One-on-One With Össur CEO Sveinn Sölvason

In April 2022, Sveinn Sölvason assumed the position of president and CEO of Össur, following Jon Sigurdsson’s retirement. I spoke with Sölvason in April, shortly after the company’s 2023 Capital Markets Day and a year into his new role, to discuss his views on the present and future landscape of O&P and Össur’s direction. O&P EDGE: Össur announced a shift in sales segmentation reporting with a breakdown of revenue into Patient Care sales. With this shift in reporting and the greater transparency of that revenue, do you think that will have any impact operationally? Sölvason: No, I don’t think it will have any impact operationally. It is more an effort to increase transparency to our shareholders as we explain the performance of the business. If we look at how Össur has developed from being a small patient care facility here in Iceland over 50 years ago to gradually becoming a global player in prosthetics and bracing and support products, to then over the last ten years, stepping into also providing patient care for the people that use our products, our business mix has just changed. The reason we’re changing our segmentation is simply to better reflect the underlying business that we are running today. O&P EDGE: When we first started covering manufacturers getting into clinical care, which was a departure from the traditional model for the US market, Össur communicated that the approach was measured growth. Does the increased focus on patient care indicate a more aggressive growth strategy for clinic ownership in the next five years? Sölvason: No, I think that’s still where we are. You used the word measured growth. I think that’s a fair description. We have a relatively small share of the US market. And now having communicated what our priorities are for the next five years is not a signal of us being more aggressive in the US. We have, as I said, a relatively small share, and we will see measured growth going forward pretty much in line with what we’ve seen in the last couple of years. So no change in that regard. I think it’s important to make that note, but I also want to try and put some words to the logic of why Össur is actively also operating entities that are active in patient care. We believe that having better access to patients…and being directly involved with payers that pay for our products, we will be better positioned to drive innovation and simply, with the rest of the industry, to influence reimbursement constructively. Because that remains one of the biggest tasks in the O&P industry—advocate for continued better access to high-quality mobility solutions, high-quality prosthetic solutions—and we believe that we are better positioned to do that as we are operating everything from creating products to being actively involved in patient care. O&P EDGE: Thank you for that insight, as there has been some perception that vertical integration is a threat to the existence of independent clinics. Can you speak to that? Sölvason: I have full understanding of that—people thinking along those lines. But even though this trend of vertical integration has been ongoing for a long time, and in some of the European markets for decades, I think it’s important to note that most amputees globally today receive care in focused independent clinical operations, and I think that will continue to be the case in the foreseeable future. But it’s also important to think about the bigger picture, macro trends that are impacting the dynamics in the industry, such as reimbursement, which continues to put pressure on efficiency and productivity. There’s going to be continued focus for the payer on getting more for less and on outcomes. We believe that again, by being an operator in the whole value chain, we will be better positioned to be a very effective partner for more focused clinical operators who will need us to partner on things other than just providing components and products, such as helping with reimbursement and other areas of the business in creating more productivity, more efficiency in terms of how [prostheses] are created. O&P EDGE: Again, looking back at our 2020 interviews, former owners at newly Össur-acquired clinics reported a good deal of autonomy in day-to-day operations and freedom in product choices, i.e., that they were free to use the best O&P solutions for the patients regardless of the manufacturer, with the benefit of centralized support in areas such as education, human resources, IT, and reimbursement. Is this still the overall management strategy for Össur’s clinical acquisitions? If not, how and in what ways has it changed? Sölvason: I’m glad you raised that point because that is a fundamental part of our strategy. Our job is to provide the best possible care for the people that need prosthetic solutions. That remains our focus, and that has to be the focus, and we really believe in that—that clinical autonomy to choose the right solution for each and every patient. We will never compromise on that because any compromise on that is just short-term thinking. Also, just from a business perspective, if we ever compromise on that, then we risk losing the people that depend on our services and depend on us building and supporting them with the right solutions. So we will never force anyone to use specific products. We will always prioritize the best possible care and best possible solution for each and every individual that is served in our clinics. And as you mentioned, our focus has more been on leveraging our infrastructure, leveraging our capabilities when it comes to business support processes. When it comes to our reimbursement capabilities to support our clinics, with these efficiency measures it enables them to spend more time and effort on the clinical care rather than on the administrative and business support side. O&P EDGE: In terms of your business model, how does clinic ownership impact the product sales strategy for the US market? Sölvason: [Product sales] is and still remains the biggest part of our business. Our success as a company will be dependent on our ability to convince clinicians about the clinical benefits of our products and bringing good products to our clinical customers. Also to convince them that we are a good partner and that we can bring them other things than just products. [For example,] we’ve been promoting our socket solutions and our partnership programs where our goal is to provide value-add services other than just components. That remains our goal because most of the people that will end up using Össur products will be served in non-Össur clinics. O&P EDGE: We have spoken about some of the reimbursement challenges; are there creative solutions that Össur has used in some of the developing markets that you’ve been able to use in existing markets that may also help in addressing that? Sölvason: That’s a great point because most of the global amputee population resides in markets where there is no reimbursement, and we are very focused on finding ways to create more access. In many ways that is not necessarily about the componentry, if you will, it’s about the holistic approach to how we both create awareness and how we find patients to deliver [prostheses] in the most effective manner. Some of these socket technologies, like the Direct Socket and our Connect Transfemoral Socket are all technologies that help us approach the market in a different way. While there is a more established clinical care model in most of the reimbursed markets, that is not the case in some of the private pay markets. But your question was around how we can utilize some of those ways of working to create more efficiency in more developed markets like the US, and I really believe that there is an opportunity for the Direct Socket. [It] is a great technology and great concept compared to the traditional way of building a definitive socket. The benefits are it’s quicker, and fewer visits are needed by the patient, which was a good advantage during COVID-19 restrictions and with mobility of patients between locations and visiting their prosthetists being limited. And, ultimately all else being equal, [that] creates more time for the CPOs to see more patients. So in a way, it increases the productivity and the efficiency of creating a prosthesis. It also has an advantage in developing markets where there is less infrastructure because if you have access to water, you can create the socket. We see great traction with our Direct Socket in all of our global markets, and you see some markets, which have almost gravitated toward where this has become standard of care, because there are these macro trends in terms of shortages of CPOs. And where there are capacity constraints, this is just a great solution to free up time to increase productivity in a clinical setting. We’re really optimistic around the growing utilization of this technology. O&P EDGE: How do you balance the opportunity for growth in the bionics area with the reluctance of third-party payers to provide reimbursement for the advanced technology? Sölvason: That is an important theme as well. Looking at it globally, on average there’s been a growing willingness to pay for bionics. We have new reimbursement systems wanting to pay for bionics, and we see that in some of the European markets—step by step, more countries, more systems, acknowledging the benefits of bionics. However, and this goes back to the whole O&P industry, we need to do more. We need to put more effort on explaining the health economic benefits that come with using high-quality prosthetic solutions. The health economics are solid and there are many medical device solutions outside of the mobility industry that are standard of care that perhaps create less value than some of these bionic solutions. But at the end of the day, there’s a finite amount of funding in each and every healthcare system, and everyone needs to fight for their share. I’d like to call out to the industry that we need more collective effort to continue to fight for more access to better prosthetic solutions. We believe at Össur that gradually these types of products that have some sensoring technology, some powered features like our latest Power Knee, which adds muscle power, motorized power, [represent] a huge benefit for particularly the elderly generation. These products will gradually become standard of care, but how fast it will get there depends on the main industry stakeholders just doing our job to fight for our share. I know it’s not easy out there. I mean our clinical customers in the US are faced with constant push-back, and requirements around all sorts of things, and that’s complex. I realize that, but if we look at the bigger picture around the potential, [it] is there and we need to believe in that, because these products are good healthcare solutions, and they save the system money [over time.] Because you have healthier, more active individuals that are using these solutions, and we need to continue to hammer on that message. O&P EDGE: Consolidation is happening, and it’s happening with manufacturers, it’s happening with clinical care. We talk a lot about the negatives of that but are there some positive aspects as well from your perspective? Sölvason: Yes, and I’ll refer back to my comments earlier. I can understand that people’s initial view in some cases is to be hesitant around these trends. But again, going back to the bigger picture, trends that are shaping the industry are reimbursement, payers wanting more for less, it’s technology digitalization changing how our industry and how other industries work. So the fact that you now have some bigger companies like Össur that are operating in the whole chain will have some positive implications for the whole industry. As I mentioned earlier, it’s going to drive an enhanced ability to deliver on the product development side, and with the direct interaction with payers, there’s an ability to constructively drive more payments and create more access for prosthetic products. I also want to reiterate my previous comment. The vast majority of amputees will continue to be served by focused clinical independent operators in the short, medium, and long term. O&P EDGE: Is there a key message that you would like to share with our readers about the O&P field in general and about Össur’s direction? Sölvason: Well, I think I would just say that overall, we are optimistic on the outlook for this industry because despite these things that are often top of mind like reimbursement challenges, it’s just a dynamic industry. At the end of the day, utilization of good prosthetic solutions is still low even in the US and in less developed markets. Also in some of the more mature European markets, fitting rates are still very, very low. So there’s a lot of work to be done in the prosthetic industry, both in terms of driving more access in less developed markets, [and] driving more access to higher quality prosthetic solutions. Össur is committed to delivering progress on all these fronts and working with our fantastic customers in the US and other markets to deliver more value for the people who need our products. Read more of our conversation in “Candid With Össur CEO Sveinn Sölvason” on our EDGE Advantage channel. Photograph courtesy Össur.

One-on-One With Össur CEO Sveinn Sölvason

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One-on-One With Össur CEO Sveinn Sölvason

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