About 15 years ago, I was working as a sales manager for a big box orthopaedic device company when I received a phone call from a self-paying patient inquiring as to why the cost of his implants was $120,000.
It was a great question – and one I couldn’t answer.
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For years, an increasing disconnect has continued to grow between the cost of manufacturing orthopaedic devices and the prices being charged by vendors to facilities and patients. Precision manufacturing has become remarkably efficient and device design hasn’t changed much. And with that, a nail is just a nail, and a screw is just a screw. But despite this commoditization, hyper-inflated prices are kept aloft, in large part, by the exorbitant costs of deploying sales staff tasked with being ever-present in the OR. In certain cases, I was actually making more money than the attending surgeon simply because of implant prices.
None of this sat well with me. There had to be a better way to improve value for patients. While the financial burden of the surgery is not clinical in nature, it certainly felt like patients were inevitably saddled with pain that would continue long after their recovery. Having worked with physicians and leaders within the U.S. healthcare system for the last two decades, I know that improving value across the entire patient-provider-payor spectrum is a primary objective for so many of us.
Ultimately, the implementation of value-based care initiatives will drive the creation of a fairer and more equitable playing field in healthcare, but progress is never linear. In healthcare, you can gain leverage and lose it; you can take big leaps forward only to have a global pandemic push it right back. Change is slow, but there is movement. Ambulatory surgery centers (ASCs), as just one example, with their ability to provide cost-effective care and statistically safer clinical outcomes than in-patient facilities, are a key to moving affordable healthcare forward.
There are approximately 5,300 ASCs in the U.S., and more than 90% are owned or partially owned by physicians. Their streamlined, outpatient models provide a much-needed alternative for many elective or non-emergency procedures – a fact that has only grown in need as hospitals are stretched to their limits.
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According to a study by the Ambulatory Surgery Center Association, ASCs were able to generate $28.7 billion in savings to Medicare during an eight-year period from 2011 to 2018 and will generate more than $70 billion dollars in savings by 2028. Researchers anticipate that advances in orthopaedic, cardiology and spine procedures will lead to a larger number of outpatient procedures in the near future.
Research has also proven ASCs are associated with lower infection rates than hospitals and more efficient for physicians and patients alike. And with a personal stake in reimbursement, physicians are motivated to further scrutinize operational costs and protocols, improving the efficiency and economics of surgical cases.
But let’s not forget the ebb and flow that is U.S. Healthcare.
CMS has walked back its initial proposal to eliminate a substantial portion of Medicare’s inpatient only list after receiving feedback from stakeholders in the medical device industry. CMS’ decision to return nearly 300 procedures back to inpatient-only coverage is counterintuitive to what the industry itself perceives to be the most valuable path moving forward. Furthermore, it sandbags CMS’ own efforts to provide consumers with alternative procedure sites and transparent pricing information, which nearly 86% of U.S. hospitals have largely ignored despite the mandate going into effect at the beginning of 2021.
It is frustrating to see industry manufacturers step on their own feet rather than embrace the flexibility needed to match the growth and value of ASCs. Value-based care is no longer just a buzzworthy term – it is a quantifiable business strategy. It is evident in the cost savings that surgery centers present to Medicare and its patients. The medical device industry must do its part to provide products and cost-saving opportunities that will foster sustainability for healthcare facilities, especially ASCs.
Manufacturers with a suite of complicated product offerings, consultation add-ons and many other high-cost solutions will struggle to offer successful partnerships in this space. ASCs are reimbursed at 53% of what hospital outpatient departments (HOPDs) receive for identical procedures. ASCs expect vendors to help them manage inventory levels, provide affordable alternatives and be transparent in their pricing methods.
Most importantly, ASCs will look to recruit reliable suppliers to partner with them in a post-pandemic world. Manufacturers innovating new business models to directly address these issues and aggressively drive down costs across the patient-provider-payor spectrum will be the first companies to see success as the market for ASCs continues to grow.
Photo: Hong Li, Getty Images
Itai Nemovicher co-founded the Orthopaedic Implant Company in 2010 to rethink how orthopaedic implants are manufactured and priced. During his 20 years in the medical device industry, he has witnessed the gap grow wider between the cost of implants and patients’ abilities to pay for them. OIC’s mission is to create unparalleled value for patients and providers across the U.S.
