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The changing market forces seen in 2007 will impact the future of joint care
In part 2 of a two-part discussion, I ask six orthopedic thought leaders to address the effect of consumerism on the future of orthopedics.
The alignment of interests between total joint replacement stakeholders is becoming increasingly more important. Historically, we have seen gradual erosion of physician-hospital relationships. However, there seems to be a genuine interest from many hospital leaders to work more closely with orthopedic surgeons. This change is at least partially driven by orthopedic workforce shortages, concerns about physician defection to privately owned facilities (ambulatory surgical centers and specialty hospitals), and “openness” by the federal government for physician-hospital collaboration and shared savings as seen by recent acceptance of “gain sharing” initiatives. New government requirements for measuring performance will also require more collaboration and integration between facilities and orthopedic surgeons as provider data collection will be tied to reimbursement.
The orthopedic industry had been very effective at cultivating strong relationships with orthopedic surgeons over the past few decades. However, there is increasing scrutiny of physician -industry relationships. The recent Department of Justice investigation of the agreements between the major orthopedic device companies and orthopedic surgeons will more clearly define these relationships. The development of AdvaMed recommendations, the new Corporate Integrity Agreements, transparency of contractual agreements and compensation and federal monitoring will likely redefine how orthopedic surgeons and industry interact.
Healthy and equitable alignment and cooperation between all stakeholders is important to the future of joint care. This will help ensure the most cost-effective and equitable treatment for a rapidly growing market and important segment of our specialty. Hopefully this Round Table will stimulate your thoughts on how this market will change.
John M. Cherf, MD, MPH, MBA
Moderator
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John M. Cherf, MD, MPH, MBA
Benjamin C. Andrew
Steve C. Miff, PhD
Kevin J. Bozic, MD, MBA 
Michael Mogul
Stan Mendenhall
John B. Reed, DO, MBAJohn M. Cherf, MD, MPH, MBA: Will international price discrimination — charging different prices for the same product in different markets — persist in an era of globalization?
Benjamin C. Andrew: This topic has been debated for years, particularly in the pharmaceutical area, and we believe that the geographic differences will narrow (look at how Japan, which despite its multi-tiered distribution system has lowered reimbursement closer to U.S. levels). However, we don’t believe it will disappear completely given the structural differences in distribution, willingness to pay and the underlying economic need for incentives for companies to continue investing in new technology.
Kevin J. Bozic, MD, MBA: Costs in health care are highly dependent on who is paying for them (eg, purchasing power). In the United States, we spend more money per capita on health care than any other industrialized country, yet our publicly reported health outcomes (eg, life expectancy) do not compare favorably with countries that spend substantially less on health care. Despite rising costs, U. S. healthcare consumers remain relatively price insensitive, since they are for the most part shielded from the true cost of their health care. One example in TJR is that patients generally prefer newer, more expensive, and often unproven technologies over older, proven technologies. As long as patients continue to demand new technologies and are not directly or indirectly accountable for the costs associated with those new technologies, price discrimination will continue to exist.
Stan Mendenhall: It probably will, although if it changes, it would be more likely because of some legislative initiative. We have had price discrimination in drugs for years, and nothing has happened on that, so it is unlikely medical devices will be impacted, and discrimination will persist. Europe will pay about half of what we pay in the United States for devices, and Japan will pay more.
Steve C. Miff, PhD: Price discrimination will continue as pricing strategies and market positioning will continue to be region specific. Currently, a hip resurfacing implant sells in the United States for around $10,200 and it is $4,200 (£2,100) in the United Kingdom. Emerging places, in India for example, are charging $8,000 for the whole procedure, including the cost of the implant. Both payers and patients will increasingly shop for services based on both quality (outcomes) and cost, increasing medical tourism. Concerns about quality, liability, complications and follow-up will continue to exist.
Michael Mogul: Actually, differentiation in pricing around the world is due to the varying cost structures in different markets. The cost of doing business in different countries around the globe varies significantly, affected by regulatory, legal, trade and other factors.
John B. Reed, DO, MBA: There should eventually be international parity in pricing for joint implant devices. Implants are non-perishable devices and can easily be labeled, stockpiled, shipped, and taken in and out of storage. Implant registries should be universal and worldwide. The market is ripe for an entrepreneurial Group Purchasing Organization to take on a niche specialty and globally source implant devices. It makes much more sense to globally source the inanimate implant device for a joint replacement procedure at a local hospital in the United States, than source a U. S. patient to the other side of the world to get the same joint implant at half the cost.
Cherf: Do you envision potential TJR workforce shortage a significant constraint for meeting future patient demands?
Andrew: We do expect to see more surgeons stop taking on Medicare patients (given the expectation for future reimbursement cuts), and more clinicians will probably leave the specialty. For those that stay, we expect the traditional mechanism of doing more cases in the same amount of time (facilitated by new technology) will allow for continued case growth, but this takes a greater and greater toll on the remaining clinicians. Patient service would suffer, but that has been the case for years, in our view. Over time, the supply and demand relationship should rebalance as increased patient demands require incentives that would eventually lead to higher enrollment in fellowship programs.
Bozic: Declining surgeon reimbursement for TJR procedures has led to a sharp decrease in applications for TJR fellowships over the past 10 years. At the same time, TJR surgeons have attempted to keep pace with demand by increasing procedure volumes. However, many TJR surgeons have reached capacity in terms of procedure volumes, and constraints on hospital resources and OR efficiency will be more important determinants of TJR procedures volumes in the future.
Mendenhall: The key to meeting the demand is the availability of trained and committed surgeons. Meeting the demand for primary joint replacements will probably be less of an issue than revision joint replacements.
Miff: Workforce supply challenges loom for providers as orthopedic surgeons are approaching retiring age. The average age of the orthopedic surgeons has increased to 50.9 years old in 2005. Demand for nurses also continues to grow, with a shortfall of 800,000 nurses expected by 2020. Shortages in adjunct specialties such as anesthesia, rehabilitation and radiology will further impact the ability to meet increased demand. Market consolidation will also be driven by these factors.
Not every hospital will be able to provide orthopedics on-call coverage or have a total joint care program. Basic supply and demand pressures will favor orthopedic surgeons and they will have the advantage when negotiating with hospitals and payers.
Mogul: Although we will see improvements in efficiency and therefore capacity, it will be important to attract more orthopedic residents towards TJR. This will also need to be recognized by payers.
Reed: It is understood that the average age of a joint implant surgeon is currently 45 to 55 years old and many orthopedic residents are seeking other higher paying subspecialty practices such as spine surgery. However, the law of supply and demand is quite powerful and will continue to favor the joint implant surgeon.
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New orthopedic residents will soon re-see the need and economic opportunity to specialize in joint implant surgery. It is incumbent on the American Medical Association (AMA), the American Academy of Orthopaedic Surgeons (AAOS), and orthopedic surgical residency, fellowship and governing boards to ensure that future workforce needs are met.
Cherf: How will joint care change in the next 10 years in terms of technology and site of care?
Andrew: I believe a substantial percentage of patients who undergo TJR today will eventually be switched to less invasive care in the next couple decades, as novel therapies including biologics, stem cell therapies, and partial joint replacements take on a larger role in orthopedics. Biologics and stem cells are currently two very active areas in the industry, and while we don’t yet know for sure which company or technology will dominate, this is certainly the direction the industry is moving in.
In terms of site of care, we expect more patients to be treated in lower acuity facilities and/or spend significantly fewer days in the hospital in the future as implant technology and techniques become less invasive.
Bozic: Over the past 40 years, improvements in implant design and surgical technique have facilitated better patient outcomes in TJR surgery. However, as noted previously, growing demand for TJR procedures and rising procedure costs could threaten access to these highly successful and quality of life enhancing procedures in the future.
I believe that innovation related to the process of care delivery (eg, focus on patient centered care, OR efficiency, perioperative care pathways, specialty hospital development, and health care financing reform), rather than changes in implant technology, will drive change and improvement in patient outcomes in TJR over the next 10 years.
Mendenhall: When you look at the changes by decades: 1980’s, 1990’s, and 2000’s – there has not been really that much change. In the 1980’s patients were receiving joint replacements in hospitals performed by surgeons and were staying about 10 days. Now the stay is less, but many of the same prostheses are being used. Some have moved joint replacement to outpatient settings, but these have been relatively rare.
Miff: We’re moving away from joint replacement and towards joint care. As younger patients seek earlier treatment, patients will undergo multiple joint surgeries and orthopedic programs must consider offering treatment options across the joint continuum of care.
In the short term, alternative technologies such as uni- and bi-compartmental knee replacements and hip resurfacing will reduce average length of stay and shift some cases to the outpatient setting. In the longer term, we’ll be moving from joint replacement to regeneration, further increasing episodic care. At Sg2 we are forecasting that technology will increase demand for joint procedures by 25% over the next 10 years, while at the same time shifting 16% of these procedures to the outpatient setting.
Mogul: The technological improvements that we have seen in the last several years have been working towards providing higher-performing, longer-lasting implant solutions. In addition to a higher number of older patients there should be increased trends toward younger, more active and greater demand patients who will expect to receive less invasive, higher-performing solutions.
We see three key drivers defining the future of joint care:
- The demands of more active patients — Designing implants that can address the motion, fit, and wear needs of a patient population that may live longer and hope to be able to do much more than simple mobility.
- Improvements in surgical workflow and OR efficiencies — Tools and processes developed to aid the surgeon and the hospital in completing the procedure in a cost efficient manner while at the same time helping to meet or exceed measures of quality care.
- Joint Preservation — New procedures, technologies, and materials that can be used to create less invasive solutions for younger, active patients to enjoy quality of life prior to needing or receiving a total joint arthroplasty.
Reed: Joint care technology will continue to evolve minimally invasive surgery (MIS) of the hip and knee. Implant devices will be refined, but not radically changed. Use of alternative bearing surfaces and computer assisted surgical guidance will become common. There will be a significant rise in alternatives to total joint replacement, such as hip resurfacing and uni-compartmental and bi-compartmental knee replacement. In terms of site of service, joint implant surgery will continue to be predominately performed in the inpatient setting. There will be significant growth in outpatient joint procedures as well. Hospitals and ambulatory surgery centers specializing in joint care will become aligned and/or operate as a single entity.
For more information:
- Benjamin C. Andrew, Group Head, Medical Devices, William Blair Financial Services, can be reached at 312-364-8828; e-mail: bandrew@williamblair.com.
- Kevin J. Bozic, MD, MBA, can be reached at UCSF Department of Orthopaedic Surgery and Institute for Health Policy Studies, 500 Parnassus, MU 320W, San Francisco, CA 94143-0728; 415-476-3900; e-mail: BozicK@orthosurg.ucsf.edu.
- John Cherf, MD, MPH, MBA, can be reached at Department of Orthopedics, The Neurologic & Orthopedic Institute of Chicago, 4501 North Winchester Ave., Room 3637H, Chicago, Illinois 60640; 773-250-1000; e-mail: jcherf@neurosource.com.
- Stan Mendenhall can be reached at Mendenhall Associates, Inc.,1500 Cedar Bend Drive, Ann Arbor, MI 48105; 734-741-4710; e-mail: Orthonet@aol.com. He is the editor and publisher of Orthopedic Network News, which has many subscribers that are orthopedic implant manufacturers.
- Steve C. Miff, PhD, can be reached at SG2 Health care Intelligence, 5250 Old Orchard Road, Skokie, IL 60077; 847-779-5300; e-mail: SMiff@sg2.com.
- Michael Mogul can be reached at e-mail: mike.mogul@stryker.com.
- John B. Reed, DO, MBA, can be reached at e-mail: ReedJB@aetna.com.