Healthcare was front and center in the "fiscal cliff" debates to end 2012 and will continue to play a large role in the "debt ceiling" debates in 2013. Over the next several years, many new initiatives will take place to reduce the percent of growth domestic product devoted to healthcare.
"In the broadest sense of the word, we have already fallen off the fiscal cliff," says Eric Louie, MD, chief medical office for Sg2. "The legislation that was passed after January 1 didn't solve anything; it was a stop gap that didn't guarantee any changes. We have a large deficit driven by national healthcare expenditures exceeding the rates of inflation. We are using more GDP to fund healthcare. In that context, we still have a lot of work to do to provide patients with higher quality, more cost effective and sustainable care."
Here are eight ways healthcare delivery is changing and what orthopedic surgeons can do to keep up.
1. Payment incentives focus on quality over quantity. Insurance companies and government payors are changing payment incentives to emphasize the value of care over the number of patients treated. In some markets, bundled payments and accountable care organizations are forming to address these issues, with and without input from surgeons.
"Medicare and commercial payors are bundling services to encapsulate and reward the full continuum of care we provide for orthopedic patients," says Dr. Louie. "It won't be sufficient to simply perform an operation; we will be evaluated on the decision to perform surgeries, execution, postoperative care and rehabilitation that will restore that individual to well-being and the ability to return to work."
Bundled payments will require providers to "guarantee" their outcomes to a certain degree, or additional care will be administered without charge.
"It's like what the car industry has done with guarantees," says Dr. Louie. "If you purchase a high end car, you are really buying a ride. The car is guaranteed to work well and if it doesn't the auto dealer will replace the broken parts at no charge. For a set fee, they will guarantee results. That's what the variety of commercial insurance prospective bundling pilots is all about."
2. Insurance companies are passing risk to patients and providers. ACOs and bundled payments pass risk from insurance companies to providers. Patients accept more risk now than in the past with high deductible plans, health savings accounts and other premium plans that require paying more for out-of-network providers and uncovered procedures.
"Insurance companies are involving patients more by encouraging them to make value-driven choices and purchasing care they are going to receive," says Dr. Louie. "Geisinger in Danville, Pa., offers PovenCare which is a prospective bundling scheme which started with coronary bypass surgery and now is now being applied to joint replacement."
As another example, Blue Shield of California has identified select providers as high value, low cost providers for total joint replacement. If patients in the CalPERS system select one of these providers, their surgery will be covered for $30,000 by the insurance company. If the patient chooses to go outside the preferred provider list, the patient is responsible for expenditures exceeding $30,000.
"To deliver good care under this new system, providers must align with physicians to develop a program that reduces variation in outcomes, improves safety and continues to provide good care. To make this economically feasible it is necessary to understand the economic envelop of an episode of care," says Dr. Louie. "Then you get price bundling. That's one huge area where we are seeing big change fueled by healthcare reform and meant to drive and incent value-driven care rather than volume-driven care."
3. Comparative effectiveness is redefined. The idea of "comparatively-effective" care is politically charged today as reformers seek to really understand what constitutes value. New therapies, and even some old, are challenged to prove their clinical worth for patients compared with the cost of administration.
"If the new therapy is more expensive then the magnitude of increased benefit must be justified by the increased cost," says Dr. Louie. "There will be increased scrutiny in the musculoskeletal arena to examine whether the approaches we have are really the best."
Fundamental changes are being made in how patients are initially evaluated and screened for conservative treatment and non-operative therapy before they arrive at the surgeon's door. Back pain is one of the most common ailments and most patients are treated without surgery. Current research focuses on how to manage different conditions and protocols developed to decrease the variation in utilization of spine surgery across the country.
"There is a lot of gray zone in how patients are being treated, but increasingly we are going to be pushed to generate the data and information that allows us to make hard treatment choices," says Dr. Louie. "The variation in treatment decisions is going to come under scrutiny and we will increasingly have to justify our choices about who we manage medically and who we manage operatively. That will be a major lever utilized to control the rise of expenditures in the healthcare industry."
4. Implant costs will be a barrier. Implants are one of the largest expenses associated with orthopedic procedures and providers are now encouraged to consider implant pricing with every procedure. Surgeons in bundled payment or ACO arrangements are incentivized to lower those costs, but even outside those arenas hospitals and surgery centers are partnering closely with physicians to bring those prices down.
"The devices and implants we use are a major contributor to the cost of delivering healthcare and increasingly we are going to have to think about which devices at which price points are the best for which conditions," says Dr. Louie. "From the hospital side, they will increasingly examine that question, and work collaboratively with physicians to make sure the right patients get the right devices."
Providers can renegotiate vendor contracts to lower prices and leverage case volume if necessary during those discussions. Many implants today are commodities, meaning several companies offer very similar devices at different costs. Compare prices from these companies for the best deal. For the most common procedures, there are companies offering implants at wholesale prices without device representatives to significantly lower their cost.
5. Sustainable growth rate control of professional fees has not yet been activated, to date. For years Congress has not found a politically successful way of implementing controls on for limiting the sustainable growth rate for Medicare expenditures on physicians' fees. Most recently, physician rates were increased with the fiscal cliff deal at the expense of facility fees to hospitals. In the absence of action at the national level, some states are taking matters into their own hands.
"We already see there are several states entertaining legislation that would limit the growth of expenditures in that state tied to economic inflators," says Dr. Louie. "The same thing might eventually happen at the national level. We delay it every year, but physician expenditures will be brought into question and there will likely be incentives to shift resources for professional services to primary care physicians and away from specialists."
This switch would decrease reimbursement to specialists like orthopedists and increase reimbursement to primary care physicians. In this environment, primary care physicians will triage the patient's care, sending only the most obvious surgical candidates along to surgeons.
"I think in many respects it's really important that physicians control recommendations to patients that influence the healthcare budget," says Dr. Louie. "These are the people who should make decisions about when to have surgery, diagnostic tests and which implants to use. That's where the government will find opportunities for redesigning care to become more cost-efficient. NIH has several initiatives to examine the comparative effectiveness of various therapeutic algorithms to clarify these decisions."
In the future, government payors may encourage primary medical homes and other initiatives to better coordinate and execute care.
6. Health IT implementation. Many providers have implemented electronic medical records to meet meaningful use standards, and many others have begun the process. EMR systems are designed to gather valuable data that can be shared between providers and researchers, increase efficiency and eliminate redundancies. However, the systems come at a great expense.
"There are some positives, but I think there is still a tremendous burden for the community to take on the challenges of healthcare reform in an economically feasible way," says Dr. Louie. "Health IT has huge upfront costs, and not just the cost of investing in the software, but also the cost of lost productivity. However, at the end of the day I believe it's a more efficient way to deliver care. Administrative and managerial costs are a formidable barrier in a cost-restricted and low reimbursing environment, but they result in better patient care and care that is less expensive to the patient, provider and community in the long run."
Physicians must learn to work as a team with other physicians, hospital executives and community members to optimize EMR and other health IT opportunities in the future.
"Diseases are more complicated now and it won't be possible for one individual physician to do all things that are required for the patient," says Dr. Louie. "They have to team with others. The only way that team can work together is to have good communication and coordination, which is easier with electronic systems."
7. More efficiency is crucial. To maintain practice in a low-reimbursing, high cost environment, surgeons must become more efficient than ever. While reimbursements are tied to quality, quantity is also important to maintaining practice and the quicker surgeons are able to move from one patient to the next, the more people they will treat.
"Increasingly there are ways to conduct actual surgery more efficiently with less trauma, lower resource consumption and shorter hospital stays," says Dr. Louie. "A growing trend dealing with elective surgery focuses on the elements surgeons can control; they can optimize care before going into surgery, which presents a real opportunity for efficiency."
Specialty hospitals in many places are becoming focused factories, specializing in orthopedics or spine. Even surgeons are subspecializing in knee, hip, shoulder and spine procedures to really hone their craft.
"If there is something preplanned, elective and structured, providers can do that in a very systemized and low-variation way," says Dr. Louie. "Isolate the work flows and pool all the similar procedures so they are performed in the same way. Concentrate that care for experienced-based learning that brings together a workforce that's good at one thing. They become more efficient and waste fewer resources. Concentrating volume and within the same team reduces variation and improves outcomes."
8. Increasing numbers of outpatient cases. Many orthopedic and spine procedures have evolved to the point where surgeons can perform cases with a less invasive technique that is better for patients and lowers the cost of overall care. Now, more cases are taken to the outpatient surgery center setting, which is a significant cost reduction from the hospital.
"Because of increased efficiencies and shortened lengths of stay, some orthopedics cases are performed on an ambulatory basis," says Dr. Louie. "Patients don't stay over night at these facilities, which is a major cost factor. The whole level of resource utilization is much lower if you manage someone on a day-surgery basis."
Only certain procedures have made the full transition into outpatient surgery centers, although some specialists are able to perform more complex procedures such as total joint replacement on an outpatient basis. Patients must be good candidates for outpatient surgery, meaning they have few comorbidities and are likely to handle same-day discharge well.
"I think this trend toward surgery centers will continue, especially as an outgrowth of the focused factory approach," says Dr. Louie. "A lot of preoperative planning is involved to make sure patients are prepared to leave the surgery center. Orthopedists have to set those expectations and train patients in their postoperative rehabilitation and therapy ahead of time. They are teaching them what they need to know early and giving them the expectations of wellness."
More Articles on Orthopedic Surgeons:
Get the Most Out of Spine Practice Recruitment: Q&A With Dr. Ty Thaiymananthan of BASIC Spine
5 Steps for Spine Surgeons to Resolve Liability Insurance Before Hospital Employment
5 Key Concepts for Orthopedics Bundled Payments
Here are eight ways healthcare delivery is changing and what orthopedic surgeons can do to keep up.
1. Payment incentives focus on quality over quantity. Insurance companies and government payors are changing payment incentives to emphasize the value of care over the number of patients treated. In some markets, bundled payments and accountable care organizations are forming to address these issues, with and without input from surgeons.
"Medicare and commercial payors are bundling services to encapsulate and reward the full continuum of care we provide for orthopedic patients," says Dr. Louie. "It won't be sufficient to simply perform an operation; we will be evaluated on the decision to perform surgeries, execution, postoperative care and rehabilitation that will restore that individual to well-being and the ability to return to work."
Bundled payments will require providers to "guarantee" their outcomes to a certain degree, or additional care will be administered without charge.
"It's like what the car industry has done with guarantees," says Dr. Louie. "If you purchase a high end car, you are really buying a ride. The car is guaranteed to work well and if it doesn't the auto dealer will replace the broken parts at no charge. For a set fee, they will guarantee results. That's what the variety of commercial insurance prospective bundling pilots is all about."
2. Insurance companies are passing risk to patients and providers. ACOs and bundled payments pass risk from insurance companies to providers. Patients accept more risk now than in the past with high deductible plans, health savings accounts and other premium plans that require paying more for out-of-network providers and uncovered procedures.
"Insurance companies are involving patients more by encouraging them to make value-driven choices and purchasing care they are going to receive," says Dr. Louie. "Geisinger in Danville, Pa., offers PovenCare which is a prospective bundling scheme which started with coronary bypass surgery and now is now being applied to joint replacement."
As another example, Blue Shield of California has identified select providers as high value, low cost providers for total joint replacement. If patients in the CalPERS system select one of these providers, their surgery will be covered for $30,000 by the insurance company. If the patient chooses to go outside the preferred provider list, the patient is responsible for expenditures exceeding $30,000.
"To deliver good care under this new system, providers must align with physicians to develop a program that reduces variation in outcomes, improves safety and continues to provide good care. To make this economically feasible it is necessary to understand the economic envelop of an episode of care," says Dr. Louie. "Then you get price bundling. That's one huge area where we are seeing big change fueled by healthcare reform and meant to drive and incent value-driven care rather than volume-driven care."
3. Comparative effectiveness is redefined. The idea of "comparatively-effective" care is politically charged today as reformers seek to really understand what constitutes value. New therapies, and even some old, are challenged to prove their clinical worth for patients compared with the cost of administration.
"If the new therapy is more expensive then the magnitude of increased benefit must be justified by the increased cost," says Dr. Louie. "There will be increased scrutiny in the musculoskeletal arena to examine whether the approaches we have are really the best."
Fundamental changes are being made in how patients are initially evaluated and screened for conservative treatment and non-operative therapy before they arrive at the surgeon's door. Back pain is one of the most common ailments and most patients are treated without surgery. Current research focuses on how to manage different conditions and protocols developed to decrease the variation in utilization of spine surgery across the country.
"There is a lot of gray zone in how patients are being treated, but increasingly we are going to be pushed to generate the data and information that allows us to make hard treatment choices," says Dr. Louie. "The variation in treatment decisions is going to come under scrutiny and we will increasingly have to justify our choices about who we manage medically and who we manage operatively. That will be a major lever utilized to control the rise of expenditures in the healthcare industry."
4. Implant costs will be a barrier. Implants are one of the largest expenses associated with orthopedic procedures and providers are now encouraged to consider implant pricing with every procedure. Surgeons in bundled payment or ACO arrangements are incentivized to lower those costs, but even outside those arenas hospitals and surgery centers are partnering closely with physicians to bring those prices down.
"The devices and implants we use are a major contributor to the cost of delivering healthcare and increasingly we are going to have to think about which devices at which price points are the best for which conditions," says Dr. Louie. "From the hospital side, they will increasingly examine that question, and work collaboratively with physicians to make sure the right patients get the right devices."
Providers can renegotiate vendor contracts to lower prices and leverage case volume if necessary during those discussions. Many implants today are commodities, meaning several companies offer very similar devices at different costs. Compare prices from these companies for the best deal. For the most common procedures, there are companies offering implants at wholesale prices without device representatives to significantly lower their cost.
5. Sustainable growth rate control of professional fees has not yet been activated, to date. For years Congress has not found a politically successful way of implementing controls on for limiting the sustainable growth rate for Medicare expenditures on physicians' fees. Most recently, physician rates were increased with the fiscal cliff deal at the expense of facility fees to hospitals. In the absence of action at the national level, some states are taking matters into their own hands.
"We already see there are several states entertaining legislation that would limit the growth of expenditures in that state tied to economic inflators," says Dr. Louie. "The same thing might eventually happen at the national level. We delay it every year, but physician expenditures will be brought into question and there will likely be incentives to shift resources for professional services to primary care physicians and away from specialists."
This switch would decrease reimbursement to specialists like orthopedists and increase reimbursement to primary care physicians. In this environment, primary care physicians will triage the patient's care, sending only the most obvious surgical candidates along to surgeons.
"I think in many respects it's really important that physicians control recommendations to patients that influence the healthcare budget," says Dr. Louie. "These are the people who should make decisions about when to have surgery, diagnostic tests and which implants to use. That's where the government will find opportunities for redesigning care to become more cost-efficient. NIH has several initiatives to examine the comparative effectiveness of various therapeutic algorithms to clarify these decisions."
In the future, government payors may encourage primary medical homes and other initiatives to better coordinate and execute care.
6. Health IT implementation. Many providers have implemented electronic medical records to meet meaningful use standards, and many others have begun the process. EMR systems are designed to gather valuable data that can be shared between providers and researchers, increase efficiency and eliminate redundancies. However, the systems come at a great expense.
"There are some positives, but I think there is still a tremendous burden for the community to take on the challenges of healthcare reform in an economically feasible way," says Dr. Louie. "Health IT has huge upfront costs, and not just the cost of investing in the software, but also the cost of lost productivity. However, at the end of the day I believe it's a more efficient way to deliver care. Administrative and managerial costs are a formidable barrier in a cost-restricted and low reimbursing environment, but they result in better patient care and care that is less expensive to the patient, provider and community in the long run."
Physicians must learn to work as a team with other physicians, hospital executives and community members to optimize EMR and other health IT opportunities in the future.
"Diseases are more complicated now and it won't be possible for one individual physician to do all things that are required for the patient," says Dr. Louie. "They have to team with others. The only way that team can work together is to have good communication and coordination, which is easier with electronic systems."
7. More efficiency is crucial. To maintain practice in a low-reimbursing, high cost environment, surgeons must become more efficient than ever. While reimbursements are tied to quality, quantity is also important to maintaining practice and the quicker surgeons are able to move from one patient to the next, the more people they will treat.
"Increasingly there are ways to conduct actual surgery more efficiently with less trauma, lower resource consumption and shorter hospital stays," says Dr. Louie. "A growing trend dealing with elective surgery focuses on the elements surgeons can control; they can optimize care before going into surgery, which presents a real opportunity for efficiency."
Specialty hospitals in many places are becoming focused factories, specializing in orthopedics or spine. Even surgeons are subspecializing in knee, hip, shoulder and spine procedures to really hone their craft.
"If there is something preplanned, elective and structured, providers can do that in a very systemized and low-variation way," says Dr. Louie. "Isolate the work flows and pool all the similar procedures so they are performed in the same way. Concentrate that care for experienced-based learning that brings together a workforce that's good at one thing. They become more efficient and waste fewer resources. Concentrating volume and within the same team reduces variation and improves outcomes."
8. Increasing numbers of outpatient cases. Many orthopedic and spine procedures have evolved to the point where surgeons can perform cases with a less invasive technique that is better for patients and lowers the cost of overall care. Now, more cases are taken to the outpatient surgery center setting, which is a significant cost reduction from the hospital.
"Because of increased efficiencies and shortened lengths of stay, some orthopedics cases are performed on an ambulatory basis," says Dr. Louie. "Patients don't stay over night at these facilities, which is a major cost factor. The whole level of resource utilization is much lower if you manage someone on a day-surgery basis."
Only certain procedures have made the full transition into outpatient surgery centers, although some specialists are able to perform more complex procedures such as total joint replacement on an outpatient basis. Patients must be good candidates for outpatient surgery, meaning they have few comorbidities and are likely to handle same-day discharge well.
"I think this trend toward surgery centers will continue, especially as an outgrowth of the focused factory approach," says Dr. Louie. "A lot of preoperative planning is involved to make sure patients are prepared to leave the surgery center. Orthopedists have to set those expectations and train patients in their postoperative rehabilitation and therapy ahead of time. They are teaching them what they need to know early and giving them the expectations of wellness."
More Articles on Orthopedic Surgeons:
Get the Most Out of Spine Practice Recruitment: Q&A With Dr. Ty Thaiymananthan of BASIC Spine
5 Steps for Spine Surgeons to Resolve Liability Insurance Before Hospital Employment
5 Key Concepts for Orthopedics Bundled Payments