In blog note posted last June, I raised the issue of outpatient knee replacements and the competition for these procedures that exists between hospitals and surgicenters started by orthopedic surgeons (see: Joint Replacement in Ambulatory Care Clincs; A Major Financial Threat to Hospitals). In that note, I suggested that surgicenters are often able be able to perform these procedures less expensively and suggested the following reasons for this difference:
- Such clinics [i.e., surgicenters] enjoy the advantages of cherry-picking the healthier and lower-weight patients who can tolerate short clinic stays.
- Because free-standing clinics are highly specialized, they can invest in the latest technologies and surgical techniques and focus on refining their techniques.
- Free-standing clinics do not have to bear the cost of maintaining money-losing units such a critical care units as is the case of general hospitals.
- As much smaller business units, these clinics are often more nimble and innovative than the often sluggish community hospitals.
The issue is continuing to brew as discussed in a recent article (see: Tug of war emerging between hospitals, surgery centers over knee replacements). Below is an excerpt from it:
Medicare, which spends several billions of dollars a year on knee replacements for its beneficiaries..., is contemplating whether it will help pay for knee replacement surgeries outside the hospital, either in free-standing surgery centers or outpatient facilities. The issue is sowing deep discord in the medical world, and the debate is as much about money as medicine. Some physicians are concerned that moving the surgeries out of hospitals will land vulnerable patients in the emergency room with uncontrolled pain, blood clots or other complications. But proponents of the change say it can give patients more choice and potentially better care, as well as save Medicare hundreds of millions of dollars....The final decision, which could come within a year, would also act as a test of sorts for Donald Trump and his new administration. They will weigh whether to limit government controls..., or to bend to pressure from hospitals and doctors, many of whom oppose the change.....Demand for total knee replacements is growing -- 660,000 are performed each year in the United States. That number is likely to jump to two million annually by 2030, making this complex and expensive operation one of surgery's biggest potential growth markets. Even if the policy change is made, Medicare would still pay for patients to get traditional inpatient surgery. But with the agency also paying for the bulk of outpatient procedures, there would be a huge shift in money -- out of hospitals and into surgery centers. Medicare could save hundreds of millions of dollars if it no longer needed to pay for multiple-day stays at the hospital.
The federal government is anxious to reduce Medicare costs. Shifting some percentage of Medicare patients to lower cost surgicenters would be one way to achieve this goal. Many of the surgicenters have demonstrated high quality results with their patients which will make such a policy change easier for Medicare officials. The argument that surgicenter patents will clog emergency departments with postoperative complications seems dubious to me. However and as stated above, the surgicenters may be cherry-picking their patients for the younger and healthier to achieve their good results. All Medicare needs to do to respond to the claim of clogged ED's is to publish criteria that reimbursement for patients undergoing outpatient procedures be limited to the more robust and younger ones. This is already occurring but the Medicare rule will make it official. Such a rule would also act as an incentive for hospitals to begin competing in this growing space.
Hospital executives needs to develop more expertise in managing patients on an outpatient basis, particularly for outpatient surgery. I have previously discussed some of the evolving new business models for hospitals such as bedless facilities (see: The Design of Bedless Hospitals Continue to Evolve Based on Cost and Technology; The Future of Healthcare: Virtual Physician Visits & Bedless Hospitals; Some Additional Ideas About the Bedless Hospitals of the Future).