From government policy to market shifts, value-based care initiatives are driving change, and some see the challenges as opportunity
Healthcare has been a hot button issue during this year’s political campaigns. On both sides of the aisle, candidates from the national to more local levels have been pushing plans for changing the system from “repealing and replacing” to “reforming” the Affordable Care Act (ACA). But true, long-lasting change is rarely driven by political policy alone, but by a combination of factors including market forces.
Negative reports on the state of the US health system have, in part, fueled the desire for change within both the government and private sector. A recent example is the Bloomberg report ranking America 50th out of 55 countries with regards to an index measuring life expectancy, healthcare spending per capita and relative spending as a share of GDP as of 2014. According to a 2013 Census Bureau Report, 45MM people in the US were uninsured prior to the implementation of the ACA.
Change is the new normal. By looking at value-based healthcare policy and market trends affecting the adult reconstruction market, we can envision the wave of change moving through other market segments.
ACA: Expanding Access but Not Necessarily the Market
Leerink’s Q316 MEDACorp Survey of hospital admins reported factors most impactful to utilization were an increase in Medicare population, demand driven by Obamacare, availability of MIS surgical approaches and improving US economic conditions. According to a White House press release, since implementation of the ACA, the uninsured rate has fallen by more than 40 percent. However, this increase in insured patients did not translate to across the board increases in procedure utilization or market growth for joint replacement, with growth rates hovering in the mid-single digits. According to BioMedGPS’ SmartTRAK Financial Dashboard, US Total Joints market growth for H116 was virtually the same as for H115 at ~2.9%. This is not surprising, given the fact that approximately 60% of TJR procedures are performed on patients over 65 and that many of the newly insured patients through Obamacare were low income and eligible for government assistance.
One effect of ACA implementation has been an increase of seasonality for elective procedures such as hip and knee replacement, with patients choosing to delay surgery to much later in the year until high deductibles could be met. With patients covered under the ACA facing decreasing choices in insurance plans, increasing premiums and higher deductibles for 2017, don’t look for this population to fuel growth.
Value-Based Care
Since CMS’ Comprehensive Care for Joint Replacement (CJR) bundled payment model rolled out in April, the shift away from fee-for-service seems to have gained momentum, and is likely to be reflected in an increase of these types of payment models in the private sector. The idea is to reduce cost, gain efficiencies and force coordination of patient care by bundling payment for the entire episode of care from admission to 90 days post-discharge. Healthcare providers would be incentivized through risk sharing to maximize the value of care for the patient, sharing in cost savings.
Reducing the use of post-acute care is perhaps the low hanging fruit for institutions to remove cost from the episode of care and potentially share in the dollars saved. However, with the push to manage risk and increase benefit, healthcare providers could potentially divert patients or delay their elective surgery if they present with major co-morbidities, such as severe obesity or diabetes. There is rising concern that adjustments to the CJR program may be needed to ensure access to quality care for all patients. Faced with increasing scrutiny over the last few months and concerns that patient care may be lacking or denied, the CJR program is likely to see adjustments in the coming year:
In September, researchers from the University of Michigan Institute of Healthcare Policy and Innovation expressed concerned that CMS bundled payment programs will penalize hospitals treating more complex patients, according to an article in InsuranceNewsNet.com. Researchers believe the CJR program should include appropriate risk adjustments to account for older, sicker patients.
An economic model study of CMS hospital payments under the CJR bundled payment programs found risk adjustment could increase reconciliation payments to some hospitals by as much as $114K/yr, but without this adjustment hospitals would in essence be penalized for treating medically complex patients. Researchers suggested CMS include risk adjustment in its bundled payment programs. Health Aff (Millwood)
A September bi-partisan letter from 179 members of Congress accusedCMS of trying to reduce program expenditures with mandatory bundled payment programs, including the CJR model, at the expense of preserving or enhancing quality of care. The letter also pointed out the agency is only charged with testing new models on a limited, voluntary basis.
The Health Care Incentive Improvement Institute sent a letter to CMS Administrator Andy Slavitt regarding problems with its bundled payment initiatives, including CJR, due to clinic-centric control and lack of adjustment for patient condition severity, according to Health Payer Intellligence. HCI3 is a non-profit focused on improving quality of care.
Challenges as Opportunity
Several orthopedic companies are turning the challenge of value-based care into an opportunity to change the way they do business. While many companies have addressed value-based care through new implant delivery and pricing models, others are looking at developing programs to impact the continuum of care. One of the most recent is Zimmer Biomet with its Signature Solutions program. In July, the company announcedits suite of clinical services and technologies to assist healthcare providers with value-based care models, including CMS' CJR program. With interactive patient tools, data analysis platforms, consulting services and digital software solutions, Signature Solutions aims to provide institutions with an all-in-one solution for the continuum of orthopedic care. Zimmer Biomet has now added to the program with its acquisition of the RespondWell telerehabilitation platform, designed to provide personalized, clinician-supervised post-op physical therapy in a patient's home. A broad commercial release of the Signature Solutions platform is slated for 2017.
Other examples of companies focusing on their value proposition include:
ConforMIS with a C-suite sales team promoting its single package delivery model for partial and total knee replacement and potential economic benefits along with clinical results demonstrating shorter surgical times, decreased LOS and a reduction in adverse.
Smith & Nephew with its Syncera program, a 3-yr agreement for hospitals to purchase a reduced range of total joint implants, have their surgeons and OR staff trained, and have implants replaced through an automatic replenishment system. This system eliminates the presence of the sales rep in the OR and allows the company to offer implants at a substantial discount.
Johnson & Johnson/DePuy Synthesplans to address cost-of-care issues, such as the CMS CJR bundled payments program, by engaging patients from post-surgery through rehab to improve outcomes and patient satisfaction with a system that could be connected to healthcare EMR systems, according to Company statements.
Stryker’s Performance Solutions, a business unit of the Company’s Reconstructive Division, partners with hospitals and physicians helping them improve patient outcomes and satisfaction while increasing the profitability of orthopedics. In April, the SPS business announced the launch of JointCoach, a digital patient engagement and education platform that helps improve overall care delivery and the experience for patients having joint replacement surgery.
Medtronic’s introduction of a new division, Medtronic Orthopedic Solutions, following its acquisition earlier this year of Responsive Orthopedics. The division will focus on providing hip and knee implants at a 40% discount from current implants on market along with episode of care management and patient monitoring tools.
With this shift to value-based care comes an ever-increasing pressure and expectation for orthopedic companies to:
Demonstrate proven clinical results
Offer instruments, techniques, and/or system that can lead to faster patient recovery
Provide Additional Value and/or bundled pricing with quality products
The value-based care offerings being promoted by orthopedic companies are sure to evolve over time. Current programs seem to be heavily focused on taking cost out of the system whether it be through more efficient inventory and resource management to optimizing post-acute care and rehab. Medtronic may seem to be the dark horse as one of the most recent entrants in this race with the June introduction of its Medtronic Orthopedic Solutions division. However, in the long run, programs like this that address multiple areas of the continuum of care will be the winners in this market environment. The key will be navigating the complexities of risk sharing while providing proven value and partnering with healthcare providers to optimize the entire continuum of care.
Negative reports on the state of the US health system have, in part, fueled the desire for change within both the government and private sector. A recent example is the Bloomberg report ranking America 50th out of 55 countries with regards to an index measuring life expectancy, healthcare spending per capita and relative spending as a share of GDP as of 2014. According to a 2013 Census Bureau Report , 45MM people in the US were uninsured prior to the implementation of the ACA.
Change is the new normal. By looking at value-based healthcare policy and market trends affecting the adult reconstruction market, we can envision the wave of change moving through other market segments.
ACA: Expanding Access but Not Necessarily the Market
Leerink’s Q316 MEDACorp Survey of hospital admins reported factors most impactful to utilization were an increase in Medicare population, demand driven by Obamacare, availability of MIS surgical approaches and improving US economic conditions. According to a White House press release , since implementation of the ACA, the uninsured rate has fallen by more than 40 percent. However, this increase in insured patients did not translate to across the board increases in procedure utilization or market growth for joint replacement, with growth rates hovering in the mid-single digits. According to BioMedGPS’ SmartTRAK Financial Dashboard, US Total Joints market growth for H116 was virtually the same as for H115 at ~2.9%. This is not surprising, given the fact that approximately 60% of TJR procedures are performed on patients over 65 and that many of the newly insured patients through Obamacare were low income and eligible for government assistance.
One effect of ACA implementation has been an increase of seasonality for elective procedures such as hip and knee replacement, with patients choosing to delay surgery to much later in the year until high deductibles could be met. With patients covered under the ACA facing decreasing choices in insurance plans, increasing premiums and higher deductibles for 2017, don’t look for this population to fuel growth.
Value-Based Care
Since CMS’ Comprehensive Care for Joint Replacement (CJR) bundled payment model rolled out in April, the shift away from fee-for-service seems to have gained momentum, and is likely to be reflected in an increase of these types of payment models in the private sector. The idea is to reduce cost, gain efficiencies and force coordination of patient care by bundling payment for the entire episode of care from admission to 90 days post-discharge. Healthcare providers would be incentivized through risk sharing to maximize the value of care for the patient, sharing in cost savings.
Reducing the use of post-acute care is perhaps the low hanging fruit for institutions to remove cost from the episode of care and potentially share in the dollars saved. However, with the push to manage risk and increase benefit, healthcare providers could potentially divert patients or delay their elective surgery if they present with major co-morbidities, such as severe obesity or diabetes. There is rising concern that adjustments to the CJR program may be needed to ensure access to quality care for all patients. Faced with increasing scrutiny over the last few months and concerns that patient care may be lacking or denied, the CJR program is likely to see adjustments in the coming year:
Challenges as Opportunity
Several orthopedic companies are turning the challenge of value-based care into an opportunity to change the way they do business. While many companies have addressed value-based care through new implant delivery and pricing models, others are looking at developing programs to impact the continuum of care. One of the most recent is Zimmer Biomet with its Signature Solutions program. In July, the company announced its suite of clinical services and technologies to assist healthcare providers with value-based care models, including CMS' CJR program. With interactive patient tools, data analysis platforms, consulting services and digital software solutions, Signature Solutions aims to provide institutions with an all-in-one solution for the continuum of orthopedic care. Zimmer Biomet has now added to the program with its acquisition of the RespondWell telerehabilitation platform, designed to provide personalized, clinician-supervised post-op physical therapy in a patient's home. A broad commercial release of the Signature Solutions platform is slated for 2017.
Other examples of companies focusing on their value proposition include:
With this shift to value-based care comes an ever-increasing pressure and expectation for orthopedic companies to:
The value-based care offerings being promoted by orthopedic companies are sure to evolve over time. Current programs seem to be heavily focused on taking cost out of the system whether it be through more efficient inventory and resource management to optimizing post-acute care and rehab. Medtronic may seem to be the dark horse as one of the most recent entrants in this race with the June introduction of its Medtronic Orthopedic Solutions division. However, in the long run, programs like this that address multiple areas of the continuum of care will be the winners in this market environment. The key will be navigating the complexities of risk sharing while providing proven value and partnering with healthcare providers to optimize the entire continuum of care.