Does horizontal integration of orthopedic practices improve quality and cost savings?
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Expansion critical for improved quality, cost savings
I feel strongly that growth and expansion of orthopedic practices are critical for improving quality and cost savings in musculoskeletal care.
The traditional model of expensive inpatient facilities and limited access points for care is not the future for orthopedic care. As orthopedic care moves to the outpatient setting, we must be able to deliver cost-effective care in communities throughout our region. In a larger integrated orthopedic practice, we can do this and provide consistent and improved quality. It requires focus on cost savings, site of service delivery and increased access points for care delivery. Coordination and focus on care pathways, evidence-based protocols and cost containment cannot be accomplished without provider engagement and alignment. An expanded integrated provider vehicle, such as a large integrated provider group practice, is the best way to accomplish this alignment. In addition, leveraging technology and innovation to improve care delivery is best accomplished in an integrated larger organization. As we transition from episodic value-based care to more global population health or disease-based management, an integrated, expanded provider practice/network will be critical for success. Smaller provider groups currently struggle to enter into the most basic forms of value-based care, so it is critical that provider groups integrate and expand to be able to deliver high quality care in the future.
Bruce E. Cohen, MD, is CEO of OrthoCarolina, professor and vice chairman of the Atrium Musculoskeletal Institute in Charlotte, North Carolina, and president of the American Orthopedic Foot & Ankle Society.
Quality may be a challenge to maintain
Horizontal integration can certainly result in cost savings, reducing overhead and the cost of doing business due to economies of scale. In many practices, overhead typically ranges from 45% to 60% with factors such as staffing, payroll, IT, electronic medical records, supplies and drugs, marketing and management influencing the total. When practices consolidate, significant cost savings may be gained with little or no pain. For example, most EMR programs are designed to handle a practice of 50 physicians as efficiently as 10 physicians. Similarly, IT systems can be managed remotely, and the same company can monitor large groups as easily as small groups. Looking at management structure, top-down management may be reduced because there is the need for only one CEO or practice administrator, which is usually the highest-paid non-physician on payroll. When looking at supply purchases, drugs and DME usually correlate with volume and key price points that may be achieved by larger groups, and discounts greater than 10% may easily be realized with increased volume.
While horizontal integration results in cost savings, quality is more challenging and may have long-term deleterious results. While it is easy for a practice to provide standards for itself, it is more difficult to maintain the quality when combining with another group. For example, one group may require all physicians to be board certified and fellowship trained and the other may not be able to meet that standard. Both government and commercial payers are focused on reimbursement tied to “value-based care,” which is just another way of recognizing the value of quality. A group’s reputation is paramount as it must not only survive, but also thrive, and the key to establishing and maintaining that reputation is through quality care and services.
Stephen J. Nicholas, MD, is the founder and president of NY Orthopedics and is the director of sports medicine, director of the Sports Medicine Fellowship Program and director of the Nicholas Institute of Sports Medicine and Athletic Trauma at Lenox Hill Hospital in New York.
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