range for rescheduling are related to COVID-19 and staffing shortages in medical facilities.” – Conformis CEO Mark Augusti
“The biggest wildcard to me is hospital staffing, healthcare workers, fatigue, which is very evident, and what that may mean for surgery schedules and overall hospital operations. And we’re all reading the same things, hearing the same things, and it remains to be seen. If COVID cases drop and people can return to their normal kind of healthcare venue and alignment of work, maybe that pressure will lessen, but we all need to see that. So I think that’s how I would frame the challenges we were looking at as we look out into the future here, whether it’s this quarter or even stepping into 2022.” – ConMed CEO Curt Hartman
“Hospitals are still going to experience some labor challenges. We don’t see that getting better in the near-term immediately. I will qualify that so to say that they have been, quite frankly, masters at understanding how to manage patient flow and procedure flow. When we look at diagnostic and routine screenings and surgical procedures, we expect the trends will continue to recover globally, similar to the trends we saw in quarter two where surgical procedures grew low single-digit above 2019 baselines.” – Johnson & Johnson Executive Vice President, Worldwide Chairman, Medical Devices Ashley McEvoy
“I think the level of staff shortages that we’ve seen now is more of a constraining event on upside to Q4 or being able to hit the relatively high Q4 volumes. I don’t see a big risk at this point unless something meaningfully changes in the future. I don’t see the staffing shortages that we’ve seen and the impact they’ve had so far being a material limiter for next year because Q1 is typically the slowest quarter per year in terms of spine surgery volumes. Q2, there was a big pickup, but we still got 5 or 6 months before that becomes a risk. But I think, again, just based on the anecdotal evidence we’ve got, it’s just more of a limiter to the upside of Q4 and even being able to sustain the typically high Q4 surgery schedules is where we’re seeing the risk for now.” – SeaSpine CEO Keith Valentine
“I think the labor shortage is the toughest component to really try and read because it’s unprecedented. And it’s not just at the nurse level. It’s really throughout the hospital setting. What we do know through survey data – this is not statistically relevant, so please don’t run too far with it but – over half of the physicians that have reported in the third quarter have stated that they’ve suffered from staff shortages. And when those particular physicians have that challenge, they’re doing about 10% fewer procedures than they normally would do. So that’s very real. And we’re also seeing that that impact is greater in the hospital setting than it is in the ASC setting. And as you know, we’ve got a more prominent share in the hospital setting, so I think it more disproportionately impacts us. Because of those, we’re taking the approach until we see substantial, durable improvement, we’re going to continue to take a view that this is lingering with us.” – Zimmer Biomet CFO Suky Upadhyay
Supply Chain Resilience a Top Priority for Orthopedic Companies
Supply chain challenges are crippling all industries these days. Some of the larger orthopedic players stressed shortages for electronic components during their 3Q calls. In September, AdvaMed and Deloitte released findings of a survey on the semiconductor chip shortage in medtech. Companies noted that they primarily need 2nd or 3rd generation chips, which puts them in competition with automotive, industrial and consumer industries for suppliers. Additionally, medtech companies said they face delays of two to 52+ weeks for chips, meaning some companies might see delays into 2023.
“It is the resin, it is silicone, it is electronic components, it is some of the circuit boards and I think it has been widely reported. I cannot speak for our competitors, but I would expect that they are seeing the same. Whether they are seeing it in the same context and with the same rigor, I cannot comment on. However, these are mainly the areas where we are seeing global supply challenges. Typically, we are small buyers in the big scheme of broader industries on these raw materials. We typically also have an ability to pay, so I think we are in good shape here in the broader context. We are also looking to seek for a priority for medical applications and medical products, as an industry and as an individual company for raw materials shortages to be actually then prioritized to the medical device industry. There is a lot going on here and quite a few moving parts.” – Smith+Nephew CEO Roland Diggelmann
“With regards to the impacts from a raw material or supply chain perspective, what I would tell you is there certainly are challenges just like everybody else has with regards to whether it’s the tight labor market or shortages in things like electronics or resins. But as of now, we’ve been able to really effectively meet all of our customer needs. What that really has required is our supply chain has really had to be much more active and its support in its partnership with the various supplier base that we have. We’ve been able to really make sure that we’re maintaining our safety stock levels. We’re able to actively purchase critical components where necessary so that we can keep production going. And then also just around the logistics and distribution as well and working actively with those partners, all of that in anticipation of the fact that we think that there’s going to continue to be some headwinds in this area.” – Stryker Vice President of Investor Relations Preston Wells
“And I could tell you from a Persona IQ perspective, we’re in a very limited launch. We do have some supply constraints here. And that will put a little bit of a damper on how we’re going to roll this out. Microchips are tough to come by. It’s not impacting us in ROSA because you’re talking in hundreds. When you move to IQ, you’re talking thousands. And so it is going to get in the way, in the short-term that we’re again – we’re trying to work through it, but that is going to put a damper on our launch.” Zimmer Biomet CEO Bryan Hanson
It’s become clear that the COVID recovery is complex. Orthopedic companies face more threats than just postponements of orthopedic surgeries. Staffing of all kinds, as well as supply chains will continue to challenge orthopedic companies into 2022.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
The pandemic’s Delta variant surged during the third quarter of 2021, creating a greater-than-expected impact on orthopedic surgeries. While those trends improved early in the fourth quarter, global supply chain issues and staffing shortages are likely to persist into 2022. While we’ve sampled executives from select orthopedic companies like...
The pandemic’s Delta variant surged during the third quarter of 2021, creating a greater-than-expected impact on orthopedic surgeries. While those trends improved early in the fourth quarter, global supply chain issues and staffing shortages are likely to persist into 2022. While we’ve sampled executives from select orthopedic companies like DePuy Synthes, Stryker and Zimmer Biomet, these obstacles impact every player in the market to varying degrees.
Staffing Shortages Impacting Orthopedic Surgery Volumes
Talk of hospital staffing shortages ramped up in the third quarter. Hospital staff continue to contend with COVID exposure and overall fatigue from the pandemic. Additionally, others decided to leave their jobs instead of complying with the federal government’s mandatory COVID vaccination for healthcare workers. Premiere, one of the largest group purchasing organizations, released data in October that noted 30% of staff in emergency, ICU and nursing departments turned over in the last year, an increase from 18% from the year before. The same study said hospitals are paying $24 billion more for labor amid the COVID pandemic due to overtime pay and agency-based staffing.
“Typically, cases are rescheduled in 4 to 6 weeks. Recently, that range has been wider as we are seeing up to 20 weeks between the original date and reschedule date. We believe the delays in wider range for rescheduling are related to COVID-19 and staffing shortages in medical facilities.” – Conformis CEO Mark Augusti
“The biggest wildcard to me is hospital staffing, healthcare workers, fatigue, which is very evident, and what that may mean for surgery schedules and overall hospital operations. And we’re all reading the same things, hearing the same things, and it remains to be seen. If COVID cases drop and people can return to their normal kind of healthcare venue and alignment of work, maybe that pressure will lessen, but we all need to see that. So I think that’s how I would frame the challenges we were looking at as we look out into the future here, whether it’s this quarter or even stepping into 2022.” – ConMed CEO Curt Hartman
“Hospitals are still going to experience some labor challenges. We don’t see that getting better in the near-term immediately. I will qualify that so to say that they have been, quite frankly, masters at understanding how to manage patient flow and procedure flow. When we look at diagnostic and routine screenings and surgical procedures, we expect the trends will continue to recover globally, similar to the trends we saw in quarter two where surgical procedures grew low single-digit above 2019 baselines.” – Johnson & Johnson Executive Vice President, Worldwide Chairman, Medical Devices Ashley McEvoy
“I think the level of staff shortages that we’ve seen now is more of a constraining event on upside to Q4 or being able to hit the relatively high Q4 volumes. I don’t see a big risk at this point unless something meaningfully changes in the future. I don’t see the staffing shortages that we’ve seen and the impact they’ve had so far being a material limiter for next year because Q1 is typically the slowest quarter per year in terms of spine surgery volumes. Q2, there was a big pickup, but we still got 5 or 6 months before that becomes a risk. But I think, again, just based on the anecdotal evidence we’ve got, it’s just more of a limiter to the upside of Q4 and even being able to sustain the typically high Q4 surgery schedules is where we’re seeing the risk for now.” – SeaSpine CEO Keith Valentine
“I think the labor shortage is the toughest component to really try and read because it’s unprecedented. And it’s not just at the nurse level. It’s really throughout the hospital setting. What we do know through survey data – this is not statistically relevant, so please don’t run too far with it but – over half of the physicians that have reported in the third quarter have stated that they’ve suffered from staff shortages. And when those particular physicians have that challenge, they’re doing about 10% fewer procedures than they normally would do. So that’s very real. And we’re also seeing that that impact is greater in the hospital setting than it is in the ASC setting. And as you know, we’ve got a more prominent share in the hospital setting, so I think it more disproportionately impacts us. Because of those, we’re taking the approach until we see substantial, durable improvement, we’re going to continue to take a view that this is lingering with us.” – Zimmer Biomet CFO Suky Upadhyay
Supply Chain Resilience a Top Priority for Orthopedic Companies
Supply chain challenges are crippling all industries these days. Some of the larger orthopedic players stressed shortages for electronic components during their 3Q calls. In September, AdvaMed and Deloitte released findings of a survey on the semiconductor chip shortage in medtech. Companies noted that they primarily need 2nd or 3rd generation chips, which puts them in competition with automotive, industrial and consumer industries for suppliers. Additionally, medtech companies said they face delays of two to 52+ weeks for chips, meaning some companies might see delays into 2023.
“It is the resin, it is silicone, it is electronic components, it is some of the circuit boards and I think it has been widely reported. I cannot speak for our competitors, but I would expect that they are seeing the same. Whether they are seeing it in the same context and with the same rigor, I cannot comment on. However, these are mainly the areas where we are seeing global supply challenges. Typically, we are small buyers in the big scheme of broader industries on these raw materials. We typically also have an ability to pay, so I think we are in good shape here in the broader context. We are also looking to seek for a priority for medical applications and medical products, as an industry and as an individual company for raw materials shortages to be actually then prioritized to the medical device industry. There is a lot going on here and quite a few moving parts.” – Smith+Nephew CEO Roland Diggelmann
“With regards to the impacts from a raw material or supply chain perspective, what I would tell you is there certainly are challenges just like everybody else has with regards to whether it’s the tight labor market or shortages in things like electronics or resins. But as of now, we’ve been able to really effectively meet all of our customer needs. What that really has required is our supply chain has really had to be much more active and its support in its partnership with the various supplier base that we have. We’ve been able to really make sure that we’re maintaining our safety stock levels. We’re able to actively purchase critical components where necessary so that we can keep production going. And then also just around the logistics and distribution as well and working actively with those partners, all of that in anticipation of the fact that we think that there’s going to continue to be some headwinds in this area.” – Stryker Vice President of Investor Relations Preston Wells
“And I could tell you from a Persona IQ perspective, we’re in a very limited launch. We do have some supply constraints here. And that will put a little bit of a damper on how we’re going to roll this out. Microchips are tough to come by. It’s not impacting us in ROSA because you’re talking in hundreds. When you move to IQ, you’re talking thousands. And so it is going to get in the way, in the short-term that we’re again – we’re trying to work through it, but that is going to put a damper on our launch.” Zimmer Biomet CEO Bryan Hanson
It’s become clear that the COVID recovery is complex. Orthopedic companies face more threats than just postponements of orthopedic surgeries. Staffing of all kinds, as well as supply chains will continue to challenge orthopedic companies into 2022.
Mike Evers is ORTHOWORLD’s Digital Content Strategist.
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Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.
