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Austin Hill MD MPH Peter Althausen MD MBA

Timothy J. Bray M.D.

RENO ORTHOPAEDIC CLINIC

Disclosures None

Objectives What we should do for the hospital

What the hospital should do for us

How we meet in the middle

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Cost Containment – Why is it our fight?

• We have a moral, ethical, and professional responsibility to contain costs without sacrificing quality

• Failure to do so will jeopardize our participation in strategic planning and future decision making

• Physicians and Extenders are end‐users of healthcare resources and have the ability to make meaningful changes

Before you start

• Make a plan

• Get accurate hospital data prior to starting (If you don’t know the costs, you can’t contain them)

• Put a mechanism in place to prospectively track your financial impact from the beginning

• Track, organize, and prepare your financial results in a format that administrators understand

Incremental work = Incremental Reimbursement Just because we should spend time on cost containment programs does not mean our time is insignificant or free

Additional time and responsibility means more time away from family

You should be compensated financially or with resources that improve your lifestyle for time and energy spent saving the hospital $

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Cost Containment Programs

• Geriatric Fracture Program (GFP)/Osteoporosis Treatment and Prevention Program

• Implant Pricing Control

• Generic Implants

• Bone Graft and Orthobiologic utilization protocol

• Improved OR Efficiency

VALUE ADDED SERVICES GERIATRIC FRACTURE PROGRAM

OWN THE BONE

COMMUNITY OUTREACH

EDUCATION

PUBLIC RELATIONS

EXPANSION SERVICES

COST CONTAINMENT‐MATRIX PRICING

GENERIC IMPLANT PROGRAMS

OPERATING ROOOM EFFICIENCY

BIOLOGIC UTILIZATION PROTOLS

GATEKEEPERS

Geriatric Fracture Program Goals:

Improve Quality of Care

Decrease Costs

Prevention of Future Fractures

Provide tremendous public health benefit to the community

Successful programs operating across US, Canada, UK

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Geriatric Fracture Program Benchmarks – Hip Fractures

Move patient out of ER in < 4 hours

OR within 24 hours

Length of stay ~ 4 days

Compliance with SCIP measures

Initiation of bone health assessment and treatment

Fall assessment and prevention

Geriatric Fracture Program Decreasing Length of Stay:

Case Coordination initiated for discharge planning in ER

Admission to Geriatric Hospitalist if possible

Remove barriers to OR – make patient NPO, prompt initiation of pre‐op evaluation (labs, CXR, EKG), eliminate unnecessary  diagnostics and consultants

Delirium Prevention – minimize mood‐altering meds, spinal anesthesia?

Prevention of medical complications

Time to the OR – independent predictor of morbidity and mortality [1]  Simunovic N, Devereaux PJ, Sprague S, et al. Effect of 

early surgery after hip fracture on mortality and complications: systematic review and meta‐analysis. CMAJ. 2010;182(15):1609‐1616.

[2]  Orosz GM, Magaziner J, Hannan EL, et al. Association of timing of surgery for hip fracture and patient outcomes. JAMA. 2004; 291(14): 1738‐1743.

[3]  Al‐Ani AN, Samuelsson B, Tidermark J, et al. Early operation on patients with a hip fracture improved the ability to return to independent living: a prospective study of 850 patient. J Bone Joint Surg Am. 2008;90(7):1436‐1442.

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BENEFITS GFP

33% COST SAVINGS/YEAR Kates SL, et al. The value of an organized fracture program for the elderly: Early 

results. J Orthop Trauma. 2011; 25:233–237.

Achieved with an integrated care plan, physician extenders, site champion

Other key components – reasonable implant costs, professional and community education, public relations

Implant Pricing Control Matrix pricing‐

Allows all implant companies to participate

Decreases use of high end, high cost implants (without proven improvements in patient outcomes)

Makes it easier for purchasing department to project and contain costs

Generic Implants Multiple companies currently on the market

Screw and Plate systems, Suture Anchors, Arthroplasty, Drill Bits

Implant Pricing Matrix Multiple tiers

All‐inclusive pricing

Hemiarthroplasty, Arthroplasty, IM Nails

Fair Play, Preserving Physician Choice

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Generic Implants

Reduced cost, equivalent quality

May encourage “name brand” implant companies to increase production of value line implants

Waddell JP, et al. Generic total hip arthroplasty. CORR. 1995;311:109–116.

Kauk JR, et al. Clinical and economic impact of generic implant usage for the treatment of femoral neck fractures. Poster presented at: OTA Annual Meeting; October 4‐6, 2012; Minneapolis, MN.

Anatomy of a $1200 Screw

Sales and Marketing

43.3% ($519.60) 

R&D 4.4% ($52.80) Manufactering 8.1% 

($97.20) 

Overhead 3.4% ($40.80) 

Net Margin 40.8% ($489.60) 

Sales and Marketing

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“Name Brand” SCREW COMPANY

$397.00/ SCREW

43%=$170.77

40%=$150   NETMARGIN

CHARGE/SCREW GENERIC SCREW COMPANIES

$97.00=

62% reduction in implant costs

Kauk J, Althausen PL, Coll D, O’Mara TJ, Bray TJ. Clinical and Economic Impact of Generic Implant Usage for the Treatment of Femoral Neck Fractures. OTA Poster

Presentation, Minneapolis MN 2012.

Bone graft and Orthobiologic Utilization Protocol• Vallier et al found a reduction in costs from $470k to 

$80k

• Eliminate DBM

• Limit BMP use to evidence based indications, not spur of the moment “why don’t we throw some BMP in there too”

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Improved Efficiency

• Critically evaluate the disposable items opened for a case:

• Is an esmarch really needed?

• Is pulsavac instead of cysto tubing (FLOW study)

• Trauma trained surgeons can reduce OR times and OR costs

Althausen PL, Coll DJ, O’Mara TJ, et al. Operating room efficiency: Benefits of an orthopaedic traumatogist at a level II trauma center. Paper presented at: OTA Annual Meeting; October 4‐6, 2012; Minneapolis, MN.

The Problem• Hospitals need surgeons to cover trauma call and help cut costs

• They would like to get this service for free

• All administrators know the numbers while the majority of physicians don't

• Increase in trauma fellowship graduates affects the supply in the workforce

• “Surgicalists” can be used to marginalize local orthopaedic surgeons when the hospital no longer wants to negotiate

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Obstacles to successful negotiations • Perpetuated Myths

• Fundamental lack of understanding by one or both parties

• Failure to avoid outright conflict

• Failure of communication• Bray T, Ziran B. How to negotiate with your hospital. 

J Orthop Trauma 26(9) September 2012

The Other Problem – “Widget Theory”

J Orthop Trauma June 2013

HYPOTHESIS

‘CORPORATIZATION’ OF ORTHOPAEDICS RESULTS IN FIRING OF SENIOR

EMPLOYEES

NEGATIVE IMPACT ON EDUCATION, RESEARCH, COMMITMENT, PATIENT CARE, FAMILY, AND

FINANCIAL SECURITY

YOUNGER SURGEONS ARE CHEAPER-NO VALUE CONSIDERATION FOR EXPERIENCE.

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HYPOTHESIS

SENIOR ORTHOPAEDIC EMPLOYEES HAVE LIMITED BUSINESS ACUMEN

DUE TO HISTORY OF HIGH VOLUME PATIENT CARE SENIOR SURGEONS HAVE HAD LIMITED OPPORTUNITIES TO MASTER COMPETITIVE

BUSINESS STRATEGIES

HYPOTHESISSENIOR ORTHOPAEDIC EMPLOYEES HAVE FAILED TO DEMONSTRATE ‘ADDED VALUE’

TO THEIR INSTITUTIONS

WE MUST LEARN TO OBJECTIVELY PROVEVALUE

Bob Probe OTA Presidential Address 2013

HOSPITAL ADMINISTRATION 101…..

1. They need surgeons to drive the OR

2. They need physician leadership to improve operational/outcome performances

3. Educate your administrator

VALUE ADDED SERVICES

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Perpetuated Myths• “Trauma loses money for the hospital”

• Rapid increase in trauma centers nationwide disproves this concept

• “The system is designed to do what it is designed to do”

• “Trauma patients don’t have insurance”

• Payer mix is worse than elective practice but collection rates are closer to 30% compared to 40% for elective practices.

Understanding Both Parties’ NeedsPhysician Hospital

•Acceptable compensation for providing services which are disruptive to an elective practice

•Compensation for services performed for indigent patients

•Appropriate resources and personnel support to provide high quality care

•Compensation for participation in hospital committees, operations, and cost savings programs

•Consistent call coverage

•Efficient patient flow out of ER

•Decreased Length of Stay

•Control of costly implants and materials

•Development of physician led quality measures

Failure to avoid outright conflict• “It’s business, not personal”

• Recognize posturing for what it is, a negotiation tactic not a personal assault

• Avoid confronting hospital admin with their complete lack of clinical knowledge

• Keep moving forward

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Failure to communicate

• Physicians have difficulty making their case from a business standpoint

• Physicians also fail to obtain objective data that quantify their positive impact on the hospital system

HOW TO MAKE IT WORK!

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RULE NUMBER 1

SPEAK THEIR LANGUAGE

ACO

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2012 FY Orthopaedic Trauma Prospectus Overview

Scientific Papers Published in Peer Review Journals 2010 - 2012

Althausen, Bray, O'Mara - J of Orthop Trauma 2012

Althausen, Bray, O'Mara - J Shoulder Elbow Surg 2012Althausen, Bray, O'Mara - J of Orthop Trauma 2011

Althausen, Bray, O'Mara - J of Orthop Trauma 2010Althausen - J of Orthop Trauma 2013Althausen - J of Orthop Trauma 2012Althausen - J of Orthop Trauma 2012Althausen - J of Orthop Trauma 2011Bray - J of Orthop Trauma 2012Bray - J of Orthop Trauma 2011Bray - J of Orthop Trauma 2011Bray - J of Orthop Trauma 2010

New IRB Applications (2012) - 4Presentations at National Meetings (2010 - 2012) - 8Instructor at Educational Course (2010 - 2012) – 88 days/yearStudents Rotating on Service (2010-2012) - 60Fellows Graduated (2010 - 2012) - 2

Implant and Orthobiologic Cost Containment

 $‐

 $500,000

 $1,000,000

 $1,500,000

 $2,000,000

 $2,500,000

2010 2011 2012

Total Cost Bone Graft & Bioloics Used

Total Nail Costs

Total Hemiarthroplasty Cost

0

5000

10000

15000

20000

25000

2010 2011 2012

Average wRVUs

Average wRVUs

2012 FY Orthopaedic Trauma Prospectus Overview

Geriatric Fracture Program

Fiscal Year Hip Fx LOS Hip fx admissions Cost per day LOS Annual Savings

2010 6.3 days 193 850 $ -

2011 4.0 days 200 900 $ 414,000

2012 4.0 days 200 950 $ 437,000

Cumulative Savings* $ 851,000

* Kates et al JOT 2011

2012 FY Orthopaedic Trauma Prospectus Overview

Total positive financial impact ‐$15,493,544

Hip Fracture Service Savings(14)

Total Cost Bone Graft (23)

Total Nail Costs (24)

Total Hemiarthroplasty Cost(19)

Contribution Margin (4)

5%

67%

5%

Hip Fracture Service Savings (14)

Total Cost Bone Graft (23)

Total Nail Costs (24)

Total Hemiarthroplasty Cost (19)

Contribution Margin (4)

Initial Cost $1,925,452 $763,897 $333,318

2011 $414,000 $327,327 $378,146 $165,000 $5,180,000

2012 $437,000 $327,327 $378,146 $165,000 $5,180,000

Total $851,000 $3,196,251 $756,293 $330,000 $10,360,000

Total positive financial impact $15,493,544

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YOUR ADMINISTRATOR

STRATEGICPLAN

“YOUR ORTHOPAEDIC

TRAUMASERVICE COST US

MONEY YEARAFTER YEAR…”

“Trauma is a money loser”“Trauma is a money loser”

RULE NUMBER 2

CONTRIBUTION MARGINHOW MUCH MONEY DOES THE HOSPITAL MAKE 

OFF OF YOUR SERVICE ?

MUST KNOW !

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FINANCIAL CONTRIBUTION OF ORTHOPAEDIC TRAUMA TO YOUR INSTITUTION

REVENUE MULTIPLIER: VALLIER-$7.81/hospital for every $1.00/collected by surgeon

REVENUE-DIRECT COSTS: Ziran= $145/work RVU, used @ university programs

ADMISSIONS/TOTAL REVENUE= Patient volume multiplier – Reno, $4,225/patient

SUBSIDIES?

Peter L. Althausen, MD, MBADaniel Coll, BS, PA‐C

Michael Cvitash, BMS, PA‐CTimothy J. O’Mara, MD

Timothy J. Bray, MD

Reno Orthopaedic Clinic Renown Regional Medical Center Trauma System

Reno, Nevada

Total Charges

Total Charges $ 77.7 Million

Trauma Activation Fees $ 7.4 Million

Xray $ 2.4 Million

CT $ 12.6 Million

MRI $ .6 Million

Laboratory Fees $ 3.4 Million

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Direct ProfitHospital Net Profit

$ 5,176,456

Excludes professional fees for physicians No Graduate Medical Education $ No external grants or subsidies

ARTICULATE THE GOALS OF YOUR PROGRAMS

EXCELLENT, TIMELY,EFFICIENT ORTHOPAEDIC TRAUMA CARE; ACUTE AND CHRONIC

COST EFFECTIVE

SHOULD BRING VALUE TO INSTITUTION

SUPPORT MISSION OF AAOS/OTA

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VALUE OF SENIOR LEADERSHIP

LEADERSHIP, AMBASSADORSHIP, SURGICAL SKILL, MANAGEMENT

PARTNER, ETC.

YOU SHOULD BE PAID FOR YOUR AVAILABILITY+EXPERTISE! $250-

$300/HR

What You Need• Control of the call schedule

• Ability to implement programs that benefit the hospital, patients, and physicians

• Dedicated OR staff, rad techs, nursing staff

• Appropriate OR equipment

• Reimbursement for duties performed outside of standard clinical responsibilities

• Mid‐level provider support

How you get it• Demonstrate improved efficiency

• Cost containment programs

• Quality measures

• Participation in hospital bureaucracy

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Participation in Hospital Committees• Be visible and available

• Exert positive influence within the hospital system

• Serve as a conduit for consultations to your elective partners

Thank You