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Voice of Industry

Affordable Care Act Tops Surgeon List of 2015 Challenges

Not surprisingly, government’s grip on healthcare continues to be the root of surgeons’ challenges. Common areas of concern include reimbursement, cost pressures, high deductibles and new product approval. To pinpoint challenges—and opportunities for industry to help—in the coming year, we queried members of our ORTHOPRENEUR® surgeon Editorial Board. Consider these surgeon viewpoints as you prepare for 2015.

Participants include:
Jack D. Goldstein, M.D., Sports Medicine Surgeon, Founder of AutomationMed
C. Scott Humphrey, M.D., Shoulder and Upper Extremity Specialist, Founder and Chief Innovation Officer of Shoulder Options
Blair Rhode, M.D., Sports Medicine Orthopedic Surgeon, Founder of Rhode Orthopedic Group (RōG)
Marshall K. Steele, M.D., Orthopaedic Surgeon, Medical Director of Stryker Performance Solutions

ORTHOKNOW: What do you see as the biggest challenge facing orthopaedic and spine surgeons in 2015? What assistance, service or resources can industry provide to you, your patients or the hospital to help address this challenge?

Jack Goldstein, M.D.: Survival in an environment where government has given the control of all of the money in healthcare to the devil (insurance companies) and the devil’s son (the hospitals). It was not too many years ago when surgical centers were being promoted to lower costs, while improving quality and patient satisfaction. In the Northeast, this was while being paid 50 percent of what the hospital charged for the same procedure.

Unfortunately, the government now stupidly thinks that giving everything to hospitals and centralizing treatment will save money. History has a way of repeating itself. Hospitals have never been good at saving money. They routinely run myriad tests (mostly unwarranted), running up costs with absolutely no oversight. They are administratively top heavy and do not even know what it costs to do procedures.

True, validated outcomes measures in the hands of patients and physicians are the only likely source of mediation of the negative forces at play. Unfortunately, nearly all physicians have been searching the ground for nickels and have not seen the train coming to hit them. I am one of the last of the private practice physicians. Most everyone has banded together in groups to get better bargaining power, at a cost to the quality of patient care.

Industry, unfortunately, has been paid better, while we have simultaneously been cut. Since I began practicing in 1990, my reimbursement has been cut to about 30 percent of what it was at that time, excluding inflation. I project that there will be a large shortage of physicians in the near future. It is a poor solution to fill this shortage with PAs and NPs. Even when they are good, they do not substitute for good diagnostic and treatment acumen. The only thing that industry can do to help is to support real outcomes measures, which prove the efficacy of treatment and their devices.

The problem has always been one of education of physicians, and their participation. I developed software for data collection over ten years ago for validated outcomes-measures collection, but without EMR cooperation, data connections are expensive to build and maintain and are different for each vendor. Now perhaps the best means would be a patient network for data collection as an app. Doctors could then opt-in if desired. This would require no cooperation with EMR companies, and one platform could be used centrally (cloud based), lowering the cost to run and maintain.

C. Scott Humphrey, M.D.: About five years ago, orthopaedists flocked to sell their practices to hospital systems due to declining reimbursement and the financial uncertainty associated with the Great Recession and Obamacare. In my region, most surgeons who became hospital employees signed a five-year contract, so soon their contracts will be up for renegotiation. It will be interesting to see what happens to these employed physicians. They sold their buildings, imaging centers and surgery centers to the hospitals. The hospitals purchased the surgeons and their ancillary services based on the upper end of fair-market value at the time, because they realized that this would allow them to gain market share, and to earn extra income from these ancillary services.

What are employed physicians going to do when the hospital offers to renew their contract at a lower reimbursement rate? In my opinion, they’ll have little leverage with which to negotiate a better salary. The employed surgeons have sold off the entire infrastructure that they had built that allowed them to be in private practice. Does it make sense to take out a loan to start over if a physician is in the mid- to late-career stage? Probably not. Now there is talk of passing legislation to end hospital facility fees. If it happens, I predict hospitals will use this as another excuse to cut physician reimbursement.

Interestingly, if physicians are in private practice, they can’t collectively bargain for better reimbursement because it is considered to be collusion to fix prices by the Department of Justice. Once physicians are employed, they can legally unionize. Though I really despise the thought of physicians unionizing, this might be where things are headed.

Blair Rhode, M.D.: The looming changes in the Affordable Care Act. From my own experience in buying health insurance, the Milton Friedman quote, “There is no free lunch,” continues to ring true. You cannot remove pre-existing conditions, keep children on health plans until they are 26, pay for a litany of preventative care treatments and expect prices not to react. On top of drastic rate increases, the insured are seeing deductibles skyrocket. To keep my premiums in line, I have to increase my employees’ deductible to $6,000. This is now an elephant in the room when having discussions about treatment with patients. It would be different if the patient or her employer hadn't just paid $15,000 to $20,000 toward healthcare premiums just to be able to have a $6,000 deductible.

Marshall Steele, M.D.: Whom to partner with: other orthopedic surgeons (leverage), hospitals (common goals) or even insurance companies (money)? Declining reimbursement in a world of rising costs—this has been going on for the last 15 years. Many doctors have dealt with it by building surgery centers and developing ancillary income, such as physical therapy and MRI. Some of them even build hospitals themselves.

Many have chosen to partner with big orthopaedic medical groups. If 100 orthopaedic surgeons are under one practice, they create this mega group to leverage insurance companies and get a better deal so their reimbursement won’t go down. They might even be able to leverage hospitals to get co-management agreements with them. They’re joining with what used to be their competitors.

If you join with a hospital, you can soon be guaranteed a referral base. If you’re out there by yourself, and you’re not part of a hospital system, you might lose those referrals to those orthopaedic surgeons who are.

We might even see insurance companies buying the surgeon’s hospital. Hospitals are becoming insurance companies, and insurance companies are becoming more like hospitals and practices. That might even be an option in the future for surgeons to say, “Okay, I’ll join with an insurance company that has all these patients as well.” I can see insurance companies that don’t want to be leveraged, to create their own doctors who take care of the patients for that particular company.

ORTHOKNOW: What do orthopaedic device manufacturers need to know about the cost pressures that private practices, hospitals and surgery centers are facing?

Goldstein: Device manufacturers should realize that unless they become participants in a system in which they are part of the problem, they will suffer in the long run. These companies are highly profitable despite cost containment complaints. This can be seen by their stock prices.

Humphrey: It is becoming more and more difficult to obtain hospital approval for new devices, and the business plan for any device company should be adjusted to reflect this new reality. To justify the new and (usually) more costly devices, hospitals are requiring studies that verify improved outcomes. Such studies are expensive and time consuming, and present a significant barrier to entry for smaller companies.

Rhode: I believe there will be an opportunity for a market-based approach to healthcare for those that have high-deductible plans or no coverage at all. I even believe that the self-insured plans (unions included) will look for a market-driven solution. One such answer is a bundled episode of care. This requires device manufacturers to become part of this process; no more sending exorbitant bills to insurers. Now they have to look the surgeon and patient in the eye and justify their pricing.

Steele: The problem of cost vs. revenue will continue. No doubt, the top line per-case revenue will continue to decrease for all parties. Cost is unlikely to go down, causing a real profit issue. As orthopaedic surgeons partner and are in positions to benefit from lowering costs, all commodity items will face significant price pressures as they currently do in surgeon-owned facilities. Industry will need to find a way to accommodate the need for better, faster, cheaper devices by designing products that meet that challenge. If they don’t, they’re going to be in a difficult place to sell their products at the price they want.

The industry’s new partner is hospitals, not just surgeons. The hospital and surgeon are going to look like one entity, not two like they have in the past. The concept of industry looking to partner with hospitals, rather than to sell hospitals stuff, is how industry can address the challenge.

ORTHOKNOW: How has the Affordable Care Act affected you and your peers in 2014? How do you expect it will affect you in 2015?

Goldstein: The “Affordable Care Act” had done nothing but become a huge boon for insurance companies and hospitals. “Insurance” might as well be a rubber stamp on the hand of patients who have been forced to pay increasing copays, essentially paying for everything as well as “insurance” which does nothing but steal from them.

Humphrey: We’ve been burned by some of the new plans where the patients have a high deductible. Ironically, the patients with these plans are the ones who are least able to pay. Once the surgery is done, the patient has little incentive to pay, so with these high-deductible plans, we have to treat the patient as if they don’t have insurance and demand payment up front for elective procedures. What these plans do is push the burden of collection to the doctor’s office.

Steele: Accountable Care Organizations and bundled payments provide a real opportunity to make money providing [patient care] better, faster and cheaper with risk and profit sharing. Stryker will be willing to take risk with bundled payments as a convener.

The government is saying, “In the past, if you did a good job, you can make a little bit of money, but now we’re asking you to do a good job outside of your own walls, and we will pay you to do that. Not just your own costs, but the overall cost, we’ll pay for some of that.” Bundled payments are going to play out in a big way in the next three years. If hospitals are doing a really good job now, they don’t have as much as an opportunity. If you’re doing a poor job as a hospital, this is the best thing in the world. This is a big opportunity and industry can go and work with hospitals and say, “We’ll go at risk with you on this.”

ORTHOKNOW: Have you seen a change in patient volume, or any other changes in patient demographics, since the introduction of the ACA?

Goldstein: I have seen a large drop in patient volume and increased cancellations of surgery, simply because patients cannot afford the copays, which are often nearly the entire cost of treatment.

Humphrey: I’m glad I can report some good news here. We’re seeing that some traditional insurance companies in our area are offering increased reimbursement rates for orthopaedists who take their cases to cost-effective facilities. In other words, we independent surgeons are getting paid more to take our cases to physician-owned facilities. This is the insurance company’s response to the increased costs that come when hospitals employ physicians. For example, if I perform a surgery at the physician-owned hospital, the cost to the insurance company is about one-third of what it would be if I did the same procedure at the local not-for-profit hospital. The insurance companies are finally acknowledging that it costs three times as much to have surgeries performed at a not-for-profit hospital, and they are finally sharing their saving with surgeons who are willing to take their cases elsewhere.

Steele: I think the ACA has put some people on the sidelines. Although all the projections are for volume to go up because of the demographics and people getting older, it’s not going up quickly. It seems volume is down some and, with a huge jump in high-deductible insurance plans from five to 20 percent and decrease in wages, this will continue.

ORTHOKNOW: What opportunities lie ahead for orthopaedic surgeons in 2015?

Goldstein: The future is grim for medicine until patients begin to scream about the insurance fraud and abuse being levied upon them. The insurance industry has had antitrust exemption since 1937. This needs to be repealed, but is never spoken about. If this alone were changed, we would see dramatic alterations in cost and quality. Suddenly, there might be some real competition where there is none. To say that the medical system is a capitalist one is simply a fantasy. Millions of dollars are stolen from patients each year to advertise and lobby against the patients themselves to maintain the antitrust laws. We need to educate patients. They are our only allies. My own website has information about this.

Humphrey: If they can weather the storm over the next few years, surgeons who can maintain their independence and provide state of the art care in a timely manner may be in a good position. As more people gain access to health services through the ACA, I foresee the big hospital systems becoming clogged. Long wait times will result. Employed surgeons won’t necessarily be incentivized to see more patients. There will likely be unmet demand for quick access to specialty care.

A group of general orthopaedic surgeons in my area recently opened a walk-in orthopaedic clinic that allows patients to bypass their primary care physician or the emergency room and see an orthopaedist directly. They are open from 8:00 a.m. to 8:00 p.m. daily. Keeping patients out of the roomer significantly decreases the cost to the patient. So far the group has been very busy.

Rhode: I believe market-based solutions may make sense thanks to Obamacare. The bundled episode of care model may make sense for self-insured plans, high-deductible plans and the uninsured who need a fair price for a particular outpatient procedure. The Surgery Center of Oklahoma and OneFeeSurgery.com are providers that have entered this market and offer “all in pricing” for common outpatient procedures.

Steele: There’s a lot of money to be made over the next three years if they chose a partner that can help them achieve the above goals and share with them. Orthopaedic surgeons have to get smart in 2015 and choose some good partners along the way. Most orthopaedic surgeons are pretty independent people and like to be their own bosses. They don’t like to compromise; I think they’re going to have to learn how to do that a little better than they have in the past. If they chose a good partner and take advantage of some of the things that are available now with the ACA, in terms of bundled payments, they can be very successful.


Continue reading on surgeon challenges:

Trends in Design and Delivery Call for Greater Conversation

Orthopaedic Industry Must Respond to Payor Denial of Implant Coverage