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Discussions at the 2017 AAOS Annual Meeting were dominated by the new era of joint reconstruction procedures and three prevailing topics: robotics, bundled payments and outpatient procedures. From our conversations with device companies, investors and surgeons, it’s clear that companies that are able to capitalize on one or more of the shifts shaping this segment will be positioned to maintain or grow market share.
Here, we recap highlights from those conversations.
Robotics: Capturing the Niche Market
The debate surrounding the use of robotics heated up, as Stryker, Smith & Nephew and Zimmer Biomet featured total knee applications for their systems (the latter unexpectedly).
You’ll recall that Stryker spent most of last year talking about its 2017 full commercial launch of the Mako robotic arm assisted total knee application. AAOS was its full kickoff. Similarly, a year after acquiring Blue Belt Technologies’ system, Smith & Nephew introduced a total knee application for NAVIO which is slated for full launch in 2Q17.
At AAOS, Zimmer Biomet steered buzz from its competitors with the unveiling of a total knee application for Rosa, the robot that it bought from Medtech in 2016. The company announced an aggressive plan for its total knee application, expecting it to be in clinical use by 2H18. The announcement’s timing might allow Zimmer Biomet to retain surgeon customers who were presently eyeing Mako or NAVIO.
Not to be outdone, DePuy Synthes said at its analyst meeting that it plans to launch a robotic offering, though leadership gave no timetable.
We concur with the analysts and surgeons we spoke with that robotics will remain a niche technology for the foreseeable future. Questions remain about equipment cost, surgeon training, reimbursement and global market opportunity.
Piper Jaffray’s analysis mentioned that around 1,500 to 2,000 U.S. hospitals will purchase an orthopaedic robot, with the average of 1.5 robots purchased per center. Stryker had 350 Mako robots placed at the end of 2016; therefore, market opportunity remains for other companies.
Mako is the only robot on the market with applications for total hip, total knee and partial knee. Stryker’s ability to be first to market with broader applications, and its strategic approach to train surgeons and build momentum prior to a full launch, positions them to be the leader in the space for now.
DePuy Synthes, Smith & Nephew, Stryker and Zimmer Biomet dominate joint reconstruction with more than 75% market share, according to our estimates. It remains clear that their focus is on new technologies that will allow them to capture sales in every portion of the market.
That being said, the top players are not the only companies seeking to corner the surgical-assisted technology market. Navigation and positioning systems were launched at AAOS, as well. We expect that the next-tier players in joint reconstruction will adopt some form of surgical-assisted technology to satisfy surgeon interest and capture market share.
Bundled Payments: Expanding Data Capture
CMS’ Comprehensive Care for Joint Replacement (CJR) bundled payment initiative will enter year two of its five-year program on April 1. The success of the first year will be unknown for several months, due to the three-month lag in Medicare’s release of data. Changes are expected to be made to the program. One modification, the ability for surgeons to own the bundle, is already known and was applauded by AAOS at the Annual Meeting.
Originally only hospitals could own, or manage, the bundle. CMS is making CJR an Advanced Alternative Payment Model (AAPM) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), giving surgeons and physician groups greater control over decision making within the 90-day episode of care.
Large device companies have said that CJR has not impacted them from a price or volume standpoint, nor do they expect it to in the future due to implant cost being tied to a DRG and not CJR’s quality and cost metrics. Still, device companies are responding to this initiative. In the past year, we’ve repeatedly highlighted launches of services to assist with episode of care data management.
Thomas C. Barber, M.D., a hip and knee specialist in Oakland, California and Chair of AAOS’ Council on Advocacy, said that there will continue to be a market for companies that can assist with data analysis, because docs need the data faster than they’re currently receiving it from CMS, electronic health records or registries.
“With CJR and other programs like this, you can’t get the data three months late, analyze it and make a change. By then it’s five months down the road and you can’t actually improve,” he said. “You need real-time data every day to know how you’re doing.”
This need for faster data is expected to increase as the appetite for bundled payments continues to grow. Surgeons and consultants pointed out to us that the current presidential administration is against the mandatory nature of CJR, and moving forward, they don’t expect that requirement to be part of programs. However, surgeons, CMS and private payors will continue to drive the adoption of new bundled programs.
“Value-based purchasing is here to stay, no question,” Barber said. “There will be bundles.”
Beyond solutions and services, device companies have released outcomes data and paired their joint devices with non-ortho products for infection prevention and wound care to appear more attractive to surgeons and hospitals that are managing to episodes of care. Companies that are able to relay this message and assist customers in meeting quality and cost metrics will be well-positioned in the market.
Outpatient Joint Replacement: Shifting Procedures
The shift continues in large joint reconstruction procedures, especially hip and knee, moving to outpatient settings. Surgeons and device companies affirmed that private payors continue to incentivize surgeons to move procedures out of the hospital. If cost reductions and outcomes continue to improve in these settings, it is expected that Medicare will eventually reimburse outpatient total joint procedures.
Additionally, surgeons said they are now better prepared from a resource effort to manage patient care safely in an outpatient setting.
In our conversation with Dr. Barber, he said that high-volume sophisticated centers are able to accommodate 30% to 50% of total hip and knee procedures.
In announcing product launches specifically for this portion of the market, Medacta cited a Vizient study that stated outpatient knee replacements are expected to increase by more than 450% and hip replacements by more than 630% in the next decade.
Our conversations with mid- and small-tier joint reconstruction players indicate that they are targeting this portion of the market due to its growth opportunity and greater surgeon preference.
One final note: it was clear in our conversations at AAOS that companies remain optimistic about the global joint reconstruction market. In 2016, stable U.S. and accelerated ex-U.S. sales led to growth in the range of 2% to 3%, according to our estimates. We’re in the final stages of producing THE ORTHOPAEDIC INDUSTRY ANNUAL REPORT®, and look forward to sharing it with you. Our forecasts show that stability in procedure volumes and price pressure is expected to lead to steady growth rates.
What did you find of interest at AAOS? Please send us your thoughts.
Discussions at the 2017 AAOS Annual Meeting were dominated by the new era of joint reconstruction procedures and three prevailing topics: robotics, bundled payments and outpatient procedures. From our conversations with device companies, investors and surgeons, it’s clear that companies that are able to capitalize on one or more of the shifts...
Discussions at the 2017 AAOS Annual Meeting were dominated by the new era of joint reconstruction procedures and three prevailing topics: robotics, bundled payments and outpatient procedures. From our conversations with device companies, investors and surgeons, it’s clear that companies that are able to capitalize on one or more of the shifts shaping this segment will be positioned to maintain or grow market share.
Here, we recap highlights from those conversations.
Robotics: Capturing the Niche Market
The debate surrounding the use of robotics heated up, as Stryker, Smith & Nephew and Zimmer Biomet featured total knee applications for their systems (the latter unexpectedly).
You’ll recall that Stryker spent most of last year talking about its 2017 full commercial launch of the Mako robotic arm assisted total knee application. AAOS was its full kickoff. Similarly, a year after acquiring Blue Belt Technologies’ system, Smith & Nephew introduced a total knee application for NAVIO which is slated for full launch in 2Q17.
At AAOS, Zimmer Biomet steered buzz from its competitors with the unveiling of a total knee application for Rosa, the robot that it bought from Medtech in 2016. The company announced an aggressive plan for its total knee application, expecting it to be in clinical use by 2H18. The announcement’s timing might allow Zimmer Biomet to retain surgeon customers who were presently eyeing Mako or NAVIO.
Not to be outdone, DePuy Synthes said at its analyst meeting that it plans to launch a robotic offering, though leadership gave no timetable.
We concur with the analysts and surgeons we spoke with that robotics will remain a niche technology for the foreseeable future. Questions remain about equipment cost, surgeon training, reimbursement and global market opportunity.
Piper Jaffray’s analysis mentioned that around 1,500 to 2,000 U.S. hospitals will purchase an orthopaedic robot, with the average of 1.5 robots purchased per center. Stryker had 350 Mako robots placed at the end of 2016; therefore, market opportunity remains for other companies.
Mako is the only robot on the market with applications for total hip, total knee and partial knee. Stryker’s ability to be first to market with broader applications, and its strategic approach to train surgeons and build momentum prior to a full launch, positions them to be the leader in the space for now.
DePuy Synthes, Smith & Nephew, Stryker and Zimmer Biomet dominate joint reconstruction with more than 75% market share, according to our estimates. It remains clear that their focus is on new technologies that will allow them to capture sales in every portion of the market.
That being said, the top players are not the only companies seeking to corner the surgical-assisted technology market. Navigation and positioning systems were launched at AAOS, as well. We expect that the next-tier players in joint reconstruction will adopt some form of surgical-assisted technology to satisfy surgeon interest and capture market share.
Bundled Payments: Expanding Data Capture
CMS’ Comprehensive Care for Joint Replacement (CJR) bundled payment initiative will enter year two of its five-year program on April 1. The success of the first year will be unknown for several months, due to the three-month lag in Medicare’s release of data. Changes are expected to be made to the program. One modification, the ability for surgeons to own the bundle, is already known and was applauded by AAOS at the Annual Meeting.
Originally only hospitals could own, or manage, the bundle. CMS is making CJR an Advanced Alternative Payment Model (AAPM) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), giving surgeons and physician groups greater control over decision making within the 90-day episode of care.
Large device companies have said that CJR has not impacted them from a price or volume standpoint, nor do they expect it to in the future due to implant cost being tied to a DRG and not CJR’s quality and cost metrics. Still, device companies are responding to this initiative. In the past year, we’ve repeatedly highlighted launches of services to assist with episode of care data management.
Thomas C. Barber, M.D., a hip and knee specialist in Oakland, California and Chair of AAOS’ Council on Advocacy, said that there will continue to be a market for companies that can assist with data analysis, because docs need the data faster than they’re currently receiving it from CMS, electronic health records or registries.
“With CJR and other programs like this, you can’t get the data three months late, analyze it and make a change. By then it’s five months down the road and you can’t actually improve,” he said. “You need real-time data every day to know how you’re doing.”
This need for faster data is expected to increase as the appetite for bundled payments continues to grow. Surgeons and consultants pointed out to us that the current presidential administration is against the mandatory nature of CJR, and moving forward, they don’t expect that requirement to be part of programs. However, surgeons, CMS and private payors will continue to drive the adoption of new bundled programs.
“Value-based purchasing is here to stay, no question,” Barber said. “There will be bundles.”
Beyond solutions and services, device companies have released outcomes data and paired their joint devices with non-ortho products for infection prevention and wound care to appear more attractive to surgeons and hospitals that are managing to episodes of care. Companies that are able to relay this message and assist customers in meeting quality and cost metrics will be well-positioned in the market.
Outpatient Joint Replacement: Shifting Procedures
The shift continues in large joint reconstruction procedures, especially hip and knee, moving to outpatient settings. Surgeons and device companies affirmed that private payors continue to incentivize surgeons to move procedures out of the hospital. If cost reductions and outcomes continue to improve in these settings, it is expected that Medicare will eventually reimburse outpatient total joint procedures.
Additionally, surgeons said they are now better prepared from a resource effort to manage patient care safely in an outpatient setting.
In our conversation with Dr. Barber, he said that high-volume sophisticated centers are able to accommodate 30% to 50% of total hip and knee procedures.
In announcing product launches specifically for this portion of the market, Medacta cited a Vizient study that stated outpatient knee replacements are expected to increase by more than 450% and hip replacements by more than 630% in the next decade.
Our conversations with mid- and small-tier joint reconstruction players indicate that they are targeting this portion of the market due to its growth opportunity and greater surgeon preference.
One final note: it was clear in our conversations at AAOS that companies remain optimistic about the global joint reconstruction market. In 2016, stable U.S. and accelerated ex-U.S. sales led to growth in the range of 2% to 3%, according to our estimates. We’re in the final stages of producing THE ORTHOPAEDIC INDUSTRY ANNUAL REPORT®, and look forward to sharing it with you. Our forecasts show that stability in procedure volumes and price pressure is expected to lead to steady growth rates.
What did you find of interest at AAOS? Please send us your thoughts.
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Carolyn LaWell is ORTHOWORLD's Chief Content Officer. She joined ORTHOWORLD in 2012 to oversee its editorial and industry education. She previously served in editor roles at B2B magazines and newspapers.
