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Voice of Industry

The Surgeon's Perspective: Forthcoming Orthopaedic Industry Challenges

We queried members of our Orthopaedic Surgeon Editorial Board for their impressions on forthcoming industry challenges, including the effects of the Patient Protection and Affordable Care Act’s individual mandate. Here, they share their views on cost pressures, outcomes data and reimbursement.

James F. Marino, M.D. Spine Specialist, CEO and Founder, Trinity Orthopedics

James F. Marino, M.D., founded Trinity Orthopedics in 2004 to develop and commercialize innovative methods and instruments for minimally invasive spine surgery. Prior to Trinity Orthopedics, Dr. Marino founded NuVasive.

Blair Rhode, M.D., Sports Medicine Specialist, Founder, Rhode Orthopedic Group (RoG)

Blair Rhode, M.D., owns 100 percent of his orthopaedic practice, Orland Park Orthopedics; his surgery center, South Chicago Surgical Solutions; and his orthopaedic implant manufacturing company, Rhode Orthopedic Group.

Blaine Warkentine, M.D., MPH, Founder, SurgeryTrack

Blaine Warkentine, M.D., MPH, is a healthcare IT entrepreneur who currently serves as Founder and CEO of SurgeryTrack and Vimty. His experience includes founding OrthoSteps and Bundle Care and serving as Clinical Director of InVivoLink.

Question #1: How do you expect the Patient Protection and Affordable Care Act will affect you and your peers in 2014?

James F. Marino, M.D.: My understanding of how the PPACA will affect the medical device industry is uncertain. I anticipate that medical device utilization will increasingly be tied to cost benefit analysis and effectiveness, as demonstrated in published studies.

Blair Rhode, M.D.: The ACA will not make healthcare more affordable. Medicare, and especially Medicaid, does not cover the cost of treatment. Private insurance rates subsidize these programs. This situation will only worsen with Obamacare. Reimbursement rates to doctors will decline as this bill continues to roll out. The bill is funded by these reductions. Obamacare will also increase the number of regulations affecting doctors. The Patient-Centered Outcomes Research Institute will examine clinical effectiveness of medical treatments and will issue clinical treatment guidelines. The Independent Payment Advisory Board (IPAB) has the goal to reduce the growth rate of Medicare spending (read: rationing). IPAB’s recommendations from its 15 unelected members will go into effect unless Congress enacts an alternative cost-cutting proposal. 

Deductibles for certain of the healthcare exchange plans will be as high as $6,350 for individuals and $12,700 for families. This will change the dynamic between the patient and the doctor’s office. There was a time when the patient’s responsibility of medical bills was minimal. Those days are long gone. With deductible rates skyrocketing, the doctor’s billing department will have to function more and more like a collections agency. The physician has long been accustomed to providing care on a credit basis. The responsible party has typically been the insurance company. As the patient bears more and more responsibility, the default rates will continue
to increase.

Blaine Warkentine, M.D., MPH: There will be more movement to value-based reimbursement and a need for more data on outcomes. Technology will play a bigger role than ever in outcome management and communication needs.

Question #2: What do orthopaedic device companies need to know about the cost pressures that private practices, hospitals and surgery centers are facing?

James F. Marino, M.D.: Device companies need to understand that device costs constitute a small but readily-identifiable fraction of surgical care. Having an understanding of how reductions in device costs will affect the global costs associated with procedures will be very helpful in challenging the continued price pressures on device manufacturers.

Blair Rhode, M.D.: I come from the generic space. I strive to create a value proposition based upon quality and price by creating efficiencies. One would expect significant downward cost pressures as the top-down Federal government provides inefficient healthcare to the masses, while only the same few makers in this country continue to pay for it. The large orthopaedic companies aren't crying foul as the bureaucracy calls for $5 million to $10 million insurance policies. It’s a nice way to drive up operating costs and keep small, innovative companies out of the market. Other central policy decisions trample on small players trying to innovate on value. An example is sterilization requirements. There has been an aggressive move away from rapid sterilization techniques and toward central sterilization techniques. This requires prolonged processing times that essentially employ different instrument trays for every case. This, too, pushes the system to reward the big players with the business, as they have the resources to ship as many trays as needed for the amount of cases that are scheduled that day. This will do nothing to lower costs. But that is the point. Keep the regulatory and bureaucratic machine bloated so as to keep the cost pressures high and the margins fat.

Blaine Warkentine, M.D., MPH: It’s one of the lowest-hanging fruits and so it will be plucked—reps will not be allowed in the O.R. 

Question #3: What do you see as the biggest challenge facing orthopaedic and spine surgeons in the next three years? What assistance, service or resources can industry provide to you, your patients or the hospital to help address this challenge?

James F. Marino, M.D.: The biggest challenge will be third-party payor requirements for class 1 (prospective controlled studies) published data to justify utilization of medical devices in specific diagnostic conditions. Such data is hard to come by, and thus this may be the means by which surgical care is limited to control overall medical costs.

Blair Rhode, M.D.: The biggest challenge is to stay independent. There is a huge push both financially and culturally to become employed by the hospital. New doctors do not have the same interests as doctors who have experienced medicine as it once was. Unfortunately, the reward is not worth the risk in the current environment. Also, the cultural mentality is one of lifestyle and family over one’s duties as a physician. I am not saying this negatively for today’s young doctors. Heck, I wouldn’t go into this profession anymore. But the move to an employed doctor staff steals the doctor’s ability to make decisions in the best interest of themselves and their patients. We are all socialists now. 

Blaine Warkentine, M.D., MPH: To assist, establish outcomes, negotiate value-based reimbursement with payors, find out ways to improve efficiency and cut waste, work as a team and organize as a service line.