Rothman Orthopaedics' strategy to 'grow intelligently': Q&A with Dr. Alex Vaccaro

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Forty-one clinic locations across four states. One hundred thousand surgeries completed and 22 new physicians hired in 2022. Revenue growth of 8.2 percent year over year.

That is where Philadelphia-based Rothman Orthopaedic Institute stands today, and it is not stopping there, Alex Vaccaro, MD, PhD, said.

Dr. Vaccaro, president of Rothman, spoke with Becker's to discuss how the practice plans to grow and how it has addressed recent challenges.

Note: This conversation was edited for clarity.

Question: What strategies have helped your revenue increase this year and manage economic headwinds?

Dr. Alex Vaccaro: The headwinds facing orthopedic surgeons today include inflation, staffing and real estate costs. They've had a significant impact on our bottom line. Even though revenue is up and our reimbursement is steady, our overhead in the last year is even higher. This has had an effect on take home pay for all the physicians in the group even in light of increased surgical numbers. This reality is true throughout the country; we are focusing on being much more efficient. We need to bend the cost curve with regards to our infrastructure through exploiting technology and earning to do things differently.

We are increasing our use of telemedicine and exploring remote monitoring and virtual physical therapy. We want to make access to healthcare easier for our patients while at home or work. In my spine practice, a growing percentage of patients I operate on are interviewed via telemedicine and I meet for the first time on the day of surgery. This is a radical departure from the pre-COVID era. From the patient's perspective, this decreases commuting time, parking and time in the waiting room. Telemedicine allows for a virtual exam and an opportunity to review all pertinent imaging studies. This may not be optimum in some cases such as spinal deformity and those that require a face-to-face interaction, and in these cases you would schedule a follow up face-to-face evaluation. But I would say about 75 to 80 percent of people just require a telemedicine interview with review of their imaging studies prior to surgical intervention. In this setting you have decreased substantially the cost of care.

Q: What does Rothman's growth trajectory look like? Are there any plans you can discuss?

AV: We're developing relationships with healthcare systems that want to improve on their orthopedic platform. We plan to continue to grow but grow intelligently and minimize the downside financial risk of a partner less interested in quality of care over market size. We're not a university that has an endowment. So in order for us to grow, we need to have a capital partner. We at this time prefer to partner with healthcare systems rather than with private equity, insurance companies, or rely on the debt markets. We've partnered successfully with New York City-based NYU, AdventHealth in Greater Orlando, Fla., Thomas Jefferson University in Philadelphia, AtlantiCare in Egg Harbor Township, N.J. and Capital Health in Pennington, N.J.. We like this medical model, especially with a healthcare system dedicated to patient-centric orthopedic care with an eye on minimizing costs through value-based initiatives. 

Q: Was private equity ever a consideration?

AV: There are three primary competitors in the race for orthopedic surgeon talent: private equity, large healthcare systems and large single or multispecialty groups. Large healthcare systems are attractive to orthopedic surgeons at this time due to premiums being offered in their RVU models. In this scenario downstream, income can be funneled to the doctor who does not have to worry about back-office management costs or overhead. The downside of this system is the method used to determine the conversion multiples, contract duration and how case mix effects on future negotiations. In this model the more bricks one breaks, the more money one makes. This may be counterintuitive to future value-based care initiatives.

The second competitor is private equity. At this time there is a lot of dry powder in the markets to finance acquisition deals. We would prefer at this point not to get involved with private equity in terms of a practice acquisition. Using capital to expand or invest in ASCs may be worthwhile, but only if the terms and conditions preserve our autonomy and attractiveness of Rothman Orthopaedics in the future for young doctors.

Q: How do you see the business of spine surgery changing in the next five years?

AV: It's changing quickly as we speak. I'm really enjoying the introduction of robotic technology in the operating room. Besides potentially being more precise in placing implants, it has dramatically decreased the stress on the surgeon, which is not something we talk about. A surgeon now has the ability to instrument a complex deformity with the aid of computer-assisted navigation and an end effector, minimize surgeon fatigue and improve reproducibility. We need to improve process flow, work efficiency, and decrease cost for these technologies, but this is an exciting time for OR innovation. I'm also excited about the introduction of virtual and augmented reality systems in surgeon education. Using these technologies to minimize injuries to surrounding vessels and nerves and minimizing collateral tissue damage will hopefully improve patient care and safety in the near future. These technologies expand upon the growing trends in minimally invasive surgical techniques avoiding radiation to the surgeon and with MRI registration in the future also to the patient. We just want to make surgery safer, with less blood loss, less radiation and less time under anesthesia.

Q: Rothman has had some recent changes in its top leadership and in its corporate structure. To what extent has that affected physician operations?

AV: Recent cost restructuring moves have had no effect on patient care. We have 1,800 employees, and we recently downsized 18 corporate positions to right size our back office. We are restructuring the business to be more consistent with economic times. Our business needs to respond to the economic realities of the times. We have to bend the cost curve. I think all surviving businesses have done this across the entire spectrum of businesses. Everyone has downsized during these inflationary periods. When staffing costs increase, you have to sometimes downsize so spending in that particular area doesn't outweigh the margins necessary to provide quality care.

Q: What other healthcare trends have you been watching?

AV: We are all watching the trend among insurance companies and healthcare centers to get bigger through mergers and acquisitions. This will only be successful if it decreases the cost of care and provides an improved quality of care. If the cost of care eventually increases due to these trends, what will the federal government's response be to that? At the end of the day, every move we make has to make it less expensive for families to access healthcare. If that does not occur, then we will see the regulators intervene on behalf of the patient.

Q: What do you predict the government would do if cost care rises? Does it match up with what you want it to do?

AV: Well, the FTC hopefully will not allow these mergers and acquisitions to decrease competition. So, number one, we have to strive to preserve the autonomy of the private practice physician. All physicians, given their autonomy, will follow their oath and place patients care centric to all care decisions. The cost of care at this time is so excessive that any margin is best shared on those that provide the care rather than third parties, unless their involvement directly improves the quality of care or improves access. So I think that we have to always preserve the private practice model in this country. When you socialize or corporatize healthcare, you risk not placing the patient first. This in my opinion is at less of a risk in a large single or multispecialty physician-run group. A large private group has the ability to be nimbler and is able to respond quickly to trends in the market. A large corporation with shareholders and multiple boards makes the ability to pivot or modify health decisions more difficult.

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