The advent of the Centers for Medicare & Medicaid’s Comprehensive Care for Joint Replacement (CJR) program fueled AAOS Annual Meeting conversations regarding the best response by hospitals, surgeons and device companies to bundled payment reimbursement models, including those that extend beyond joint reconstruction.
The basics are known. CJR is a five-year pilot program that launches April 1. Hospitals in 67 metropolitan areas will receive a fixed rate for the entire episode of joint reconstruction, stretching from time of surgery through 90 days after the procedure. Starting in year two of the program, hospitals will be monetarily incentivized or penalized for their ability to meet that fixed rate plus corresponding quality metrics. Simply put, payment for nearly one-third of total hip and total knee replacements in the U.S. will be linked to quality and patient satisfaction, as well as cost measures.
A possibility of CJR is the advancement of bundled payments by private payors and Medicare. Medicare fully intends to use CJR as the test model to further roll out mandatory bundles for high-cost, high-volume procedures. Private payor contracts can also be found in shoulder and spine and, moving forward, all private bundles could include significant incentives to reduce costs in targeted portions of the episode, including the implant and surgery.
One unknown is how the program will directly impact orthopaedic device manufacturers. CJR focuses on the elimination of waste for post-acute care, meaning that hospitals will be incentivized or penalized for their ability to reduce cost in settings such as skilled nursing facilities, home healthcare and in-house physical therapy. There is not an incentive to reduce implant price. That being said, hospitals could seek savings throughout the episode to act as a cushion if they need to pay Medicare for not meeting the post-acute care metrics. Implant price pressure is expected to remain in the low- to mid-single-digits, according to analysts and joint reconstruction companies.
The risk for device companies, though, is competing only on implant price in a bundled payment era. Opportunity lies in thinking beyond the implant and surgery, and helping hospital customers find value—whether that’s enabling faster recovery, reducing complications, shortening post-acute care or measuring outcomes data. Regulatory, R&D and supply chain folks within device companies can expect that their development and rollout of new products will correlate to reimbursement changes.
“The prosthetic companies that are able to work with hospitals and physicians, and partner with them to improve care and improve the utilization of resources at the same time, are the ones that are going to profit from this,” says Thomas C. Barber, M.D., a joint reconstruction surgeon based in Oakland, California and Chair of the AAOS Council on Advocacy.
Barber says that hospitals want to improve efficiency and productivity in the operating room in order to perform higher volumes of procedures in a shorter, safer manner. He points to a decrease in trays as one possible innovation, stressing that the word ”innovation” can no longer be loosely defined, but must be clinically and economically proven by device makers.
“Small innovations make a big difference as far as cost and time,” he says. “I do think there is going to be room for innovation, but that’s going to be tracked more closely.”
Some device companies are taking varying approaches to hospital partnerships and portfolio extensions, while others are taking a wait-and-see approach. Companies of all sizes are analyzing their roles in bundled payments.
Richard Iorio, M.D. is the Dr. William and Susan Jaffe Professor of Orthopaedic Surgery and Chief of the Division of Adult Reconstructive Surgery at NYU Langone Medical System, which is active in bundles in joint reconstruction, spine and cardiac. He pointed to DePuy Synthes’ and Medtronic’s focused efforts.
DePuy Synthes announced a strategic alliance with Value Stream Partners, a firm focused on design, development and implementation of bundled payment programs. The collaboration will assist hospitals in improving clinical outcomes, increasing patient satisfaction and lowering overall costs. Stryker Performance Solutions offers a similar program.
Iorio says that he expects tracking software and low-cost implant lines to become part of device company portfolios.
Medtronic has encouraged Medicare to expand its bundled payment initiatives. During a recent earnings call, Omar Ishrak, Medtronic Chairman and CEO, gave few details but said that the company is actively partnering and collaborating with hospital systems, payors and governments, and is focused on technology, services and business models that address value across the continuum of care.
Another vocal proponent of bundled payments is ConforMIS, which is targeting sales efforts in CJR cities with anticipation that its iTotal products and clinical and economic data will be of interest to cost-cautious hospital administrators.
Another ancillary effect of CJR and bundled payments in general will be the continuation in volume shift of where procedures are performed. Hospitals and surgeons will become more specialized in order to reap the incentives of increased outcomes and decreased costs, Barber says. Larger centers are able to better control these factors because of the volume. This could lead to further consolidation at the hospital level and will likely lead to procedures being moved from smaller to larger, more urban hospitals.
“The successful, larger centers have collaborated as an entity to have a single way of treating patients. That single way can be different from one center to another,” Barber says. “You’re going to see large centers with total joint-specific surgeons who are doing large volumes themselves. We’re going to be less and less dependent on general practitioners doing joint replacements.”
Public and private bundled payments will continue to develop in the next decade. Conversations at AAOS centered on the importance of surgeon ownership in bundles (not part of CJR), elimination of waste from the entire episode and a push to extend beyond joint reconstruction and the inpatient setting. The conversation is just beginning. The opportunity for device companies lies in providing proven ideas that meet the evolving challenges of customers and reimbursement.