Orthopedics is being squeezed from both ends: falling reimbursement on one side, rising labor and liability costs on the other. At the same time, consolidation is redrawing the market, care is moving out of the hospital and patients expect the convenience they get everywhere else. The two executives running Rothman Orthopaedics see a specialty experiencing a reset, with a clear set of moves for the organizations that want to come out ahead.
Christian Ellison, CEO of Philadelphia-based Rothman, and Alexander Vaccaro, MD, PhD, the group’s president, shared their views with Becker’s on the pressures facing orthopedic practices, how consolidation is changing the competitive landscape, how technology and outpatient migration are reshaping care and where the specialty has room to grow over the next decade. Rothman has about 200 physicians across more than 35 locations, Dr. Vaccaro said, and is trying to show that a physician-led group can operate at scale while “controlling their own destiny.”
Squeezed on both sides of the ledger
Both leaders put reimbursement at the top of the list of concerns. Medicare rates for physicians have been falling since the early 1990s, Dr. Vaccaro said, and many commercial insurers follow Medicare’s lead while adding layers such as prior authorization and step therapy.
Those layers, he said, are “designed to slow care and increase administrative costs without demonstrated improvement in patient outcomes.”
Mr. Ellison pointed to the bind that creates. “Most businesses can increase prices to cover rising costs. Healthcare providers cannot do that,” he said. Commercial rates are locked for the term of a contract, and CMS — Rothman’s largest payer — “is materially reducing what they pay orthopedists for what they do.”
Meanwhile, costs keep climbing. Labor is typically a practice’s largest expense, and wage inflation has persisted since the COVID-19 pandemic, Mr. Ellison said. Shortages compound it: Dr. Vaccaro cited a thin supply of registered nurses, occupational and physical therapists, surgical technologists and advanced practice providers.
Malpractice premiums and employee benefits add more pressure. Mr. Ellison said rising malpractice costs hit harder in states with venue shopping, such as Pennsylvania, where it “lends itself to outsized plaintiff awards.”
Recruiting is its own fight. Health systems are offering physicians starting pay that private practices often can’t match, Mr. Ellison said, making it harder to grow or replace retiring surgeons. Dr. Vaccaro added private equity-owned companies and other large multi-service organizations to the list of competitors putting pressure on surgeon-owned practices trying to stay independent.
The strain shows up inside groups, too. “When there are financial pressures such as these, it creates stress and can divide groups that need to be aligned and cohesive more than ever to survive,” Mr. Ellison said.
A market built on scale
Consolidation is the backdrop for nearly every decision in orthopedics now. For Mr. Ellison, competing in that market starts with talent. Groups have to “win the battle for the best physicians,” he said, and that begins with pay strong enough for doctors to repay debt and build a secure future for their families.
Market power has shifted, too. “Physician practices have been left behind as health plans and health systems have gotten larger and consolidated market power,” Mr. Ellison said. Practices consolidating among themselves can win back some of that leverage — with policymakers, health plans and large employers.
Dr. Vaccaro framed it as building the capabilities of a large system without handing over the keys. That means investing in non-clinical talent: professional management, data analysis, revenue cycle and payer contracting. Those functions, he said, give physicians negotiating leverage with payers.
Both executives said groups need to own more of the musculoskeletal continuum. Mr. Ellison listed surgery centers, diagnostic imaging, physical therapy, orthotics and durable medical equipment. Dr. Vaccaro added urgent orthopedic care sites, arguing a full platform delivers higher-quality, lower-cost care that payers and employers will value. For Mr. Ellison, it is also a way to diversify income as rates fall — and a convenience patients notice.
Dr. Vaccaro drew one firm line. “Most important however, is maintaining physician governance,” he said. “Clinicians who provide care should always make decisions about patient treatment.”
Where growth comes from next
Over the next five to 10 years, both leaders expect growth to come from paying for value, moving more complex care out of the hospital and taking cost out with technology. Within organizations, Mr. Ellison sees the biggest opportunity as “inside out”: providing as much of a patient’s current care as possible in-house, improving the experience and generating revenue to fund growth.
Keeping physicians takes more than a paycheck, he said. Groups that offer teaching, research and leadership roles become the employer of choice.
He also made the case for health system partnerships over head-to-head competition. “We have demonstrated that an independent physician group that is aligned with a health system is more productive for the health system than them employing doctors that compete with the independent group,” Mr. Ellison said.
Both leaders pointed to employers. Mr. Ellison said direct-to-employer contracting “may finally be coming” as benefit costs become unsustainable, though it requires a broad specialty and geographic footprint. Dr. Vaccaro tied it to value: bundles, direct-to-employer contracts and other models that pay for outcomes rather than volume.
“Because orthopedic episodes of care are relatively straightforward and measurable, I believe this area offers strong potential for growth and innovation,” Dr. Vaccaro said.
He also pointed to clinical shifts: moving complex procedures, including many spinal fusions, to outpatient settings; biologic and regenerative therapies that may reduce or eliminate the need for surgery; and real-world outcomes data to match treatments to the patients most likely to benefit. Practices that pair new clinical approaches with the ability to track and report outcomes “will likely lead the way,” he said.
Mr. Ellison added two more levers: MSK-adjacent wellness and lifestyle services that keep patients within the practice and reduce dependence on payer reimbursement, and automation that improves the patient and staff experience while cutting costs to fund wage growth.
Care moves out — and closer to the patient
Dr. Vaccaro said navigation, robotics and augmented reality are improving precision and reproducibility in surgery, especially spinal fusion. Enhanced recovery after surgery protocols and less invasive techniques now allow many joint replacements and spinal fusions to be performed safely in ASCs, which offer lower costs and high patient satisfaction.
Outside the OR, AI is being applied to administrative work such as documentation, image interpretation, scheduling and prior authorization requests. “If AI successfully automates these tasks, orthopedic surgeons will have more time to devote to treating patients,” Dr. Vaccaro said.
Mr. Ellison called the outpatient shift “a material economic growth opportunity for practices and a better patient experience” — one that practices should embrace. Patients now expect convenience, he said: more technology, fewer office visits, locations near home, hours that fit their lives and “overall less friction interacting with their doctors.”
Dr. Vaccaro listed similar expectations, including same-day access, online scheduling, transparent pricing and telemedicine follow-ups. But he cautioned that practices “must prioritize quality and safety while building their business model around meeting patient expectations in a much more ‘consumeristic’ marketplace.”
Meeting those expectations takes money. Mr. Ellison said groups will need capital and non-clinical staff who understand consumerism, and third-party funding will likely be required. He sees reason for optimism there.
“Fortunately, there are more alternatives for funding than ever before,” he said, “and many of them don’t require giving up physician control like historic private equity funding.”
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
