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A team approach to orthopedics: Surgeons and hospitals working together
We needed a better business model. For over 30 years, our orthopedic department worked as an independent, private corporation within our medical center. Six years ago, as the new chairman of the department of orthopedics at Case Medical Center, I was elected president of our practice corporation — a professional for-profit corporation. To continue to provide top-quality care for our patients, it became progressively obvious to us that we needed to modify our business model to better manage the changes in health-care law and reimbursement, to keep up with the investment needed in technology, and to retain and attract top orthopedic surgeons.
In conjunction with the senior administration of our medical center, we developed a new business model. To create this business structure, we sold our corporation to the medical center and, with appropriate contractual controls, became a sub-corporation of our hospital. This arrangement has allowed us to align incentives clinically and economically for both our surgeons and our medical center.
Our practice model encourages our surgeons and the medical center to invest jointly in three areas: improved technology, expanding our practice sites and, most importantly, the recruitment and retention of expert orthopedic surgeons for our medical center. While our surgeons are intimately involved with the purchases of implants and with the efficiencies in our medical center, our hospital is equally engaged in new recruitment and in the success of our surgeons’ practices. We both share the successes and the failures — profits and losses — of the orthopedic profit center at our hospital. Obviously, in a successful partnership, all partners are protected by carefully designed contractual arrangements that provide for fair participation and compensation of all involved. In view of the constantly changing health care compliance issues as well as third-party compensation initiatives, I have asked our panel of experienced surgeons and administrators to provide their views regarding the impact of these issues on the practice of orthopedic surgery in the future.Randall E. Marcus, MD
Moderator
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Randall E. Marcus, MD
Douglas A. Dennis, MD
Robert A. Winquist, MD
Bernard F. Morrey, MD
Thomas F. Zenty IIIRandall E. Marcus, MD: What experiences have you had with a “team approach” of hospitals working in partnership with physicians in providing improved patient care?
Douglas A. Dennis, MD: I have had extensive experience over the past 15 years with two different hospital systems in partnering with hospital administrators to improve patient care. In both instances, specialty centers in joint replacement were developed, which required a hospital commitment to research as well as providing physiotherapists and nursing staffs, both in the operating room and postoperative nursing units, whose primary responsibility is for care of the total joint patient.
Bernard F. Morrey, MD: This is a basic practice model that I have worked with my entire professional career. Both of the hospitals used by Mayo Clinic staff in Rochester are owned by the Mayo Clinic; hence, the integration of hospital administration and functions has always been seamless in our practice. Nonetheless, it is obvious that there are different perspectives of patient care from a hospital and from a physician.
We are fortunate in that the “bottom line” is represented by a combination of both physician and hospital efforts and defines or characterizes the incentive of each group. Thus, we are in one of the best positions to minimize any issues that relate to conflict or lack of alignment of incentive. This arrangement allows us to focus only on one goal: patient care. I feel as though the quality of the care we have been able to provide has been enhanced due to this arrangement.
Robert A. Winquist, MD: In Seattle, multiple independent orthopedic groups have worked to collaborate with Swedish Hospital on a team approach for patient care. Surgery is frequently a major event in a person’s life, producing certain anxieties and concerns. It has been important to make this as smooth as possible for the patients, and that requires a coordinated effort among the offices and the hospital.
Initially this occurred in a multispecialty hospital, but recently a special orthopedic wing has been built for just orthopedic and spine surgery and this has improved matters considerably. It has provided a single stop for the patient’s visit, laboratory studies, blood work, and registration. Careful preoperative planning, with correct scheduling and proper notification of equipment needs greatly enhances the hospital and surgery experience.
Multiple orthopedic companies have also been involved and of course are an integral part of both supplying equipment and supporting the operative staff during procedures. Also in a single-specialty hospital, the operating room staff is highly skilled in orthopedic and spine surgery, thus allowing the surgeons to concentrate on their work.
Unfortunately, anesthesia has not stepped up to provide a group of dedicated anesthesiologists to the institution, so improvement is still needed in this area.
The word “partnership” is used in the question, and I frequently think of that as meaning a business partnership. There were initial comments about joint-venturing on the hospital portion, but the hospital quickly withdrew that. While the nation only temporarily barred physicians from owning hospitals, the state of Washington has made it made it permanent; therefore, this is only a collaboration, not a partnership.
Thomas F. Zenty III: At University Hospitals (UH), we pride ourselves on a model of collaborative care that is both system-based (ie, across our network of systems and hospitals) and multi-disciplinary. We work as a system to improve care in many specialties including orthopedics, cancer, heart and vascular and neurological institutes to both track quality of care as well as disseminate best practices across the system. UH also uses telecommunication linkages to our community-based sites.
Our experience includes a relationship-based nursing care model of inpatient care, which includes close teamwork among physicians, nurses, and other caregivers.
An institute/service line model also integrates physicians from multiple specialties and crosses the inpatient/outpatient continuum.
System-wide chief medical officers (CMOs), led by the UH CMO, meet on a regular basis to both track quality metrics and assure that best practices are utilized throughout our system while working toward minimizing variations in clinical care.
In our system, team based orthopedic care includes nurses, physicians and physical therapists working together resulting in superior outcomes for our patients. The advantages of a team-based approach observed and documented include improved safety and improved outcomes
Marcus: Are there advantages for higher- quality patient care with a team approach?
Dennis: There are many advantages for the patient, surgeon and hospital to work together. With a commitment to dedicated health care teams, operative procedures are completed more efficiently with reduced morbidity. Postoperative care is standardized, which lessens errors in patient care. The floor nurses rapidly gain expertise as they care for a large number of patients who have a similar disease process.
In summary, repetition of care facilitates excellence in care. The hospital benefits with this type of patient care model, as length of stay is frequently reduced and treatment care pathways can be developed with an emphasis on delivery of cost-effective care.
Morrey: It goes without saying that optimizing effective high-quality patient care is a complex issue. As I have implied, any time there is alignment of incentive, the processes should be more efficient and there should be greater benefits from the effort.
In this instance, having the hospital and the physicians on the same page with the same ultimate goal and incentives to realize the goal will, without any question, have a direct benefit on patient care. In addition, however, it should also provide a more efficient management model that allows the hospital and the physician to recognize an appropriate financial return for the effort put forth.
Also, and importantly, the environment that this provides also enhances professional satisfaction since it lessens the conflict and stress between the hospital and the physician. Without question, this relationship should also enhance patient satisfaction because they are receiving cost-effective high-quality medical management when processes are standardized and incentives are aligned.
Winquist: One of the greatest advantages of this approach is that it reduces stress on the patients and their families. Being at only one place for all of their preoperative studies has dramatically eased the frustration of trying to find their way around a large center.
While the patient is in the hospital, an extra bed is provided for the family to both console the patient and to learn how to help when the patient leaves the hospital.
More important are the protocols for postoperative management, starting in the recovery room and extending through the hospital stay. The formulation of these required a lot of work and cooperation by physicians who normally compete with each other from different offices. They agreed to standard orders and postoperative management protocols. This of course included pain management, anti-coagulation management, physical and occupational therapy routines, and group therapy sessions.
Monitoring a patient’s progress and length of stay and physicians reporting it has been of value. Surgeons have sat together with the hospital to discuss implant selection and had weekly conferences for case discussion. Quarterly conferences are held for quality assurance and to discuss complications. All of these steps have added a higher quality of care for the patients.
Zenty: The health care environment is under increasing scrutiny to provide superior-quality patient care while reducing costs. With a focus on hospital and physician pay-for-performance, quality branding, clinical dashboards, regulatory compliance, and the unpredictability of future increases in payor reimbursements, a team approach of hospitals working in partnership with physicians has become a strategic and business priority.
Joint venture relationships, partnerships and collaborative relationships among hospitals and physicians, when properly structured, will improve quality of care and promote operating efficiencies.
The ultimate question that should be answered is, “How will this strategy directly benefit our patients and the care we provide to them in a sustainable way?”
Our opportunity today is to create long-term “partnerships” that create sustainable value for the future. Competition has intensified, some markets are saturated, and the capital markets have tightened. Hospitals and orthopedic surgeons can create a partnership agenda to improve efficiency, deliver exceptional clinical quality, improve patient satisfaction and create successful business relationships.
Marcus: Do you foresee significant control or financial risks for orthopedic surgeons if Medicare proceeds with a proposed bundling of payments to hospitals and physicians for orthopedic procedures?
Dennis: Bundling of Medicare payments to hospitals and physicians has both advantages and disadvantages. A potential advantage would be an increase, or at least stabilization, in physician compensation if a fair physician compensation level could be negotiated. This would likely require some form of gainsharing arrangement in which physicians could benefit if costs are controlled.
My fear with bundling is that fair physician compensation would likely not occur, as for-profit hospital systems would demand an increasing share to maintain profit margins. I am unclear who would have the greatest influence, the hospital or physician. To be successful, some type of national regulation to guide hospital-physician negotiations would need to be established to protect individual physicians.
Morrey: The bundling of reimbursement for an episode of care in the hospital is an extremely sensitive and complex question. Unless there is an arrangement such as we have, where the hospitals and the physicians are all part of the same administrative and business unit, this approach will, of necessity, introduce competition that will tend to cause malalignment. Each group will try to be sure that they get their fair share of the bundled payment.
The problem that always arises is on what basis is the distribution defined. Much of the care that is provided can be objectively measured. However, an equal, if not possibly a greater, amount cannot be reliably and consistently, measured, demonstrated, or documented on an objective basis. This would then imply that the distribution of resources could in some instances be arbitrary and, hence, unjust. The whole process allows for a potential gaming of the system. It would seem to me that this circumstance does not bode well for enhanced quality patient care and keeping the patients’ needs first when we are as much, if not more, so focused on our own needs as well.
Winquist: I do not see a problem with this if the money goes to the surgeons and is then paid to the hospitals. I believe the leadership of the American Academy of Orthopaedic Surgeons met in Washington in 1994 to discuss the same proposed plan. A proposal was sent out to many hospitals across the nation with a bidding process for this book of business. Surgeons protested that this would be unfair to physicians if it all went through the hospitals. The plan then disappeared, I am not certain of the reason.
The concern still exists that if all of this is controlled by hospitals, some serious problems can occur from both a financial standpoint for physicians and a quality standpoint for patients. Decisions made by hospital administrators are decisions made by people who do not take care of patients, face the patient before or after surgery and live through the complications with them. They have the tendency to buy products, such as instruments and implants that are less than ideal and have value only as the cheapest entity.
Although I think hospital administrators share the physicians’ concerns about patients, they do not have the level of knowledge to make good decisions about quality of health care. Poor decisions in this matter, made for financial reasons and handed down to physicians are bad for the patient. If the money is controlled by the hospital, they can also mandate unreasonable call schedules and uncompensated care of patients while they are receiving a tax incentive. I have not studied it recently, but it appears that top administrative salaries are increasing faster than physician salaries.
Zenty: As background, risks and opportunities exist related to transparency, equitable distribution of payment amounts, expected quality outcomes and patient satisfaction measures when physicians, hospitals and payors, including commercial payors, proceed with a bundling strategy.
Medicare is currently engaged in a demonstration project called the Acute Care Episode (ACE) Demonstration in Texas, Oklahoma, New Mexico and Colorado. This project requires the formation of a physician hospital organization (PHO) and encompasses the bundling of 38 cardiac MS-DRGs and nine orthopedic MS-DRGs, which focus on procedures that are joint related (hips & knees).
The ultimate goal of the project is to maintain or improve patient quality of care while reducing costs to the patient and the Medicare program. The participating hospitals and physicians are to jointly develop best practices, in a cost effective method, and the physicians have the opportunity to participate in the savings through a CMS-approved provider incentive program (gainsharing). Provider incentive programs require the formation of a hospital committee consisting of administration, physicians and an independent patient advocate or consumer representative who will be responsible for the development and operation of the program.
Incentives to the physician must not induce the physician to reduce or limit services that are medically necessary nor should the incentives be based on volume or referrals. The incentives must be based on net savings and linked to actions that improve overall quality and efficiency and result in cost savings for the episode of care. Payments to physicians may not exceed 25% of the amount that is normally paid to the physicians for the case.
Quality targets drive the incentives and the physicians who do not meet the quality targets are not eligible to receive the incentives.
In response to this demonstration project, if the hospitals and orthopedic surgeons work together to develop best practices that focus on patient quality and cost effectiveness, the bundling should present minimal risk to the orthopedic surgeon and may actually present an opportunity for the surgeon to gainshare in realized financial savings.
Surgeons would be instrumental in the analysis of the bundled procedures, focusing on quality outcomes to be achieved, surgical procedures to be utilized, assist in selection of the best suppliers of implants and other items used in developing the guidelines for best practices cases.
Marcus: How should a Medicare-bundled total joint replacement (TJR) reimbursement be distributed?
Dennis: While I have stated that some benchmarks would need to be developed to guide hospital-physician negotiations, my fear is the government officials would try to regulate distribution of funds. A compensation model that may work at one institution may not work at other centers due to a myriad of factors including quality of hospital administration, quality of physician care, payor mix of the hospital and physician, as well as patient volume. The physician and hospital would need to be free to distribute funds as they see fit. This would likely require modifications in the current Stark regulations.
The orthopedic surgeons and hospital administrators would first need to agree upon a guiding vision that would hopefully benefit the patient, taxpayer, hospital, and surgeon. I would envision the need to establish a legal entity that is charged with monitoring receipt and distribution of funds. It would function as a board of directors and be comprised of an equal number of hospital representatives, orthopedic surgeons, and knowledgeable and independent members who have no conflict of interest with either the hospital or physicians. A baseline reimbursement level for surgeon services would initially need to be established with additional income based on quality of care and cost management parameters. This would require accurate data recording of these parameters as well as a totally transparent system of sharing of this information among all parties involved.
I believe some form of increased partnership of TJR surgeons with their hospital institution is inevitable considering the steady decline in surgeon reimbursement for TJR procedures and increases in office overhead costs. This may be more critical for the joint arthroplasty specialist than other orthopedic subspecialties due to the limited ability of the arthroplasty surgeon to generate outside income from entities such as ownership in outpatient surgery centers, radiology imaging devices, etc. I fear that the private orthopedic practice dedicated only to total joint arthroplasty may not be viable 5 years from now unless changes in the current economic structure are made.
Morrey: It is difficult for me to know the answer to this since the distribution of funds implies a knowledge of the effort and value added which requires detailed and accurate accounting of overhead expenses, percentage effort and the like. Clearly, there are hundreds of touch points or pass-offs during an episode of care, particularly one that involves surgery. Each one has a potential to enhance the patient’s experience and care, but also to generate a problem with the care and the outcome.
Ideally, each one of these hand-offs or touch points would have some measured value and the aggregate would accurately reflect the relative value contributed by the hospital and the physician. This is virtually impossible to realistically consider at this time, but would be a topic that might be explored in the future. One area that is important is to have data systems that allow data to be captured and define and recognize the effort, complexity, and intellectual components of a surgical procedure. Hopefully the dollars will follow these parameters; however, as with any government or bureaucratic system, as history has so clearly demonstrated, there is no reason whatsoever that they will get it right – or even come close!
Winquist: For physician payments, Medicare has already hit rock bottom and some orthopedists are trying to decrease their number of Medicare patients because of this. If 100% of a physician’s business were Medicare, he or she would have to close the practice. Note the graph on page 36. It shows the reimbursement over time for a total hip by Medicare vs. the cost of living in Seattle. As you can see, the reimbursement rate has fallen to a level that makes it difficult to sustain an office. It is about equivalent to a dental crown, but there is substantially more work and of course much higher risk.
The only reason for Medicare to bundle this reimbursement would be to reduce payment even further. Because I believe there is more room to reduce payment on the hospital side than on the physician’s side, I think that the payment should be given to the physician and the physician should then manage the other services. This view is probably not shared by the hospitals, but is one that I think surgeons should insist upon or not participate in this type of program.
Zenty: In the bundling demonstration project, Medicare is expecting a discount from the base DRG payment amounts for the treatment of the patient in addition to improved patient quality of care. The discounted payment, with hospital and physician components, is applicable to all of the bundled DRG’s and is subject to the annual updates each October.
In light of this bundling initiative, hospitals and physicians would be working to reduce costs while maintaining or increasing the patient quality. With diligence, the cost savings could be close to or exceed the reduction in payment associated with bundling. Cost savings, in excess of the baseline, may be shared with the physicians. Medicare requires that incentives be based on quality measures and if the measures are met or surpassed, the physician may receive incentives up to 25% of what the pre-bundled reimbursement.
Therefore:
Quality measurements require considerable analysis in defining suitable outcomes;
Once established, quality measurements for hospitals and physicians must be achieved in order to allow participants into the program;
Equitable payment schemes based upon true, total costs must be mutually agreed upon and rigorously applied;
Payment structures must be evaluated periodically to insure equity of payments in a changing payment and cost environment;
Specific criteria must be established for hospitals and physicians to remain in a bundled reimbursement program with appropriate oversight applied to both in order to be allowed to continue to participate in the program once established;
Organizational oversight representation must include both physicians and administrative leadership;
Also, if this is a federal program, an effective communication effort by physicians, professional societies and hospital associations needs to be established to insure program support and financial funding by legislators or other government officials.
Programs of this nature should be undertaken with caution, evaluated against objective criteria to insure that cost and quality benefits are achieved, and termination provisions established in the event that program goals are not attained. Complete transparency in both financial and quality performance outcomes is required in order to insure that programs of this nature can be adequately evaluated.
For more information
Douglas A. Dennis, MD, can be reached at Colorado Joint Replacement, 2535 S. Downing St., Suite 100, Denver, CO 80210; 720-524-1367; e-mail: kslutsky@co-ortho.com.
Randall E. Marcus, MD, can be reached at 11100 Euclid Ave., HAN 5043, Cleveland, OH 44106; 216-844-3041; e-mail: Randall.Marcus@UHhospitals.org.
Bernard F. Morrey, MD, can be reached at 200 1st St. SW, Rochester, MN 55905; 507-284-3659; morrey.bernard@mayo.edu.
Robert A. Winquist, MD, can be reached at 601 Broadway Seattle, WA 98122; 216-844-8447; e-mail: r.winquist@proliancesurgeons.com.
Thomas F. Zenty III can be reached at 11100 Euclid Ave., Lakeside 1024, Cleveland, OH 44106; 216-844-1501.