A common pain point for healthcare employers is a fragmented system where payers, physicians and suppliers aren’t always coordinated, but these challenges can also lead to innovation in the ASC space, Mike Boblitz, CEO of Athens (Ga.) Orthopedic Clinic, said.
“Market forces continue to push innovations that align incentives across industries to disrupt the status quo,” he told Becker’s. “The employers – via the payers – are similar to a traditional consumer where price matters. Healthcare providers, orthopedic practices and hospital-based orthopedic service lines are commodities — with employers seeking lower-cost alternatives.”
In the medtech sphere, payers are recognizing the effect of implant costs on healthcare and introducing contracts that steer from “cost plus” reimbursement, Mr. Boblitz said.
“Implant costs have been inflated for years in exchange with ‘rebates’ that reward ASCs for utilizing higher cost products. New payer proposals include increasing facility rates in exchange for ASCs eliminating the inflated rebate-driven prices. This can create a net positive to private orthopedic practices that operate ASCs via aggressive negotiations with vendors that are hungry to capture market share — at prices below current market rates. A great approach to help reverse the rapidly rising cost of healthcare for employers.”
And at the same time new deals are linking employers to private orthopedics with wholly owned ASCs, a model that AOC follows.
“[It] offers employers simple bundled pricing that combines the facility fee, the anesthesia fee and the physician fee in one invoice — significantly below higher cost hospital-based pricing,” Mr. Boblitz said. “In addition, AOC is expanding beyond the surgical episode to offer employers direct pricing for access to Northeast Georgia’s only orthopedic urgent care centers that operate seven days per week, a network of MRI/CT Centers, and a robust outpatient therapy network with over 46 providers. This broader approach expands the aim with a laser focus on access, prevention and recovery — while allowing the contracted beneficiaries to avoid expensive hospital care.”
Orthopedics ranks second in the U.S. in total cost of care, with back pain and joint replacement being major cost drivers, Mr. Boblitz said. This opens the door for insurer’s innovations to help the ASC setting thrive.
“The cost for a spine surgery or a joint replacement surgery is at least 40% more expensive in the hospital setting,” Mr. Boblitz said. “Payers are becoming more innovative via ‘carve outs’ in these higher cost conditions to allow private orthopedic practices to transition these patients into the ambulatory surgery setting. Limited reimbursements for these higher cost conditions have traditionally kept these cases in the hospital outpatient setting. A financially viable ASC can invest in extended care capabilities and robotics to replicate the traditional hospital environment — at a fraction of the cost.”
One other advantage large private orthopedic groups have are related to supply costs, leading to an “aggressive” supply chain strategy.
“This focus eliminates waste in practice expenses to fund expansion projects and further drive market share away from higher cost settings and providers. AOC is negotiating large price reductions in DME, installing best in class automated inventory management systems, and partnering with the largest GPO in the U.S. The aim — to drive costs fast and grow. These cross-industry approaches are making improvements in the overall cost of care.”
Mr. Boblitz is speaking at Becker’s 22nd Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Conference, set for June 18-21 at the Swissotel Chicago. If you would like to join the event as a speaker, please contact Carly Behm at cbehm@beckershealthcare.com.
