Why Orthopedic Surgeons Must Fight Back Against Declining Reimbursements

Orthopedic implant cost reimbursements

In the ever-evolving landscape of American healthcare, spine surgeons are facing a storm that has been silently brewing for over two decades. A comprehensive analysis of Medicare reimbursement trends for spine surgeries from 2000 to 2021 reveals a consistent decline in financial returns for some of the most common and crucial spine procedures.

When contrasted against the backdrop of inflating healthcare costs, this downturn in orthopedic implant cost reimbursement rates paints a picture of a profession under financial siege. To better understand the concerns, let’s delve into the recent data, implications for patient care, surgical decision-making, and the future of spinal health.

The Data Tells a Story

While the plight of spine surgeons might not capture the headlines, its impact is far-reaching and illustrates many of the obstacles facing medical care as a whole. A recent study by Journal of Neurosurgery that spans two decades (2000-2021) reveals a sobering trend in spinal surgery – a steady, unyielding decline in Medicare reimbursement rates.

orthopedic implant cost remibursements

The core of this study is a meticulous examination of the 15 most commonly performed spine surgery procedures. Each of these, a testament to the advancements and complexities of modern medicine, has faced a tangible financial devaluation over the years. After adjusting for inflation, the average reimbursement for all these procedures plummeted by 33.8%. This sharp decline signifies a growing chasm between the costs of providing cutting-edge medical care and the financial recognition of such services.

Anterior cervical arthrodesis, a procedure crucial for patients suffering from significant neck pain and nerve damage where a herniated or degenerative disc in the neck is removed, experienced the steepest decline at 38.7%.

At the other end of the spectrum, vertebral body excision, essential for patients with spinal tumors or severe trauma, saw a comparatively smaller yet significant reduction of 17.1%.

As we delve deeper into the study, the adjusted reimbursement rate for these procedures dipped by an average of 1.9% annually. This steady descent, characterized by a compound annual growth rate (CAGR) of -2.0%, starkly contrasts with the economic reality of rising healthcare costs.

Over the same period, inflation measured by the Consumer Price Index (CPI) rose by 59.3%, highlighting the widening gap between increasing operational expenses and dwindling financial returns.

The implications of these findings are multifaceted and profound. They not only highlight the economic challenges spine surgeons face but also underscore a looming crisis in patient care affordability and accessibility. The data speaks volumes about the economic pressures mounting on a medical specialty that is crucial to the quality of life for the 16 million Americans suffering from chronic spinal ailments.

To be clear, this 20-year trajectory of declining reimbursement rates is not just a financial concern for healthcare providers. It’s a call for a broader conversation about the value we place on medical services, the sustainability of healthcare systems, and the need to reevaluate reimbursement models. While medical advancements may have leaped forward, the financial models supporting them have lagged behind.

Behind the Numbers – The Surgeon’s Perspective

Today, spine surgeons are finding themselves in an increasingly precarious position. As data highlighting the harsh reality of declining Medicare reimbursements emerges, they’re facing additional hardships such as decreased pay.

On November 2nd, the Centers for Medicare & Medicaid Services (CMS) released its final 2024 Medicare physician fee schedule proposal, which included a decreased conversion factor of 3.4 percent. Coupled with the average Medicare reimbursement decrease of 33.8%, many spine surgeons found it another insult to injury.

A troubling graphic from the American Academy of Surgeons highlights just how far off the conversion factor for surgeons is when indexed for inflation.

For many physicians, the financial constriction is not just a distant thunder but a storm already here. This is partly due to current law, which states physicians are not to receive an annual, inflation-based payment update currently regulated for large institutions such as hospitals and nursing homes.

This is problematic since many physicians own offices or Ambulatory Surgery Centers that operate more like small businesses than public entities. They have numerous expenses, such as staff salaries, commercial leases, equipment costs and maintenance fees, technology expenses, utilities, and basic supplies.

The impact of these economic pressures isn’t confined to the operating theaters and clinic rooms. It ripples outwards, affecting the entire ecosystem of spinal care. Every aspect of spinal surgery feels the pinch, from procuring state-of-the-art surgical equipment to employing skilled support staff.

Additionally, the Orthopedic Surgeon profession itself is facing a staffing shortage. According to the Association of American Medical Colleges (AAMC), close to 60% of orthopedic surgeons in active practice are 55 years old or older. As this “retirement cliff” looms near, the Health Resources and Services Administration (HRSA) projects a shortage of 5,080 orthopedic surgeons by 2025.

Patients at the Crossroads

The declining Medicare reimbursement rates have not only squeezed the finances of healthcare providers but have also started to reshape the patient experience in spinal care.

For the average patient suffering from chronic back pain, the journey to finding relief is not just medical. It’s entangled in a complex healthcare system where financial realities often dictate the availability and quality of care. The decrease in reimbursement rates, while seemingly a matter of ledger books, has a direct and profound impact on his care. It determines what kind of treatments are available to him, how quickly he can access them, and, in some cases, whether he can afford them at all.

When reimbursement rates fall, hospitals and ASCs may need to reduce the number of spinal surgeries they perform, limit the use of advanced surgical technologies, or even reduce staff numbers. For patients, this could mean longer wait times, reduced access to cutting-edge treatments, and a potential compromise in the quality of care.

Moreover, geographical disparities in reimbursement rates further complicate the scenario. Patients in states with lower reimbursements might face more significant challenges in accessing care than those in states with higher rates. This uneven landscape of spinal care availability can create a postcode lottery, where a patient’s quality of care depends significantly on where they live.

For elderly patients, who are more likely to rely on Medicare, the situation is particularly concerning. Spinal issues are common in older adults, and the diminishing reimbursement rates might limit their access to essential surgical interventions, directly impacting their quality of life. The story of declining Medicare reimbursements is not just a narrative of financial constraints and healthcare policies. It’s a story about real people facing real challenges.

Charting a New Course – The Road Ahead

As surgeons navigate the choppy waters of declining Medicare reimbursements, we must seek to chart a new course.

One promising avenue is the optimization of the supply chain, particularly in the realm of orthopedic implants. Implants constitute a significant portion of the cost structure in spinal surgeries. For cases such as a Lumbar Interbody Fusion, it can be as high as 55%. Companies like Advantien are pioneering an orthopedic implant revenue management approach, offering a blueprint for how effective supply chain management can revolutionize financial outcomes in orthopedic surgery centers.

The role of such companies goes beyond mere cost-cutting. They provide comprehensive solutions that include negotiating with manufacturers, managing inventory more efficiently, and streamlining the ordering and billing processes. This holistic approach reduces direct costs and alleviates administrative burdens, allowing surgeons and staff to focus more on patient care.

These collaborations also open avenues for improved reimbursement strategies by providing detailed cost analyses and leveraging their extensive market knowledge. Advantien has over a decade of experience negotiating better pricing with 130+ Orthopedic vendors, processes 10,000 surgeries a year, and consistently expands and updates its pricing database of 300,000 product SKUs. The average Ambulatory Care Center (ASC) would be hard-pressed to provide such persuasive and defensible price negotiation arguments for its surgeons.

Another significant aspect of these partnerships is the introduction of data analytics into surgical practice management. By analyzing trends in implant usage, patient outcomes, and cost structures, surgeons can make more informed decisions that balance clinical efficacy with financial sustainability. These Surgeon Scorecards help identify and define best practices among surgeons as they seek to improve profitability on their ASC’s surgical cases. This emphasis on profitability is especially valuable as the percentage of surgeons owning and investing in ASCs increases.

In one case study, Advantien created over $1 million annually in increased profit for an Orthopedic and spine ambulatory center with fifteen orthopedic physicians and five spine surgeons. With a volume of $7 million in implant spend, $4 million in sports/trauma/joints, and $3 million in spine, they were looking to reduce implant pricing with their existing 30+ vendors without impacting surgeon choice or causing disruption to the ASC.

Advantien analyzed existing pricing and payor contracts to identify potential savings and profit opportunities while structuring a pricing/savings/rebate plan to maximize per-procedure profit. Ultimately, they were able to secure lower prices than the neighboring large hospital systems, significantly increase per-procedure profits (not just cost savings, but reimbursement improvements), and improve paperwork efficiencies.

In addition to external partnerships, there is a growing emphasis on internal efficiencies. From adopting lean management practices in surgical centers to utilizing technology for better patient management, the focus is enhancing operational efficiency. This can be especially valuable for ASCs facing staffing shortages as Advantien’s supply chain services augment internal staff, often replacing the workload of one full-time employee.

Here’s a detailed breakdown of the financial results achieved:

      • Negotiated 23% savings from existing spine vendors.
      • Reduced per-procedure disposable costs by 28%.
      • Increased per-procedure profit by $756 on ortho cases and $3,640 on spine cases.
      • Generated $1.3M/yr in incremental profits – not just cost savings – to the facility.
      • No disruption or change to surgeons’ preferred products, reps or vendors.

As we look towards the future, it is evident that the sustainability of spinal surgery practices will depend heavily on embracing these innovative approaches. Collaborating with implant revenue management firms like Advantien is not just a financial strategy but a commitment to maintaining high-quality patient care in the face of economic challenges.

Case Study: $1.3M/Yr in Increased Profit for Ortho/Spine ASC

Final Thoughts

As we distill the insights from the discussions on the declining Medicare reimbursements in spine surgery, it’s evident the challenge is multifaceted, impacting not just the financial stability of surgical practices but also the quality and accessibility of patient care. The statistics and narratives reveal a landscape in urgent need of recalibration, where the financial viability of critical medical procedures is increasingly under threat.

However, in every challenge lies an opportunity. For spine surgeons and healthcare facilities, the path forward demands a proactive and innovative approach to financial management, particularly in supply chain optimization. The role of companies like Advantien in transforming the economic landscape of spinal surgeries is becoming increasingly crucial. Their expertise in reducing implant costs and streamlining operational efficiencies offers hope in these turbulent times.

If you are a spine surgeon, healthcare administrator, or stakeholder in Orthopedics, reach out to Advantien for a complimentary implant cost-saving analysis. This simple step could be the key to unlocking significant savings, enhancing operational efficiency, and ensuring you continue providing your patients with the highest standard of care.

Request a Free Implant Cost Savings Analysis

Advantien partners with ambulatory surgery centers to streamline purchasing, reduce ortho/spine implant and supply costs, and drive significant profits – without impacting surgeon choice. 

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