Big Changes Coming to Spine Surgery?

On October 31, 2014 Medicare added nine new spine codes to its final 2015 Ambulatory Surgery Center (ASC) payment rules. Those codes are:

22551            Neck spine fusion & removal below c2
22554            Neck spine fusion
22612            Lumbar spine fusion
63020            Neck spine disk surgery
63030            Low back disk surgery
63042            Laminotomy single lumbar
63045            Removal of spinal lamina
63047            Removal of spinal lamina
63056            Decompress spinal cord

Source: Centers for Medicare and Medicaid Services

Given the rise of outpatient spine surgery, these new codes could make outpatient spine surgery as common or perhaps more common than inpatient spine surgery. Holding the majority share of the $9 billion in annual spinal implant and instrumentation market would make the outpatient spine surgery market a very big deal indeed.

But, beyond the procedure and sales volumes, these codes have the potential to push innovation in new and interesting directions in order the meet the unique needs of the ASC market.

Outpatient vs. Inpatient Spine Surgery

Outpatient spine procedure volumes have exploded in the last ten years. In 2005, according to Jeff Leland, CEO of Blue Chip Partners, a manager of ambulatory surgery centers, only about 5% of all spine surgeries were performed in an outpatient basis. This year, he estimates, approximately 280, 000 spine procedures will be performed in an outpatient setting. Between 2005 and 2015, he figures, the percentage of spine surgeries performed in an outpatient setting has risen from 5% to 44% of all spine surgeries.

Furthermore, even when a patient undergoes an inpatient surgical spine procedure, the number of days they are staying in the hospital are declining. So, even “inpatient” is becoming more and more “outpatient”.

The following chart from Accelero illustrates this trend.

And what better way to accelerate this trend then to approve nine new ASC reimbursement codes? With outpatient spine case volumes approaching inpatient numbers, it won’t be long before the majority of spine surgery is performed in the outpatient setting.

The economic incentives are clearly aligning to support significant expansion of outpatient spine surgery. According to a recent study of spine surgery procedures by Accelero Health Partners (a practice management consulting group), surgical spine cases accounted for 37% of the total musculoskeletal case contribution margin in 2012 and of that, the outpatient portion amounted to a little under half that at 15%.

Accelero compiled this data from a database of more than 45, 000 inpatient and outpatient surgical spine cases.

Traditional outpatient spine procedures like hernia repair or decompression deliver among the lowest contribution margin of any spine surgery. According to Accelero, the higher contribution procedures are lumbar fusion cases. As the table below illustrates, lumbar fusion contributes an average of $14, 249 per case while traditional outpatient spine surgery contributes about one third as much or $3, 048 per case.

But the BIG story is the difference between inpatient variable cost and outpatient variable cost. Inpatient variable costs are FIVE TIMES greater than outpatient for spine surgery.

Payers understand that outpatient surgery will inherently cost less than inpatient. But ASC-based spine surgery is largely new territory. According to Leland:

“Because outpatient spine is a relatively new phenomenon, payers are uncertain about what it means to their business or how to approach it. Equipment and supply providers have been similarly hesitant. As a result, many payers have dragged their feet on signing on any contracts for fear that they would sign bad ones. Some even preferred to ask their customers (employers) to pay higher rates than admit their confusion.”

“Specifically, spine-focused ASCs should work directly with payers to define algorithms for specific treatments and forge a comprehensive payment system for outpatient spine. Collaborating in this way may cost established spine ASCs some of the massive revenue they’re currently generating, but by demonstrating a savings for the payers, they’ll be more likely to capture a steady, long-term profitable revenue stream.”

Spine Surgery in a Box?

Some of the most innovative new instruments and spinal implants are being designed for this rapidly growing market.

Case in point is Safe Orthopaedics. This French company is innovating a line of single use, sterile and fully traceable instrumentation systems for spine surgery. And Safe is not limiting themselves to decompression or hernia repair. The company is offering the entire range of spinal implants with associated, but disposable, instrumentation in kit form. They are ready to use out of the box.

Safe’s goal is to streamline the expensive, complex and inefficient process by which traditional implant systems are delivered. One cost. No re-use. No sterilization.

The promise of single use implant and instrumentation kits is that they will:

Save time:

• Less operating room prep time
• Always new and ready to use instruments for each surgery
• Fewer instruments (16 instruments)
• Pre-loaded implants
• No stolen/lost implants or instruments

Lower OR procedure costs:

• No cleaning, decontamination and sterilization of instruments
• No sterile paper, detergent, containers needs
• No energy and water costs

Optimize logistics:

• Easier storage
• Simplified and limited inventory
• No delivery delay

The company was founded near Paris in 2010 by Dominique Petit, a 22-year entrepreneur and engineer veteran of innovative spine technologies, Pierre Dumouchel, industrialization expert, and Thomas Droulout, technology and materials expert. The company opened its U.S. subsidiary in 2011 in Memphis, Tennessee.

Surgical instrumentation and implants in a kit is nothing new—it’s just new for spine. ECA Medical Instruments, for example, has been designing and manufacturing sterile-packed single use procedural kits for surgeons since 1979 and has sold more than 30 million single use instruments to date.

Customers for ECA implant device leads, fasteners, screws or connectors are ambulatory surgery centers and outpatient clinics at hospitals and the indications for ECA kits include Cardiac Rhythm Management, Cardiovascular, Neuromodulation, Orthopaedic, Spine, Trauma, Extremity, Sports Medicine and Cranio-Maxillofacial markets.

Horsham, Pennsylvania based Flower Orthopedics also has a spine surgery kit in development. Flower Orthopaedics, which has innovated a number of very clever orthopedic surgical kits, sells the “FlowerCube”. The Flower Cube is a standardized yet comprehensivesystem of implants, instruments and appliances. Each FlowerCube is tailored to the indication. So there are Flower Cubes for ankle bone fixation, or shoulder, or elbow or wrist—you get the idea. Instruments are single-use and disposable. No preoperative, on-site sterilization required.

All the implants in the FlowerCube are visible in the sterile pack, marked and color coded. Each sterile pack has its requisite QR Code and Bar Code.

Keep it Simple; Put it in a Kit and Price Accordingly

A recent study in the Journal of the American College of Surgeons (J Am Coll Surg. 2014 Oct;219(4):646-55. doi: 10.1016/j.jamcollsurg.2014.06.019. Epub 2014 Jul 11) titled Assessing the magnitude and costs of intraoperative inefficiencies attributable to surgical instrument trays authored by Stockert EW and Langerman A, found that the average percentage of instruments used from individual trays were 21.9% for neurosurgery cases, 18.2% for bariatric surgery and 15.5% for plastic surgery. That means that the vast majority of implants and instruments in a typical surgery tray are not used and then repeatedly sterilized.

According to these researchers, the cost of this re-sterilization and repackaging can be as much as $0.51 per instrument or more.

Another study, which was published in the Journal of Otolaryngology Head and Neck Surgery (Reducing otolaryngology surgical inefficiency via assessment of tray redundancy. Christopher J Chin, Leigh J Sowerby, Ava John-Baptiste and Brian W Rotenberg), found that a simple analysis of utilization rates led to a dramatic reduction in the size and complexity of the surgical tray.

Said the authors:

“We conducted a review of instruments on surgical trays for 5 commonly performed procedures between July 5th, 2013 and September 20th, 2013 at St Joseph’s Hospital. The Instrument Utilization Rate was calculated; we then designed new ‘optimized’ trays based on which instruments were used at least 20% of the time. We obtained tray building times from Central Processing Department, then calculated an overall mean time per instrument (to pack the freshly washed instruments). We then determined the time that could be saved by using our new optimized trays. :

In total, 226 instrument trays were observed and the average Instrument Utilization Rate was 27.8% (+/− 13.1). Our optimized trays, on average, reduced tray size by 57%. The average time to pack one instrument was 17.7 seconds.”

Outpatient Spine Surgery

All the pieces for a very different approach to spinal implant and instrumentation have been in place for a while. But CMS’s (Centers for Medicare and Medicare Services) nine new ASC spine surgery codes plus single use, fully disposable spine surgery kits (which rationalize the instrument tray and eliminate pre-op sterilization) may well be the catalyst to make outpatient care the predominate form of spine surgery.