The last few years have been tough on spine device companies.
Many elective procedures were halted during the pandemic and companies had to pivot strategies and strengthen partnerships to stay afloat. Smaller companies pushing innovation faced financial instability while mid-sized and large companies consolidated.
Then the economy took a turn. With inflation on the rise, hospitals and physicians saw margins tighten. Expenses grew faster than reimbursement and payers, especially Medicare, have been tight-fisted. Hospital budgets for spine and orthopedic devices are dropping, and more of those procedures are headed to the low-cost outpatient ASC setting.
Where does that leave orthopedic and spine device companies?
"I expect that 2024 will continue to be a difficult environment for surgeons as well as orthopedic and spinal implant companies," Peter Whang, MD, professor in the department of orthopedics and rehabilitation at Yale University School of Medicine in New Haven, Conn., told Becker's. "Considering the looming cuts in Medicare reimbursement for our services in the setting of increased expenses, we are facing significant headwinds that make the practice of medicine almost untenable for surgeons and our industry partners alike."
CMS plans to cut physician pay 1.25% next year and lower the conversion factor 3.4%, which will make it difficult for spine surgeons to stay independent.
"In response to these challenges, I believe that we will see an even greater shift of orthopedic and spinal procedures to the outpatient setting in an attempt by surgeons to establish more diverse income streams while providing more cost-effective care," said Dr. Whang. "Likewise, I anticipate that there will be further consolidation in our industry as more companies grapple with the stark economic realities of our healthcare system."
Device companies can play a huge role in helping surgeons and hospitals transition care to the ASC and make sure patients undergo safe procedures. Outpatient surgery centers are significantly different operations than inpatient hospitals, but can provide better outcomes at a lower cost.
"This migration of surgeries to the ambulatory surgery centers and other outpatient centers have been fueled by the innovation of several enabling technologies," Philip Louie, MD, a spine surgeon and medical director of research and academics at Virginia Mason Franciscan Health's Center for Neurosciences and Spine in Seattle, told Becker's. "With ongoing financial stressors of large hospital systems and patients' concerns with hospitals, the ability to expand technologies to aid safe surgeries in outpatient settings will be paramount. Understanding how this all plays out in a landscape trying to become more value-based will be interesting to be a part of."
Zimmer Biomet already recognized the rapid shift of orthopedic procedures to the ASC space and CEO Ivan Tornos said the company will be "relentless" in pursuing its ASC strategy.
Hospitals are also seeing expense growth exceed Medicare pay growth, and are looking for ways to partner with vendors on value-based care initiatives. Innovation is moving beyond the implants, cages and screws to focus on robotics, navigation and endoscopic procedures for better outcomes at a lower cost. But that also means the price point of these technologies may need to drop.
"I expect to see spine technologies on the horizon that allow spine surgical navigation to be safer, less obtrusive to the surgical workflow, continual registration/recalibration, and at a lower cost," Hasan Zaidi, MD, co-director of the adult deformity/scoliosis center and assistant professor of neurosurgery at Harvard Medical School in Boston, and director of spine research at Boston-based Brigham and Women's Hospital, told Becker's. "Democratization of spine surgical navigation outside of major academic medical centers, with lower cost and higher fidelity navigation tools are the future."
Despite the clear challenges, Dr. Whang still sees opportunities for innovation in spine.
"I remain optimistic about the future of orthopedic and spinal surgery. which I am confident will continue to advance in terms of the development of novel technologies and the ability to improve the clinical outcomes of our patients," he said.