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AAOE survey data

AAOS Now

Published 4/1/2019
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Bradley Coffey, MA, O-CHCP

Use Detailed Operational Benchmarking Data to Drive Increases in Ancillary Revenues

Durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) play an important role in musculoskeletal care. Such tools are often used to provide physical support to patients who have undergone surgery. Other types of DME may assist with correcting musculoskeletal deformities, such as scoliosis.

The average orthopaedic practice with approximately nine clinical providers will see 27,817 patients each year for physician visits. Roughly 6 percent of those patients will receive a prescription for DMEPOS. In discussions with members, the American Alliance of Orthopaedic Executives (AAOE) found broad coverage for DMEPOS products and services by insurers, except for traditional Medicaid. State Medicaid plans utilizing managed care typically cover DMEPOS products and services. However, coverage is regulated at the state level and may vary.

Documentation to ensure coverage varies by payer. For traditional Medicare Part B, an advanced beneficiary notice is typically required to notify beneficiaries that the product may not be covered. Some insurers, typically smaller Medicare Advantage managed care organizations, require proof of delivery and/or copies of medical records. Medicare operates under a set DMEPOS fee schedule, but payments from other insurers can vary.

All AAOE members involved in discussions on the topic indicated that their surgeons prefer to prescribe DMEPOS prior to surgery. For some, it is an effort to control the quality of the products being dispensed and used for post-acute recovery. Others indicated that DMEPOS use is a first-line attempt to avoid or delay surgery for patients who are not ideal surgical candidates. This becomes particularly important with Medicare’s shift from volume to value, because more patients with higher comorbidities typically mean increased costs for clinical episodes. When other variables that affect the cost of a surgical episode are equal, utilizing DMEPOS to delay surgery until comorbidities are addressed will lead to greater savings.

In September 2018, the Data Analytics and Benchmarking Council of the AAOE surveyed the membership on DMEPOS use in their practices. Specifically, the council was interested in gathering general data, such as business models and annual volume.

Among the practices that distribute DMEPOS to patients, 84 percent use the “stock and bill” method of storing and dispensing DMEPOS items. This method of inventory has ancillary revenue implications for practices and the physicians who own them. More broadly, however, the provision of DMEPOS itself raised a median of $828,692 in additional revenue for each orthopaedic practice in 2017 (Fig. 1). Those data comprise the net patient revenue among all practices reporting revenue data in AAOE’s annual benchmarking survey for 2017 (n = 122). Median DMEPOS revenue per physician in 2017 was $61,030. Of note, revenue is the income a practice or physician generates before any expenses are subtracted.

AAOE survey data
Fig. 1 2017 durable medical equipment, prosthetics, orthotics, and supplies revenue
Courtesy of the American Alliance of Orthopaedic Executives

AAOE research showed that DMEPOS is an important component of the orthopaedic practice revenue equation and has been for some time. Although the median revenue for this service is the second lowest in AAOE benchmarking results for 2017, its prominence in respondents’ practices and its ability to lower the total cost of care in value-based payment arrangements indicate that it is a valuable ancillary tool and a valuable component of patient care.

These data are important as Medicare considers adding off-the-shelf back and knee orthotics to the DMEPOS Competitive Bidding Program, where we can expect to see reimbursements for such devices drop by as much as 35 percent—based on historical information. After the research was complete, AAOE submitted comments to the Centers for Medicare & Medicaid Services (CMS) on its proposal for the Competitive Bidding Program. Using operational data and additional information compiled from members, AAOE strongly urged CMS to consider other ways to fight potential fraud in the distribution of DMEPOS products in the Medicare program.

AAOE uses the data it collects to advocate for practices, but physician owners can use the data to evaluate the success of their DMEPOS investments. Operational data like these can be helpful to orthopaedists who want to improve business performance, whether in a facility or nonfacility setting.

The purpose of the AAOE is to support the business of orthopaedics through advocacy, data analysis, and education. The AAOE offers operational benchmarks to assist orthopaedic surgeons and their practice executives in identifying areas for improvement. AAOE staff are always available to answer executive and physician questions; email data@aaoe.net.

Bradley Coffey, MA, O-CHCP, is the manager of data solutions and government affairs at the AAOE in Indianapolis, where for the past three years he has worked with AAOE volunteers to build the organization’s department of government affairs. Under his guidance, AAOE was named Outstanding Government Affairs Program for associations with a budget greater than $750,000 in 2014 at the Indiana Society for Association Executives’ Star Awards.

Reference:

  1. Newman D, et al: Medicare Competitive Bidding Program Realized Price Savings for Durable Medical Equipment Purchases. Available at: https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2016.1323. Accessed February 19, 2019.