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The impact of healthcare reform on orthopaedic surgeons

By John Cherf, MD, MPH, MBA

Expect transformational changes as provisions are enacted

On March 23, 2010, President Obama signed into law one of the most comprehensive healthcare reform bills ever enacted, The Patient Protection and Affordable Care Act (PPACA). The PPACA will likely result in significant changes to the American health care system, in particular for most healthcare providers.

The final impact of the legislation is difficult to assess at this point, because some reform provisions may be repealed before they ever take effect. The foundation of this legislation, however, will probably remain intact and will have both direct and indirect impacts on practicing orthopaedic surgeons (particularly those in private practice).

John Cherf, MD,
MPH, MBA

Because not all provisions of the legislation go into effect immediately, the timeline can be divided into three periods: the prelude (2010–2013), market expansion (2014–2017), and regulation and restructuring (2018–2020).

The prelude period
During the prelude period, I anticipate slow growth in orthopaedic services, a deterioration in payor mix, and increasing premiums for commercial insurance. I also anticipate that the shift from private practice to hospital employment for orthopaedic surgeons will continue.

The following are among the factors contributing to this shift:

  • the information technology requirements imposed by the Health Information Technology for Economic and Clinical Health (HITECH) Act
  • the lack of reasonable medical liability tort reform
  • pressure to reduce reimbursement
  • increasing overhead costs for private practitioners

Hospitals, recognizing the importance of musculoskeletal care to their enterprises, will be eager to hire orthopaedic surgeons to ensure an adequate physician supply and capture the revenue stream from this important service line.

During this period, the government will seek to impose new taxes to help fund the coverage expansion scheduled to begin in 2014. For example, current proposals include a Medicare payroll tax for high-income earners, increased taxes on interest and dividends, a tax on indoor tanning businesses, a tax on the sale of medical devices, and fees on pharmaceutical manufacturers and health insurance companies.

This period will also be marked by payment pressure on providers and penalties on hospitals based on the number of patient readmissions, the incidence of hospital-acquired conditions, and the occurrence of so-called “never events.”

Market expansion
The second period, what I call the period of market expansion (2014–2017), will involve the expansion of health insurance coverage to 32 million Americans who are currently uninsured. More than half of these individuals will be covered under Medicaid, straining capacity in emergency departments and with primary care physicians.

The impact on orthopaedics will be less intense because under existing legislation (the Emergency Medical Treatment and Active Labor Act, or EMTALA), many uninsured patients already receive treatment for traumatic musculoskeletal injuries. Others will be covered by payors with low reimbursement rates.

This change in payor mix will increase the percentage of patients covered by the Centers for Medicare & Medicaid Services (CMS). As the largest purchaser of healthcare services, CMS will propel comparative effective research to help identify optimal treatments. The insurance market will become more heavily regulated, and states will push for federal assistance in funding their state Medicaid systems.

Individual mandates to purchase health insurance and penalties on employers who do not provide coverage for their employees will drive the push toward universal coverage; ultimately, more than 90 percent of the U.S. population will be covered by some form of health insurance.

Regulation and restructuring
By 2018, most provisions of the PPACA will be implemented. One of the last to be addressed will be the excise tax on “Cadillac” health plans. But by this time, government, healthcare providers, healthcare insurers, employers, and patients may begin to feel the impact of previously enacted provisions.

For example, the expansion of coverage may result in a new federal budget crisis. Successful pilot programs will stimulate innovation in dealing with capacity constraints, cost and quality transparency, rate regulation, and risk shifting. These pilot programs will strive to make hospital and insurer payment rates a matter of public record, lead to profiling of all providers, and expand payment systems that require clinical and financial integration of providers.

The Independent Payment Advisory Board or IPAB could have a profound impact on payments for healthcare providers. Physicians in particular will be affected because the IPAB does not have oversight over hospitals or pharmaceutical companies.

During this period, hospital systems and physician practices that have not found ways to cope with the multiple changes will fail or be absorbed by more successful systems. Although this consolidation in the provider system may contribute to increased healthcare costs, the effect may be mitigated through the elimination of waste and unnecessary treatments that characterize the current system.

Orthopaedic Related Provisions in Health Care Reform (PDF)

John Cherf, MD, MPH, MBA, is a clinical advisor to Sg2, a healthcare information company, and president of OrthoIndex, a developer of technology management programs. He can be reached at jcherf@cioo.org

Editor’s Note: The AAOS course, “Practice Forward: Managing Your Practice Ahead of the Curve,” will be held Sept. 24-26 in Chicago. John Cherf, MD, MPH, MBA, course codirector, shares his views on what healthcare reform measusres mean. For more information on the course, which is designed to keep physician and practice executives up-to-date on major trends in health care, visit www.aaos.org/courses

AAOS Now
September 2010 Issue
http://www.aaos.org/news/aaosnow/sep10/advocacy3.asp