Essay · Capital & Regulation
The first commercial decision a MedTech company makes is buried in its 510(k) paperwork · Juan Vegarra
Most founders treat 510(k) predicates like tax paperwork. Necessary. Boring. File and forget. That instinct burns years of runway and tens of millions of dollars waiting to get paid. Because the predicate you pick does not just decide your FDA pathway. It decides your reimbursement inheritance.
Here is the mechanism nobody explains at JPM Healthcare. When you clear a device by demonstrating substantial equivalence to a predicate, you are not only inheriting its safety and performance bar. In practice, you are stepping into the commercial rails already built around that device category: the CPT codes clinicians bill under, the DRG bundles hospitals are paid through, and the payer precedent that took the incumbents a decade to establish. Pick predicates that sit inside an active, well-paid code family, and on day one of clearance, claims can move. Hospital billing teams already know how to run them.
Now run the other path. Pick a dated predicate with no active code family riding on it, and you have inherited a museum piece. Go De Novo, and the situation is worse in a way founders consistently underprice: you are first, which sounds heroic, and you are also alone. No CPT inheritance. No DRG logic. Typically a temporary Category III tracking code that pays, in most cases, nothing, while you spend two to three years and a mountain of evidence convincing payers, one by one, to cover you. The industry has a name for companies in that position: cleared and unpaid. A startup with FDA clearance and no way to get paid is a zombie with a press release.
The inheritance logic also runs upward. Programs like New Technology Add-on Payments can layer meaningful per-case dollars on top of an inherited DRG for the first years after clearance, and cardiovascular technologies have historically drawn some of the largest add-on payments of any clinical category. The public poster child is Shockwave Medical and coronary intravascular lithotripsy: a breakthrough designation, a payment-aware pricing strategy, and a commercial ramp that ran the play the way it is supposed to be run. The lesson is not the specific device. The lesson is that the payment architecture was designed alongside the regulatory strategy, not after it.
Once you see the mechanism, predicate selection becomes a commercial diagnostic you can run on any company, including your own. A team that chose predicates inside an active, well-reimbursed code family, with a credible story for why their device is a substantial improvement, made a commercial decision. A team that chose whatever cleared easiest, or wears De Novo as a badge of novelty without a funded plan for the coverage campaign, made a filing decision. Both will celebrate their clearance letter. Only one of them has a business attached to it.
MedTech founders: if your regulatory lead has not had a real conversation with your reimbursement lead this quarter, that is today's fix. The predicate memo and the coverage strategy are the same document wearing two hats.
MedTech investors: when a deck presents predicates before reimbursement, ask which one drove the other. The answer tells you whether the team understands commercialization or just clearance.
Predicates are not paperwork. They are the first commercial decision a MedTech company makes.
Juan Vegarra is the author of An Outsider's Playbook (forthcoming). The views here are his own. More from the Notebook · Continue the conversation