Published 5/1/2007
Thomas J. Grogan, MD

It’s time to drop insurance contracts

About 10 years ago, I wrote an article for the AAOS Bulletin outlining how to “manage” managed care. The approach was simple—understand what was happening in the world of contracting and learn to manage the process before it managed us.

To be successful then, surgeons had to embrace the contracting system, even going so far as to undertake capitation contracts and become comfortable with financial risk assumption. Building a practice required marketing to attract contracts and control patient populations through a series of preferred provider arrangements.

But then the economic climate changed. Managed care companies, insurers, and the federal government (Medicare and Medicaid) quickly discovered they had to lower fees to control costs. Surgeons became adept at doing more procedures on fewer patients, hiring physician extenders (physician assistants) to see patients, and investing in passive income generators such as in-office magnetic resonance imaging, ambulatory surgery centers, and orthopaedic specialty hospitals. Lucrative consulting agreements could increase a surgeon’s income.

The rules have changed
Today’s economics have changed again. Although more than 80 percent of nonelderly adults are covered by employer-sponsored health care, plans are being redesigned to shift more of the financial burden to the patients with higher copayments and deductibles. More than 3.2 million people have health savings accounts (HSAs), up from just 1 million a year ago. With out-of-pocket costs for HSAs ranging from $1,050 to $5,450 per year, patients are starting to ask questions about the cost of services and the economic impact of therapeutic decisions.

Government-sponsored care is becoming a higher portion of the $1.8 trillion healthcare industry, with Medicare and Medicaid together making up the second-largest payer in the United States. Average U.S. healthcare spending exceeds $6,280 for every resident—$13,382 for every family. In 2004, Medicare spent $309 billion, Medicaid $290 billion, private insurance $644 billion, and consumers $557 billion.

With more than 40 million uninsured people in this country, there is a growing trend to alter state and federal government programs to provide “coverage” for these Americans. California is the latest state to consider a universal coverage program for all residents.

Adapt or die
Orthopaedic surgeons need to consider how to adapt to realities such as the push to adopt electronic medical records (EMRs). Although I can appreciate how EMRs may improve patient safety, I am unsure how they will benefit my practice in terms of return on investment. For example, the Kaiser EMR system has a price tag of more than $4 billion or $363,000 per participating physician.

Only time will tell exactly how well these systems function in a changing healthcare market. When I first entered practice more than 20 years ago, many surgeons in my area were just beginning to use a computer for billing purposes. Perhaps it will take another generation to fully incorporate EMRs into everyday practice.

Currently, my practice is evolving. Several years ago, I realized my best asset was my patient base. Most of my referrals came from patients talking to other patients and not from patients calling from a preferred provider list. With that knowledge, I decided to drop all my insurance contracts and take a patient-centered approach in my practice. I adjusted the daily schedule to allow for same-day emergency appointments. I accept credit cards and give patients a super bill to help them bill their own insurance. Although I still bill third-party payers for surgeries, I help my patients understand the copayment and deductible process.

In listening to my patients, I found they wanted three As—ability, affordability, and availability. I have a number of patients who cannot afford to pay their deductibles or have no insurance. I “give away” 10 percent to 15 percent of my care, but I do so at 100 percent of what I am worth. I have built my practice to take care of my patients, and I find that they want to take care of me. I have become a country doctor in the midst of the urban sprawl of Southern California.

The way to go
Many opportunities for improvement exist. With the trend toward higher deductibles and copayments, orthopaedic surgeons can help patients overcome these barriers to access our services. To an employed patient making twice the minimum wage (around $25,000 a year), having a $3,000 deductible is almost like being uninsured. Medical credit cards are just becoming available. Although they can charge high interest rates, they can also ensure access to needed care in an emergency.

A practice that works with patients on developing payment plans is usually rewarded by a huge dose of loyalty. Orthopaedic surgeons need to charge prices that are fair; we should not shy away when we are asked how much a procedure costs. We need to advocate for our patients who need outside exams or tests. When we do, we will be rewarded because they will advocate for us in our communities.

Finally, we need to improve how and what we teach medical students. Although there is much emphasis on teaching them sophisticated techniques, there is very little on how to manage patients. Patient-centered care is here and now. We just have to listen better to our patients, instead of to ourselves.

Thomas J. Grogan, MD, is a pediatric orthopaedist practicing in Santa Monica, Calif., and a member of the AAOS Practice Management Committee. He can be reached at tjgrogan@aol.com

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AAOS issues Patient Safety Member Alert on FDA Class I recall
On March 27, 2007, the Food and Drug Administration (FDA) issued a Class I recall, the most serious type of recall, for the Smith & Nephew, Inc. Radiofrequency (RF) Denervation Probes, which are intended for use only with the Smith & Nephew, Inc. Electrothermal™ 20S Spine System. The product is being recalled due to a mislabeling of the non-sterile product as sterile. The reusable item is intended to be sterilized by the medical facility prior to each use, including the initial use. The FDA notice states that this error may result in infections with associated risks including organ failure and/or death. No injuries have been reported to date associated with this issue.

Hospital compliance with surgical “time-out” remains low
A new report published by the Joint Commission finds that U.S. hospitals have, over the last four years, made significant improvements in quality of care for certain conditions. However, degree of compliance tends to vary by state, and significant differences remain between the highest- and lowest-performing hospitals. The National Patient Safety Goal requirement that surgical teams take a “time out” before surgery to confirm patient identity and correct procedure displayed the lowest level of compliance of any program. The complete report can be viewed at:

FDA issues advisory on ESAs
The U.S. Food and Drug Administration (FDA) has issued a public health advisory regarding erythropoiesis-stimulating agents (ESAs). The affected drugs are darbepoetin alfa (Aranesp) and epoetin alfa (Epogen and Procrit). Studies have correlated an increased risk of death, blood clots, strokes, heart attacks, and rapid tumor growth with ESAs applied at higher than recommended doses. Physicians are advised to monitor hemoglobin levels and to adjust ESA dosing to maintain the lowest hemoglobin level necessary to avoid blood transfusions. For more information:

FDA drops prescription drug “watch list” plan
The U.S. Food and Drug Administration (FDA) has cancelled plans to post a Web-based list of pharmaceuticals with emerging safety concerns, citing possible confusion with the agency’s existing MedWatch program, which issues alerts about medical products. Instead, the FDA will add a red asterisk to the names of such drugs on its existing drug information page. In July 2005, AAOS filed comments recommending that the FDA seek input from its advisory committees, pursue active surveillance programs, and proceed with definitive actions when a safety signal is identified.

Genetics may affect hip replacement outcomes
A study in the journal Annals of the Rheumatic Diseases finds a correlation between genetic variations in certain genes associated with the generation of matrix metalloproteinase 1 (MMP1) and aseptic loosening in total hip arthroplasty (THA) patients. A review of 312 THA patients found that 91 developed aseptic loosening. Patients with variations in MMP1 were three times as likely to have aseptic loosening as those without the genetic variation. The abstract of the study can be viewed at:

Fragmented care poses problems for P4P initiatives
A study published in the March 15 New England Journal of Medicine raises questions about the effectiveness of pay-for-performance (P4P) initiatives under the current fee-for-service Medicare payment model, due to the dispersion of patients’ care among multiple physicians. P4P programs assume that claims data can be used to retrospectively assign patients to physicians or practices with primary responsibility for their care, and that physicians can be held responsible for a meaningful percentage of the patients they treat and the visits they bill for. The study found, however, that many different physicians and practices provide care to each elderly Medicare patient, so identifying which provider is responsible for which patient is difficult. The complete study can be viewed at:


OA patients taking aspirin should avoid ibuprofen
A study published online in the journal Annals of the Rheumatic Diseases finds that high-risk cardiovascular patients taking a combination of ibuprofen and aspirin for osteoarthritis are nine times more likely suffer a heart attack than those taking aspirin in combination with either naproxen or the Cox-2 inhibitor lumiracoxib. Although the research team suggests that its conclusions be treated as “hypothesis generating,” the lead investigator recommends that physicians avoid prescribing ibuprofen for pain relief to osteoarthritis patients who are taking aspirin for a heart condition. The abstract of the study can be viewed at:

Scam targets California physicians
The California Medical Association (CMA) has reported a possible scam targeting physicians. Several offices report receiving a faxed request form designed to look like a Health Insurance Portability and Accountability Act compliance document. The document implies that the physician has treated one or more patients using the Three Rivers Provider Network (TRPN), and asks the provider to confirm his or her participation in TRPN in order to receive reimbursement. CMA states that the form is an attempt to get providers to join TRPN and accept the insurer’s discounted rates as payment in full. For more information:

Hospital errors continue to increase
In its fourth annual Patient Safety in American Hospitals Study, HealthGrades found that patient safety incidents have risen 3 percent during the years 2003 through 2005; top-performing hospitals have a 40 percent lower medical error rate than the poorest performers. If all hospitals had performed at the level of the top-performers, the report estimates that 34,393 Medicare deaths could have been avoided and about $1.74 billion could have been saved. The total number of potentially avoidable deaths during the three-year period was 247,662, and the cost to hospitals during that time was $8.6 billion.