One of the purposes of the OIC blog is to bring the inner workings of healthcare to the general public’s attention with an obvious slant toward orthopaedics. Coincidentally, this facet of healthcare has grown into one of its biggest components as a percentage of cost for this country. In the quest to understand how costs have spiraled out of control, several entries in this blog have lead us to the common denominator of reimbursement and how the fee-for-service model has forged the healthcare-cost cliff we find ourselves barreling over.
For the second time in as many months, however, our encounters with two surgery centers in the same Northeastern state have proven the problem is both bigger than we had thought, yet far simpler to fix. Administrators for these orthopaedic ASCs have agreed that our savings are great and a welcomed change, yet the adoption of our products would cost them money. That is to say, medical devices of equal or better quality to what they use today that cut the device spend in half for a case, are more expensive for them to use. Their contracts stipulate that if the device costs more than $1,000, the device is completely covered. If the device costs less than $1,000, the surgery center has to cover the cost. Fundamentally, this drives the surgery center to spend as much as they can on medical devices for certain cases – a vendor’s dream. “We can only buy it if it’s a thousand dollars or more. Any less would be criminal…..” And with that higher cost of reimbursement comes what we all have been living with year in and out – higher premiums.
For all the flack the Federal government gets, I think a nod to CMS is in order for its Bundled Payment Care Initiative. While commercial payers have the counter-intuitive contract terms on cruise control, CMS is innovating reimbursement formulas that incentivize physicians and facilities to create better value. For a quick definition, as the name ensues, bundling the payment means a single reimbursement is made for physician and facility to share for a case. There are a few iterations in test right now, referred to as Models 1 through 4.
Had we brought in surgeons from the dark years ago, data supporting commercial payers’ reimbursement models would look starkly different. Like every other facet of life that demands consumers’ dollars, the market would be a concurrent race of plummeting costs and maximizing value. Doctors together with hospitals would be boasting “cheapest acute care episode” awards on billboards across America. It’s a dream, sure, but if no one dares to dream it, it’ll never happen.