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The COVID Challenge for Orthopaedic Surgery – One Surgeon’s Response

By Scott Leggett 
December 9, 2020

Nine months into the COVID-19 pandemic and cases are soaring. As we head into the colder months, the forecast is grim, with an estimated surge of COVID-19 hospitalizations nationwide. The pandemic has made people pause and re-evaluate their careers, lifestyle choices, social circles, and even their healthcare. At a time when our health is most important, people must prioritize the care they need and identify the safest site for receiving their care. When it comes to surgery, the safest location is an outpatient surgery center or OSC – commonly referred to by the industry and Medicare as ambulatory surgery centers or ASCs.

With the overwhelming need for hospital beds for COVID-19 patients, operating in an OSC setting is the clear choice for elective surgeries. In response, Hospitals across the country are beginning to suspend elective surgeries as these beds are a necessity for COVID-19 patients. Underscoring the importance of safe patient care and health protocols amid a pandemic, the need for these very safe OSC facilities is essential.

Dr. Michael Hannon

Dr. Michael Hannon, a double board-certified Orthopedic Surgeon, was forced to re-evaluate his practice once the COVID-19 shut down occurred, tapping the breaks on any hip and knee surgeries until mid-June. Fortunately, Dr. Hannon was able to use the time to help develop a Robotics Total Joint Program and the comprehensive outpatient protocols to support it at Cedars-Sinai Precision Ambulatory Surgery Center, where he is migrating medically appropriate partial and total knee replacement cases. Located in the heart of Beverly Hills, the center was recently ranked among the Top Ten Best ASC in the US by Newsweek and is part of a network for four ASCs treating patients across all specialties.

“Patient care is important,” notes Dr. Hannon. “People are missing routine screening tests, and, unfortunately, they are not getting all the care that they need. If you’re an end-stage osteoarthritic patient, we can perform a safe procedure at our OSC despite the fact that we are in the middle of a pandemic. We’ve developed the appropriate protocols to make these elective surgeries streamlined and as safe as possible.”

To simplify the billing process that comes with elective surgeries, Dr. Hannon teamed up with Global 1 to help provide one, up-front price for the patient in an outpatient setting via the Global 1 bundled payment program. “In my opinion,” says Dr. Hannon, “for patients that don’t have comorbidities, outpatient centers can provide patients a superior experience. Studies have confirmed this to be the case. The Global 1 program provides price transparency and reduces financial anxiety from the procedure.”

According to Dr. Hannon, “there has been a huge impact on doctors in terms of the flow of patients. Our patient volumes are still down 15-20 percent. Elective healthcare has been significantly affected.” Needless to say, the ability to continue to see and care for his patients in a safe outpatient setting has been vital. Patients and doctors have always put a great deal of trust in outpatient surgery centers to provide high-quality service with a high standard of care.

When the shutdown was enforced in mid-March, Dr. Hannon knew he could not just sit around. “I didn’t stop working because our patients still needed care,” says Dr. Hannon. “It gave me the final push to help an outpatient program, and I am pleased that it has come to life.”

Dr. Hannon has also incorporated robotic surgery to assist with his outpatient knee replacement cases. This technology helps improve outcomes as it provides the surgeon with increased accuracy and consistency.

Another benefit to outpatient surgery is the patient returns home the same day as the surgery. Allowing the patient to recover in the comfort of their own home in a clean and safe environment is key to solving patients’ needs for medical care and potentially slowing the spread of COVID-19. Outpatient centers do not treat sickly people, such as patients with COVID-19 or other infectious diseases.

Finding the silver lining, Dr. Hannon says, “Though COVID-19 has been terrible for so many people, there is some good that comes out of negative situations. Because of the pandemic, we were able to take the time to launch this extensive program. It has given me the time to research, develop, and give my full attention to what was needed. I wouldn’t be surprised if COVID-19 cases continue to increase and elective surgeries at hospitals are halted again. Thankfully, we can continue to provide some needed care in an outpatient setting.”

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

Global 1– As the leader and largest administrator of outpatient surgery center-based perspective and commercial bundled payments in the nation, Global 1 provides an innovative, value-based surgical delivery and payment program. By aligning the facility, surgeon, and anesthesiologist, the Global 1 Bundled Payment Program supports high-quality outcomes in a lower-cost setting, providing a single transparent price for an episode of care. More than 70 bundled procedures are available within specialties including orthopaedics, spine, general surgery, ear/nose/throat, and women’s health.

The True Cost of Healthcare: A Hidden Tax on the American Middle Class

By Scott Leggett

Americans’ healthcare costs, as calculated by the Centers for Medicare Services (CMS), have grown consistently at the rate of about 4 percent per year over the past 20 years.

What is the result of this unrelenting growth in healthcare costs? As Americans, we now spend about $10,000 per person or $3.6 trillion annually on healthcare. If you are wringing your hands about this large number, you are not alone.

While this big number is, well, big it isn’t personally significant to most of us.

The significant healthcare numbers are much, much smaller. They are the real cost of healthcare as measured in our paychecks, family budgets, and taxes.

Given that, mine is a simple premise: the actual cost of healthcare is a hidden tax on America that is slowly sapping the earning and spending power of workers across the income spectrum, save for a few with high-incomes of $250,000 or more per year.

Consider one statistic to illustrate my point. The Pew Research Center, using 2001-2014 data from the Bureau of Labor Statistics (BLS), noted in a 2018 article, “One theory is that rising benefit costs – particularly employer-provided health insurance – may be constraining employers’ ability or willingness to raise cash wages.” According to BLS-generated compensation cost indicestotal benefit costs for all civilian workers had risen at an inflation-adjusted 22.5% since 2001 (when the data series began), versus 5.3% for wage and salary costs.” 

These are employee cost data reported by employers as differentiated from employee wage increases. However, it is illustrative of my underlying point; benefit-cost increases – especially healthcare costs – have substantially outstripped wage cost increases. 

As a further illustration, using data from the Pew Research Center reported in 2018, “…despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have mostly flowed to the highest-paid tier of workers.”

Pew Research Center, in the same 2018 article, goes on to note that, “In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.”

Finally, Pew notes that “Meanwhile, wage gains have gone largely to the highest earners. Since 2000, usual weekly wages have risen 3% (in real terms) among workers in the lowest tenth of the earnings distribution and 4.3% among the lowest quarter. But among people in the top tenth of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).”

Making a similar point, The Wall Street Journal ran a story in 2014 in which they noted, “Rising health costs don’t affect every employee the same. Today, an average family health policy costs employers nearly $12,000 per year, up from only $4,200 in 1999. Had employer premiums not risen, average salaries today would be around $7,800 higher. For a lower-income worker who today makes $30,000, that could have meant a 26% salary increase. By contrast, a ‘one-percenter’ making $250,000 today would have seen his earnings rise only by 3.1%. Health costs are a bigger share of total compensation for lower-wage workers, so rising health costs hit their salaries the most. The result is higher income inequality.”

To put a finer point on this, consider an average American family of four (with no older adults in the household) with an average family income of approximately $75,000 per year. An employer covers this family-sponsored insurance plan. According to Peterson-KFF Health System Tracker, a non-profit focused on measuring healthcare costs, the average family will spend approximately 11 percent of their gross income, or $8,200 per year, on healthcare costs. This number includes expenditures for out-of-pocket healthcare spending (which Kaiser Family Foundation estimates are up 71% over the past ten years), health insurance premiums, and state and federal taxes that fund health programs such as Medicaid and Medicare.

However, there is another side to the story: the costs to the employer. When combined with the typical family spending on health plus the employer’s contribution, the total equals $16,700 or about 22 percent of the family income. Kaiser Family Foundation estimates that the total costs for covering a family of four are even higher, exceeding $20,000 per year or about 26 percent of average family income.

Further, Kaiser reports that insurance premium increases had outpaced wage increases over the past decade, a period following the Great Recession of 2008 when many Americans experienced sustained flat income growth.

The net effect; individuals and families are carrying an increasing burden of overall healthcare costs when their real wages have not increased to offset these costs.

“There is growing evidence that cost protections have eroded for those who have employer-sponsored health coverage, putting the burden of health care costs on workers and their families,” noted David Blumenthal of The Commonwealth Fund as reported by CNBC.

Health System Tracker, in a recent report, notes that “economists generally believe” that the increased cost of healthcare coverage for employers “offset[s] wages.” In other words, instead of giving workers pay increases, employers spend on the ever-increasing cost of health insurance, which, according to Kaiser Family Foundation, is up 26 percent in the past decade.

American’s are living to work as they work to pay for healthcare.

The American Dream, powered by opportunity and hard work, drives many Americans’ efforts to achieve that dream. Ever-increasing healthcare costs are robbing too many Americans of that dream. Healthcare costs are one of the core factors chipping away year by year at America’s middle class, the US economy’s real economic engine driving the American dream. Ever-increasing healthcare costs are the real reason healthcare in the US has to change – this is no longer an option.

Adding to the long-term trends of ever-increasing healthcare costs against a backdrop of stagnant purchasing power is the impact of the COVID-19 pandemic. According to a report published earlier this year by the non-profit Families USA, “the COVID-19 pandemic and resulting economic crash have caused the greatest health insurance losses in American history.” The report went on to note that in the first half of 2020, “5.4 million laid-off workers became uninsured,” representing an increase in uninsured adults that is 39 percent higher than any annual increase ever recorded.

Today, the US healthcare crisis dwarfs any challenge America has experienced. News of the pandemic and presidential election has mostly masked coverage of the broader healthcare crisis. Nonetheless, we Americans face an unprecedented challenge long in the making, brought to a boiling point by the pandemic.

With the election looming, it will likely be next year before we have wide-spread public awareness of this crisis’s extent. We must answer this challenge immediately.

Employers who provide roughly 50 percent of the healthcare coverage in America and other health plan sponsors must be prepared to step up and aggressively take charge of their healthcare spending. Employer support for healthcare innovation, evolving business models, and streamlined regulations will be required to confront this crisis in the near term. An unprecedented crisis requires an exceptional response.

Many employers are considering new approaches to managing benefit costs using the concept of value-based benefit design. I know first-hand from my experience with ambulatory surgery centers and bundled payment procedures that there are value-based options immediately available to employers and plan sponsors to increase quality and simultaneously reduce healthcare costs today and into the future.

We can no longer afford to ignore this crisis. It requires immediate, large-scale decisive action to meet runaway healthcare costs head-on. Join me in raising awareness and taking action now.

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

An Alternative for Elective Surgery in Light of Coronavirus: Independent Outpatient Surgery Centers

By Scott Leggett

It is no surprise that the American hospital system has been drastically affected by the COVID-19 pandemic.

The silver lining is that, for years, a movement toward independent outpatient surgery centers (OSCs) has been gaining momentum and is poised to take on a significant role in our healthcare system. Bonus: even Medicare is onboard.

While hospitals should always be the epicenter for the sick or injured, OSCs (commonly referred to by the industry and Medicare as ambulatory surgery centers or ASCs) are growing in numbers to provide a solid alternative for those generally in good health seeking a variety of scheduled procedures.

For decades, OSCs have seen record-low infection rates due, in part, to the singular purpose of these facilities – treating non-emergent injuries, not illnesses. Extensive precautions are taken to protect the surgical environment through sterilization and elimination of exposure to outside diseases. As OSCs are gearing up for the post-COVID transition of ramping back up elective surgeries, OSCs are stepping up their game even more:

  1. Providers wear the recommended CDC Personal Protective Equipment (PPE) and get screened on a regular basis
  2. OSCs practice the same level of social-distancing as hospitals – patients are accepted at the facility door, and their loved ones are provided updates remotely
  3. All patients are screened closely prior to surgery
  4. All patients are discharged the same day or within 24 hours from the facility to recover comfortably with loved ones
  5. OSCs efficiently adding even more measures to sanitize and reduce the risk of exposure to virus and bacteria

Often a more economical alternative to in-patient hospital care, OSCs provide a wide variety of surgical options depending on the particular facility. Previously, common procedures included low-acuity orthopedics, hernia surgery, ophthalmology, and gastrointestinal (GI).

Now, due to incredible technology and advanced pain management techniques, it is very common for OSCs to offer major spine, joint replacement, women’s health, cardiac, and general surgery. Beginning in 2020, Medicare has approved reimbursement of certain joint replacement surgeries in an outpatient setting.

Bottom line – There are few elective surgeries that cannot be done in an OSC. And since most of these facilities operate outside the hospital system, they are not impacted by the financial turbulence affecting hospitals.

Time will tell what the ultimate impact of COVID-19 will be on the American economy and the healthcare system. An early observation of the new norm is that various industry movements already trending will just get super-charged; we see this accelerated movement of more elective surgery from hospitals to OSCs. A safe bet would be that OSCs have the potential to create a new standard of care for elective surgeries. In the meantime, I’ll take outpatient surgery, and hold the lime.

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

The $3.5 Trillion Challenge — A Case for ASC Bundled Payments

By Thomas D. Wilson

According to Centers for Medicare and Medicaid Services (CMS), the total cost of U.S. healthcare is approaching 18% of GDP, or $3.5 trillion. Modifying the healthcare delivery system will provide a positive impact on the U.S. economy, as well as on businesses and individual consumers, who will benefit greatly from a transparent, value-based healthcare system.

American academic, economist and business strategist Michael Porter captured the attention of healthcare and business leaders alike when he and fellow author Robert S. Kaplan wrote a groundbreaking piece in the prestigious Harvard Business Review touting healthcare bundled payments as a preferred approach for improving outcomes and reducing costs. Porter and Kaplan’s “The Case for Bundled Payments in Healthcare” was published on June 28, 2016.

Why did Porter and Kaplan strongly support the concept of bundled payments? Because the concept of bundled payments is simple, efficient and effective: link together all medical services associated with a medical condition during an episode of care (generally 60-90 days) through a previously established all-inclusive price, transparent to patient and payer alike.

In contrast to the bundled payment model, today most individual procedures (diagnosis and testing, anesthesiology, surgery, facility costs, post-acute care and physical therapy) are disconnected and paid for individually. This fractured care model generates inefficient outcomes and higher costs. Patients are confused by the multiplicity of bills when simplicity is in order. Payers carry the burden of significantly higher costs.

Bundled healthcare with transparent pricing is an initial step in improving healthcare efficiency and value. Close observers recognize that the American healthcare landscape is interspersed with a notable example of cost-and-outcome-driven efficiency: ambulatory surgery centers (ASCs), where surgical procedures are performed on an outpatient basis. Reflecting this growing trend, 80% of all U.S. surgeries are now performed on an outpatient basis, driven by technological advances including long-acting local anesthesia and minimally invasive surgical techniques. Nearly half of these surgeries are performed outside of hospitals in lower-cost ASCs.

Bundled Benefits

There are demonstrable benefits to keeping surgical procedures in outpatient clinics: patients recover more quickly, procedure costs are significantly lower and there are fewer associated complications. According to the ASC Quality Collaboration Quality Report for the 4th Quarter 2018, in which 1,609 ASCs from around the country participated, complication rates reported by ASCs across a wide range of procedures averaged less than 1%.

Most importantly, performing bundled payments in ASCs can recalibrate the healthcare system through the effect of open market forces. The framework of ASCs and bundled payments has the potential to increase competition, hold providers responsible for outcomes, introduce transparency, incentivize innovation and decrease costs while ensuring quality outcomes for patients.

Many leading payers, including large companies and commercial insurers, are supporting an ASC bundle-based system. They do so with the knowledge that competition and consumer choice will improve overall systemic performance.

In this context, many healthcare leaders consider Porter and Kaplan’s publication a turning point in the long-running debate over bundled payments. Published in the widely respected Harvard Business Review, the Porter/Kaplan article reached senior executives at the largest American companies that collectively provide healthcare coverage to 50% of Americans. These senior executives, responsible for the profitability of their firms, are relentless in their search for value-based healthcare coverage for their employees.

One metric reflecting the payers’ focus — especially self-insured employers — on reducing costs while ensuring outcomes is the dramatic growth in the use of ASC outpatient bundled payments for a single episode of care. Although vastly underutilized as measured against the scale of all surgical procedures performed in the U.S., bundled payments are rapidly gaining traction in the commercial market. Many self-insured companies and private insurance plans view ASC bundled payments as a strategy to inject open market forces, including transparency, choice and competition, into a historically opaque healthcare marketplace.

Where Are the Savings?

The trend towards bundled payments has been gestating for some time. As early as 2001, Blue Shield of California and Monterey Peninsula Surgery Center in Monterey, Calif., entered into an outpatient bundled payment agreement for reconstructive joint and spine surgery. Today, ASC bundled prospective payments are commonplace. For example, in 2019, Carlsbad, California-based Global 1, a medical provider network and claims service organization, is projected to administer in excess of 1,000 surgical bundles per month for large self-insured employers and commercial carriers.

Given the volume of ASC bundled payment procedures Global 1 is processing, it seems logical to ask, where are the savings?

One person who can answer that question is Michael Larsen, executive director of MCSIG, an insurance group that provides insurance plans to more than 70 school systems and municipalities in California. MCSIG reported savings of $7,121,250 through its ASC bundled payment program administered by Global 1. MCSIG also reported the average savings per surgery was $14,683, with a complication rate including infections and readmissions of less than 1%. This is over 485 surgical procedures performed between January 2015 and December 2018.

According to Larsen, “While the cost savings have been tremendous, the consistently amazing outcomes our members have received with Global 1 are even better. The quality is exceptional, and price savings are remarkable. The bundled case in the ASC has delivered enormous value to MCSIG members as measured by the optimum combination of quality, service and price.”

Peer-reviewed scientific studies in highly respected national medical journals have reported ASCs have lower complication rates, elevated patient satisfaction rates and lower prices. The addition of providing these surgical services through a transparent all-inclusive bundled payment system elevates these facilities to true centers of value.

Pivotal Juncture

We are at a pivotal juncture in the vitally important healthcare sector. The lack of market forces has allowed healthcare to become prohibitively expensive. Porter and Kaplan have accurately identified bundled payments as a way forward to improve outcomes and reduce costs. Bundled payments in the ASC setting ignites an even more powerful vehicle for creating transparency, consumer choice, innovation, efficiency and savings compared to the current archaic and inefficient system. The future is now, and it is time to act.

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With over 100 surgery centers and 600 surgeons in the statewide network, the Blue Shield California (BSC)-Global 1 bundled payment program is going strong with many plans to expand.

Tom Wilson is Co-Principal of Global 1 and Co-Manager of Convergent SameDay Orthopedic Strategies. Contact Tom Wilson at: tom@globaloneventures.com, (760) 602-7872.

Global 1, a licensed third-party administrator (TPA), is the largest commercially insured bundled payments manager in California and amongst the largest in the nation. Global 1’s innovative bundled payment structure is designed to deliver cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting.