I had the chance to speak with Jim Herndon recently about how the current healthcare climate is affecting orthopedic surgeons. He said that there are 3 things that worry orthopods:
- Decreasing Medicare reimbursement. In 1990, reimbursement for a total hip procedure was $2,200. In 2007, the reimbursement is $1,190. Medicare is planning to further cut reimbursement 30% in the next 4-5 years.
- Increasing malpractice insurance costs. Premiums are steadily increasing. In Boston, the average malpractice insurance is about $50,000/year. In Philadelphia, the cost is $150,000. And if you’re an orthopedic surgeon specializing in spinal surgery, malpractice insurance premiums can start at $250,000/year.
- Pay for performance. No one really knows how this will be applied specifically to surgeons (other than the obvious infection rates), but fears are mounting regarding how to show the best possible performance in one’s practice.
Let’s say that a typical surgeon in Philadelphia pays 33% in overhead (the hospital facilities, staff, etc.). Let’s say that he is also taxed 33% on his income. That means that he’d have to perform 382 hip replacements per year, just to pay his malpractice insurance. That’s almost 2 surgeries/day, 5 days a week, 11 months/year.
So what are surgeons doing? They are reducing overhead by setting up outpatient surgery centers (Dr. Herndon estimates that 60% of orthopedic surgery can be performed in an outpatient setting), they are increasing the volume of surgeries they perform, they are buying radiology facilities where they send their patients for XRays, MRIs etc. (Dr. Herndon explains that Stark Laws don’t prohibit this, so long as the physician takes on the risk of the facility – i.e. that he can potentially make or lose money), and they are financing physical therapy practices that supply therapy to their patients.
Orthopedic surgeons in private practice have become very business savvy in order to survive in this climate. But somehow I feel saddened by all this – the business of medicine is a grim reality that can create a wedge between the physician-patient relationship. A patient is left to wonder about the motivations behind tests and therapies – and perhaps even behind recommendations for the surgery itself.
I guess the second opinion has become more important than ever before?
This post originally appeared on Dr. Val’s blog at RevolutionHealth.com.