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Published 7/1/2008
Jeffrey R. Binder

Will reimbursement policies create an access crisis?

As of this writing, Congress is working on legislation to forestall a 10.6 percent cut in physicians’ fees under the Medicare program. Although the reprieve is welcome, it is hardly the end of the war. Without a permanent solution to fix the formula by whi­ch Medicare calculates physician fees, planned cuts will simply be delayed. As it stands, by 2016, physician pay­ments are scheduled to be cut 40 percent from 2001 levels, while practice expenses will increase 40 per­cent above 2001 levels (Fig.1).

Clearly, policymakers do not fully appreciate the value of surgical care in general, or of orthopaedic care in particular. Current reimbursement policies, in combination with other pressures on orthopaedic surgeons, run the risk of compromising patient access to these important procedures.

A perfect storm: Patient demand, physician shortage, and reimbursement cuts
Demand for orthopaedic services is expected to surge in the coming years. Doctor-diagnosed arthritis is expected to increase 40 percent from 2005 to 2030, while the number of patients with limited daily activities from arthritis is expected to increase 42 percent during the same period.

We can expect even more acceleration in the need for total joint replacement. Demand for primary total hip arthroplasties is expected to grow by 174 percent and for total knee arthroplasties, by 673 percent by 2030.

To further compound this trend, most people who need total joint replacements do not receive them. According to the 2003 National Institutes of Health Consensus Panel Report on Total Knee Replacement, only 9 percent to 13 percent of total joint replacement candidates have been willing to undergo the procedure. As patients become more aware of their options and the success of total joint replacement, demand may reach even higher levels.

Will there be an adequate supply of surgeons able to perform these procedures? Many authorities have already predicted a future shortage of physicians in general, with shortfall estimates ranging from 55,000 to 200,000 by 2020. Within orthopaedics specifically, the number of orthopaedic surgeons per 100,000 citizens has grown at an average rate of only 1.1 percent per year from 1994 to 2004.

Although the American College for Graduate Medical Education has increased the number of resident positions, it is far from clear that this will compensate for impending retirements and expanding demand for ortho­paedic care. This is especially true in certain subspecialties, where young orthopaedic surgeons are justifiably concerned about future economics. For example, in the 2007-2008 fellowship year, 38 per­cent of U.S. total joint replacement fellowships went unfilled.

As patients approach retirement age, so too do orthopaedic surgeons. Already 53.2 percent of orthopaedic surgeons are age 50 or older, and the mean retirement age is 59 years old. Impending surgeon retirement may have a significant impact on patient access to specialty care. If a significant percentage of these surgeons are motivated to retire early due to declining reimbursement, we may encounter a severe shortage of skilled surgeons. Indeed, a recent report found that the major factors affecting orthopaedic surgeons’ decisions to retire are malpractice costs, regulation, and decreasing reimbursement.

With demand for orthopaedic services threatening to overwhelm the supply of orthopaedic surgeons able to provide them, Medicare has chosen precisely the wrong path: discouraging surgeons from performing life-changing orthopaedic procedures by drastically cutting their pay. From 1992 to 2007, Medicare has reduced orthopaedic surgeon pay by 28 per­cent for the 25 most commonly performed procedures. Total joint surgeons have been especially hard hit, sustaining cuts of 42 percent to 45 percent in payments since 1992 (Table 1).

Surgeons have responded admirably to these changes—not by reducing treatment of Medicare patients, but by improving their productivity. Between 1987 and 2006, Medicare fees for total hip replacement dropped 69 percent, but services per 1,000 patients increased 60 percent. For total knee replacement, fees dropped 66 percent, but services increased 283 percent.

According to the Medical Group Management Association’s Physician Compensation and Production Survey Report for 2002-2006, specialists increased their productivity 107.1 percent from 1990 to 2005, while compensation during the same period increased only 56.2 percent. Although incomes for orthopaedic surgeons continue to increase, this is due to increased surgeon productivity at a drastically reduced rate per treatment.

Will such productivity increases be realized in the future? It is reasonable to expect that the confluence of a frantic work pace and untenable economics will eventually force surgeons to drastically change their practices, to the detriment of patient access.

The last straw?
As a recent American Medical Association survey makes clear, physicians are reaching the breaking point. According to the survey, physicians will respond as follows to the impending fee reduction:

  • 32 percent will decrease the number of new Medicare patients they treat
  • 28 percent will stop accepting new Medicare patients
  • 32 percent will decrease the number of established Medicare patients they treat
  • 8 percent will stop treating established Medicare patients

When asked about their response to the 40 percent fee reduction anticipated by 2016, physicians gave the following answers:

  • 13 percent will decrease the number of new Medicare patients they treat
  • 64 percent will stop accepting new Medicare patients
  • 44 percent will stop treating established Medicare patients

Further, many physicians would cut back on practice expenditures and outreach programs and/or reduce workload (Table 2).

Medicare overlooks the positive economics of orthopaedic care
The economic burden of musculoskeletal disease and disorders is huge. According to The Burden of Musculoskeletal Diseases in the United States, “In 2004, health care costs and lost wages for persons with a [bone/joint] disease diagnosis have been estimated to be $849 billion, or 7.7 percent of the national gross domestic product.”

The proportion of gross domestic product consumed by musculoskeletal disease has accelerated over the years and is expected to continue to do so.

Clearly, orthopaedic surgeons are part of the solution. For example, by any measure, total joint replacement is both an economic and a medical miracle. Numerous studies indicate that total joint replacement is among the most cost-effective treatments, as measured in cost per quality-adjusted life-year (QALY). The problem with this measure, of course, is that only patients can define what a QALY is worth to them. To policymakers, a QALY is an abstraction.

Perhaps a better question is: In terms of its impact on the economy of the United States, how does the cost of a total joint replacement compare to the cost of nonsurgical treatment of end-stage osteoarthritis?

According to the results of a study presented at the 1996 AAOS Annual Meeting, total knee replacement for a 70-year-old patient with end-stage osteoarthritis and average life expectancy saved $51,000, as compared to nonsurgical treatment. The savings were realized largely by eliminating the need for care in a long-term facility. Adjusted to 2007 dollars, every total knee replacement performed saves society $68,800. Another study found even greater economic utility for total hip replacement, which saved as much as $158,000 in the best-case scenario.

These comparisons are conservative, because none of the calculations takes into account the savings realized as a result of returning patients to greater productivity, or from helping patients avoid the deleterious effects of immobility.

Additionally, more work days are lost due to musculoskeletal disorders than any other malady, resulting in $339 billion in lost wages in 2004. Surely returning these individuals to productive, independent life is a worthwhile investment.

The government continues to tinker with cost-control methods disguised as quality initiatives (such as pay for performance or gainsharing), while ignoring the true economic benefits realized by highly skilled surgeons delivering personalized care. These policies threaten patient access to essential, life-changing procedures, at the very time that they are needed most.

So what can we do? The good news is that orthopaedic societies are fully engaged and have proven effective in forestalling cuts, albeit temporarily. If you visit their Web sites, you will find information and instructions on how you can participate.

In addition, the following few simple actions might help make a difference:

  1. Inform your patients. The biggest supporters for continued access are your grateful patients.
  2. Contribute to the American Association of Orthopaedic Surgeons’ (AAOS) Orthopaedic Political Action Committee. The AAOS is working hard on your behalf and needs your support. You can contribute online at www.aaos.org/pac
  3. Inform yourself. If you have not kept abreast of the issues, now would be a good time to catch up. The Web sites of various orthopaedic societies have sections devoted to socioeconomic issues. An excellent overview is “Medicare Physician Reimbursement: Past, Present, and Future,” by Sanaz Hariri, MD; Kevin J. Bozic, MD, MBA; Carlos Lavernia, MD; Ann Prestipino, MPH; and Harry E. Rubash, MD, in the November 2007 Journal of Bone and Joint Surgery (American), which clearly describes the flaws in Medicare’s physician payment methodology.
  4. Talk to your Congressional representatives. You are paying their salaries, after all. Make sure that they know where you stand and how govern­ment policy may affect patient access.

A permanent solution to Medicare’s flawed and short-sighted physician reimbursement policies must be delivered, and soon. We cannot sit on the sidelines and hope for the best. All of us who work on behalf of patients—on the provider side and the industry side—must lend our voices to the battle for patient access to specialty care and for reasonable compensation for the highly skilled surgeons who make possible the miracle of pain-free mobility.

Jeffrey R. Binder is president and chief executive officer of Biomet, Inc.

Editor’s note: The opinions expressed in “Sound off” are those of the author and do not necessarily reflect those of the AAOS or AAOS Now. The publication of an editorial submitted by an individual who is not a member of the AAOS does not indicate that the AAOS endorses the individual’s company, product, or position on an issue.


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