Challenges of orthopedic private practice present opportunities to adapt, thrive
In the rapidly evolving health care landscape, orthopedic surgeons in private practice face numerous challenges that threaten their viability, with declining reimbursement rates at the forefront.
During the past 20 years, the Medicare Conversion Factor, which is critical to determine payment based on work relative value units, has decreased from $37.90 to $32.35. The decline affects Medicare reimbursement and private insurance contracts, which often use Medicare rates as a negotiation basis, significantly eroding the financial value of orthopedic services.
Patients are often unaware of actual compensation for orthopedic procedures. In a 2020 study by Boudreau and colleagues, patients self-reported reasonable surgeon fees to be 11.2 times more than Medicare reimbursement for orthopedic procedures. The most significant discrepancy was for total hip replacement, where the perception was actual fees more than 20 times greater than the Medicare fee schedule, thus underscoring the disparity between perception and reality.
Increasing costs
Beyond declining reimbursement, the cost of maintaining an orthopedic practice continues to increase. Expenses for staffing, advanced practice providers and information technology are significant. Advanced practice providers are essential. According to data from the Medical Group Management Association, the compensation for advanced practice providers continues to increase above the annual cost-of-living rate. Information technology costs increase, especially regarding revenue cycle management, which is critical to contend with the growing number of strategies used to delay or deny reimbursement.
Health care system consolidation compounds financial pressures, restricts patient access, reduces competition and undermines free-market principles. While consolidation is often presented as a cost-reduction strategy, it typically increases health care costs. Large systems leverage bargaining power over reimbursement rates, which is unattainable by private practices even with their superior outcomes and patient experiences. Despite government efforts to enforce hospital price transparency, compliance and enforcement are low, further distorting the free-market competition.
Financial burdens extend beyond operations, as practice growth requires significant capital. Some surgeons turn to private equity investors, often leading to autonomy loss, increased burnout and reduced take-home pay. While there are laws against the corporate practice of medicine, private equity firms adjust the budget of the management service organization (MSO) that operates the physician practice based on aspirational investor returns. The MSO leadership then subsequently applies the budget, routinely forcing surgeons to deviate from the previous practice methods that they have associated with best quality and patient outcomes. The influence of investor returns has cast doubt on the sustainability of private equity models in ensuring long-term success of orthopedic practices that aspire to provide the highest quality of patient care.
Ancillary services
To navigate these challenges, orthopedic surgeons in private practice must maximize the value and utilization of ancillary services, such as ASCs and imaging services. However, government regulations, such as the moratorium on physician-owned hospitals and the archaic Stark Law, stifle competition and limit growth opportunities.
The Stark Law limits physicians’ financial and business relationships with designated health services. Hospitals have no restriction on their employed physicians referring care to their designated health services and often require this behavior, therefore, maximizing revenue from the services and other ancillaries, such as OR facility fees. The disparity in reimbursement rates between hospitals and physician-owned ASCs for identical procedures further exacerbates the issue and highlights the need for policy changes to better reflect the free market.
Restrictive covenants
If employed physicians are dissatisfied with their work environment, transitioning to private practice can be challenging. Employers want restrictive covenants to protect their business interests. The positon of the AMA is “Covenants-not-to-compete restrict competition, can disrupt continuity of care, and may limit access to care.”
The current climate suggests a growing interest in eliminating restrictive covenants, but support from case law is slow to develop on a state-by-state basis. For now, restrictive covenants in employment contracts hinder the mobility of orthopedic surgeons, preventing one from leaving unsatisfactory work environments without significant personal and professional upheaval and losing continuity of care. The health care system will argue there is no loss of continuity because patients belong to the health care system, not the surgeon, and they will provide continuity with another employed surgeon in their system.
Entrepreneurial spirit
Given these challenges, the future of orthopedic private practice appears uncertain. However, orthopedic surgeons’ resilience, innovation and entrepreneurial spirit offer hope for sustaining high-quality, cost-effective, value-based care. Several measures can be implemented to support this endeavor. Improvement in revenue cycle management will likely be positively affected by new AI-based companies providing highly accurate and effective services. In addition, orthopedic surgeons need to strongly consider not accepting contracts that create a deficit when providing appropriate patient care. Out-of-network policies, including the possibility of opting out of Medicare, are likely to increase for practices that can carefully document expenses and revenue.
More successful challenges to restrictive covenants combined with state-based political advocacy are likely to reduce or remove the impact of restrictive covenants for surgeons. Lifting the moratorium on physician-owned hospitals and aligning the Stark Law with the same privileges that hospitals have will improve competition and transparency. Government incentives, such as tax breaks and rewards for practices that demonstrate exceptional patient satisfaction and outcomes, could further enhance the viability of private practice.
Adapt and thrive
Although the challenges facing orthopedic surgeons in private practice are substantial, there are opportunities to adapt and thrive. Embracing innovative strategies and advocating for policy changes to foster a competitive, equitable health care market will enable private practice orthopedic surgeons to continue delivering the highest quality of patient care.
Collaboration, advocacy and a commitment to preserve the values defining the orthopedic profession will benefit patients and surgeons alike.
- References:
- AMA. AMA Principles of Medical Ethics: III, IV, VI, VII. Available at: https://code-medical-ethics.ama-assn.org/sites/amacoedb/files/2022-08/11.2.3.1.pdf. Accessed: Jan. 30, 0225.
- Boudreau SC, et al. South Med J. 2020;doi:10.14423/SMJ.0000000000001081. PMID: 32239232.
- https://public-inspection.federalregister.gov/2024-25382.pdf. Accessed: Jan. 30, 2025.
- https://www.ama-assn.org/system/files/ama-2025-mpfs-summary.pdf. Accessed: Jan. 30, 2025.
- Medical Group Management Association. 2024 MGMA Provider Compensation and Production. Available at: https://www.mgma.com/data-report-provider-comp-2024. Accessed: Jan. 30, 2025.
- For more information:
- Anthony A. Romeo, MD, is the Chief Medical Editor of Healio | Orthopedics Today. He can be reached at Healio, 6900 Grove Road, Thorofare, NJ 08086; email: orthopedics@healio.com.
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