Leading the Way to Healthcare Savings

Regardless of with whom you speak—patient, physician, payer, or even device manufacturer—virtually all agree that the increasing cost of healthcare is becoming unsustainable. We simply cannot continue to see the price steadily rise without having sacrifices made where the cost prevents patients from being treated. Even more frustrating is that the U.S. ranks at the top of the list in terms of highest total spending per person per year on health, yet it is not even close to the top of the list in the value for that spend.

It’s pretty obvious that we in the U.S. are dealing with a broken healthcare system that desperately needs to be fixed. How to go about accomplishing that is a topic of much debate, and by no means will it be resolved in this Editor’s Letter. However, perhaps a small glimmer of hope has been realized and could lead to further savings across more of the healthcare industry.

Recently released research from the Perelman School of Medicine at the University of Pennsylvania has found that bundled payment models are leading to reduced costs without a sacrifice of quality. In fact, the cost cutting was observed to be more than 20 percent. The researchers combined hospital cost with Medicare claims data for joint replacement procedures. Since the orthopedic industry has served as the guinea pig for a bundled-payments model, it made for the best option for the researchers.

Further, the researchers feel there are even more savings that could be achieved as the program progresses. “On the whole, the health system’s rapid achievement of savings through changes in a few key areas suggests that hospitals in the long run will be able to reduce costs in many areas, not only internally but through greater care coordination with external facilities,” said lead author Amol S. Navathe, M.D., Ph.D., an assistant professor in the department of Medical Ethics and Health Policy at the Perelman School of Medicine, and a member of Penn’s Center for Health Incentives and Behavioral Economics. “There are still more savings on the table.”

It’s fantastic to hear that there have been significant savings realized from the bundled-payments model, while quality has remained consistent. Hopefully, this is a model that can lead the way for other care sectors well beyond orthopedics. If bundled payments can trim costs for cardiovascular, neurological, and laparoscopic surgeries, and then expand even further, true savings in the U.S. healthcare system could be achieved.

On the other hand, the research found that one of the two sources for the significant savings originated from “a 29 percent drop in average per case cost of an artificial joint, accomplished in part through evidence-based data to engage surgeons and manufacturers.” How this portion of the research specifically impacts implant manufacturers and their products is unclear, but could it eventually lead to hospitals seeking price reductions from the implant OEM? Sure. Then again, that could have eventually happened without the bundled-payments model being put into place.

Device manufacturers are responding in an effort to capture more of the bundled payment dollar and further enhance the quality of overall care being delivered to the patient. After all, it’s in an OEM’s best interest to serve as a partner in the value of care being offered to patients. If they don’t, their nearest competitor certainly will. And hospitals are going to seek out orthopedic device manufacturers who are providing that value-added service that further supplements the care they are providing.

In the May/June 2016 issue of ODT, managing editor Michael Barbella wrote about several of these programs in his The Last Word column. He cited news out of DePuy Synthes and Stryker Corp. that were intended to enhance each company’s value offering to hospitals in direct response to the bundled-payments model. Since then, both Medtronic plc and Johnson & Johnson have rolled out comprehensive programs that aim to aid hospitals in improving orthopedic care.

“Our Orthopaedic Episode of Care Approach builds on our breadth of experience in hip and knee replacements and hip fracture episodes of care, to help hospitals and surgeons realize better clinical and economic outcomes in these orthopedic procedures. Providers now have an invested partner to help manage episodic costs and drive better, more predictable outcomes for patients,” said Tim Schmid, chief strategic customer officer at Johnson & Johnson Medical Devices Companies.

This type of partnership between orthopedic device manufacturers, hospitals, and surgeons will ideally further enhance the quality of care provided while tightening up costs. A win for all involved.