GRAND RAPIDS — A startup company backed by West Michigan investors wants to reduce costs at hospitals and outpatient surgical centers by centralizing and managing their sterile processing for surgical instruments.
Sterile Processing Express, or SPDx, opens its first sterile processing center next month in Phoenix, Ariz. The Grand Rapids-based company has been scouting for locations in Dallas, Texas, and Orlando, Fla. for the next two centers with hopes to begin construction in each market in the latter half of 2023.
SPDx aims to have six sterile processing facilities within four years and “then expand it from there,” CEO Julius Heil told MiBiz.
“We envision a model where we have as many as 30 of these around the country in major metropolitan areas to support both the hospitals and the ASCs,” Heil said.
Heil joined SPDx earlier this year after serving as president and CEO of national group purchasing organization Intalere Inc. that Utah-based Intermountain Healthcare sold to supply chain management company Vizient Inc. two years ago. Heil continued with Vizient for a transition period.
Focused primarily on orthopedics, SPDx wants to handle the sterilization process for hospitals, ambulatory surgical centers and instrument manufacturers and manage their inventory. In time, SPDx also could manage sterile processing departments inside hospitals as a third-party vendor and is considering a future move into sterilizing surgical instruments for dental and veterinary practices, Heil said.
The company’s value proposition is predicated on driving greater efficiency and the improving cost structure for clients through centralized sterile processing centers.
“Health care is spiraling out of control from a cost perspective and we’re all customers,” Heil said. “There’s a huge shift in where the customers want to get health services performed, have access and make sure that they’re safe.”
SPDx plans to pursue a $15 million Series A capital round later this year to support its expansion, Heil said. The company has garnered early interest from hospitals, surgeons who have ownership interests in ASCs, and venture capital firms and other health care industry investors, Heil said.
Grand Rapids-based Genesis Innovation Group LLC formed SPDx to play into a “massive shift” occurring in health care where surgical procedures are increasingly moving from hospitals to lower-cost outpatient ambulatory surgical centers, Heil said. The company will sterilize and store surgical instruments for clients and deliver them “almost instantaneously when needed, whether that’s the surgical center up the road or the hospital down the street,” he said.
The idea for SPDx came from a limited partner at Grand Rapids-based Cultivate(MD) “who has significant commercial experience in orthopedics” and “brought the concept to our attention,” said Matt Ahearn, a director at Genesis Innovation Group.
Venture capital firm Cultivate(MD) is part of Genesis Innovation Group and invests in medical technologies.
The Cultivate(MD) limited partner “noted an increasing trend within his customer base of knee and hip replacement surgeries being performed in an outpatient setting,” Ahearn wrote in an email to MiBiz. “He also noted that the surgeons wanted to do more knee and hip replacements in an outpatient setting, but that the surgery centers didn’t have the capacity to clean and sterilize the instruments required for the surgeries”
Genesis Innovation Group’s due diligence validated the concept with hundreds of orthopedic surgeons and ASC owners and development groups, Ahearn said. The group’s due diligence also confirmed that the market demand for services in Phoenix was “incredibly high,” he said.
SPDx launched in 2021 with capital from Cultivate(MD) and The 4100 Group Inc., the Lansing-based investment arm of dental insurer Delta Dental of Michigan and its Ohio counterpart.
Attracted by the operating efficiencies that SPDx can generate and the growing market for ASCs around the nation, The 4100 Group invested $2 million in SPDx, said Chief Investment Officer Scott Lancaster.
Lancaster learned about SPDx last year when he was introduced to Ahearn through a professional connection. After looking into the company, The 4100 Group concluded “this was intriguing enough that we decided to participate,” Lancaster said.
Partners at Genesis Innovation Group “found a pretty unique segment of opportunity” in SPDx with the potential to drive cost and capacity efficiencies for hospitals and ASCs that can outsource an operation that typically has been a cost center, he said.
“A lot of what’s going on in health care is decentralization of services away from the highest expense centers, which are typically hospitals,” Lancaster said. “This is a complementary service that fits nicely into that whole decentralization model.”