Published 4/1/2016
Cindy Bracy, MPH, RHIA, CCS-P

The Healthcare Value Equation

Orthopaedic surgeons are facing a multitude of challenges. Government mandates affecting payment structure, coding classification, and performance evaluation have changed the focus of practicing medicine.

During the Practice Management Seminar for Practicing Orthopaedic Physicians, held during the 2016 AAOS Annual Meeting, Steven F. Schutzer, MD, medical director at the Connecticut Joint Replacement Institute, addressed the "Value Equation" and how orthopaedic surgeons need to prepare for the emerging value-based healthcare market.

Changing culture
Although commercial bundled payment initiatives are a more attractive option for hospitals and orthopaedic surgeons, they are more difficult to administer, according to Dr. Schutzer. "Orthopaedists need … an organizational culture that truly embraces the healthcare value equation," he said. That is the first step to designing a bundle that will create an incentive to improve quality and efficiency of patient care delivery.

According to Dr. Schutzer, in this "adapt or die" environment "it is a foregone conclusion that clinging to fee-for-service (FFS) is tantamount to a race to the bottom." Although FFS will likely not disappear entirely, alternative payment models that incentivize value creation must be embraced. Ensuring that physicians receive their requisite share of the value equation requires determined physician leaders with a shared vision who foster physician alignment/engagement.

Important steps include establishing metrics, monitoring quality and cost, and finally, measuring value creation. It is an iterative process, enabling physicians to learn and adjust their processes to ensure improved patient outcomes in the future. 

"It's not only the dollar that provides incentive for improved quality outcomes," Dr. Schutzer said. He pointed out that the first phase of the process will involve an initial investment, and that practices may not see a profit for a couple of years. "It is important to keep in mind that there are primary, secondary, and supreme drivers in the value equation," he added. Primary drivers include increased healthcare value, margin, volume, and market share. Secondary drivers are increased access to patients, improved operational efficiency, and the evolution into an integrated practice unit. Finally, the supreme drivers are opportunity, autonomy, mastery, and purpose. 

Primary challenges
Not surprisingly, many orthopaedic surgeons are asking the question: How can my practice survive the evolving reimbursement landscape? This is the time for self-assessment and strategic planning, according to Dr. Schutzer. Physicians will need to sharpen their negotiating skills, perform market analysis, and join forces to educate and learn from their colleagues. The primary challenges are people, data, and trust. Achieving success with the value framework demands a substantial change in behavior. Physician leadership and engagement are the most essential elements of this successful value-based framework.

Finally, Dr. Schutzer stressed that it is possible for physicians and medical practices to not only survive, but to have a clear strategic advantage and grow profitably in the emerging value-based markets. To do so, they must successfully redesign patient care, make data-driven decisions, adopt a standardized approach to care delivery, create a culture focused on the value equation, and accept and manage performance risk.

Cindy Bracy, MPH, RHIA, CCS-P, is the manager of practice resources in the AAOS office of government relations. She can be reached at bracy@aaos.org