Top Ten New Year’s Orthopedic Industry Resolutions

What does an industry do for New Year’s—lose weight?

In its own way orthopedics has been shedding extra pounds over the last several years as it deals with pricing pressures, challenges to product innovation and evolving business models at the hospital and clinic level.

So, perhaps in the triumph of hope over experience, we offer these ten aspirational resolutions for the New Year.

1.    Reframe and restate the covenant between surgeon and payer.

Payers and physicians need each other. Payers may be from a financial planet and physicians from a healthcare services planet, but the two groups are in each other’s gravitational orbit. So it is time to reframe and restate the covenant that exists between payers and providers.

How? Start with something payers have which providers can use—data and administrative tools. If providers have full access to payer clinical and economic data then perhaps both sides can better agree on costs. Also, take advantage of the payer’s key strength—well-honed administrative tools—to cut back the administrative burden of healthcare delivery.

2.    For hip/knee implant suppliers, find ways to earn more with less.

Prices were uniformly soft across the hip/knee world in 2015 and there is no relief in sight for 2016. Demand for large joint implants is strong and that, assuming currencies stay constant, should allow hip and knee sales to grow slightly in 2016. The best commentary, we think, came from Joanne Wuensch of BMO Capital Markets in her December 14, 2015 Medical Technology report.

“The worldwide Hip market reached $5.6 billion in 2014, increasing 2.2% constant currency, including 2.8% in the U.S. The market includes the usual suspects: Zimmer Biomet holding the No. 1 market share position with 35% share, followed by JNJ at 26%, Stryker at 23%, and Smith & Nephew with 12%. Throughout 2015, it has ebbed and flowed, weighed down by integration issues at Zimmer and Biomet, and a voluntary partial recall from Smith & Nephew of its Birmingham Hip Replacement (BHR) products. We are lowering our estimates for the Hip market in 2015 to 1.4% growth from 1.7%, in 2016 to 1.7% from 2.2%, and 2017 to 1.9% from 2.6%, and we are introducing a 2018 estimate of 2.1%.”

“The Knee market reached $7.1 billion in 2014, increasing 2.3% ex-fx, including a 1.8% rise in the U.S. As with Hips, Zimmer Biomet is the market leader, holding roughly 41% share, followed by JNJ (23%), Stryker (20%), and Smith & Nephew (12%). Given how it is tracking year to date, we estimate that it will increase 2.4% in 2015, and we are lowering our 2016 and 2017 estimate to 2.3% from 3.0%, and introducing a 2018 estimate of 2.4%.

3.    For spinal implant suppliers, fix product line gaps and imbalances.

For market leader Medtronic: add a modular posterior fixation system, an interlaminar stabilization device, a better lateral fixation device, an expandable lateral interbody implant and a lateral interbody fixation device.

For DePuy Synthes: an expandable cage, an interlaminar fixation/stabilization device, a lateral expandable interbody implant, neuromonitoring and a lateral tumor/trauma device.

For Stryker: a total disc replacement implant, modular pedicle screw fixation, interlaminar stabilization system, lateral fixation, neuromonitoring and a lateral tumor/trauma solution.

For NuVasive and Globus, those product lines look pretty complete.

For everyone else, there’s plenty of work to do in 2016.

4.    Address surgeon burn out.

Being an orthopedic surgeon is no easy task. Too often the person everyone looks to for solutions is the one who feels neglected and drained. This year, every institution must address the emotional, physical and psychological toll that this profession requires. Physicians should never be backed into survival mode because of fear of making mistakes, exhaustion, isolation or pressures of day-to-day work. Make 2016 the year that the surgeon burn out gets top priority.

5.    Aim for higher ethics, integrity and patient focus in orthopedics.

A Gallup poll conducted in early December 2015, reported that in terms of honesty and ethics Medical Doctors ranked #3 overall behind Nurses (#1) and Pharmacists (#2). In fact, Americans give Medical Doctors 10 more percentage points in terms of honesty and ethics in 2015 than they did 40 years ago when the poll started (1976). Here’s a news flash. Orthopedic physicians DO aim high in terms of ethics, integrity and patient focus. And the country knows it. Aiming high means taking care of patients and, if the insurance companies will allow it, maybe Orthopedists will overtake Pharmacists in the 2016 poll.

6.    Manage an orderly transition to a bundled care future.

Here are three simple steps to transition to some form of bundled care. Ready? First, after a lot of careful research, select just a couple episodes of care that are amenable to bundled payments. Second, select your patients with care. Third, buy reinsurance to cover those unexpected catastrophic events. On this foundation, you can build a bundled care program.

7.    Retool the logistics of implant, instrument and biologic delivery.

In this era of declining reimbursement for implants, instruments and biologics the supply chain is looking like a fertile area for cost savings. For example, if a hospital runs out of product, their only recourse is to call the supplier directly and place a rush order. If that doesn’t work, then hospitals have to stockpile. Add up all the dollars trapped in instrument trays and consignment inventory and pretty soon we’re talking hundreds of millions of dollars. It’s time to retool the system.

8.    Design a new system for innovating in a deflationary and highly regulated industry.

Innovating implants means running the FDA and CMS gauntlet—which adds tremendous costs to each product. When implant prices are squeezed, there are fewer dollars to pay for running that gauntlet—to say nothing of the R&D process. Taking at face value that innovating implants, instruments, diagnostics and biologics is good for everyone, then Orthopedics needs a new system for innovating.

9.    Solve the ‘conundrum’ of paying for advanced orthopedic care.

Healthcare costs remain a top issue for Americans and one that about a third say led them to put off medical treatment for themselves or a relative. While they have become more amenable to the concept of the government being responsible for providing healthcare, Americans remain overall disapproving of the Affordable Care Act (ACA). What Americans pay for their healthcare premiums has not noticeably improved since the ACA’s implementation, and experts have stressed that a rise in premiums will continue for several years.

Maybe the market is developing an answer. We noticed a very innovative, nascent program emerging in Los Angeles called the Prime Surgeon program, which addresses this issue head on (we’ll have more later). And there are other provider innovations bubbling up too. 2016 could be the year of the provider innovator.

10.  Stay healthy, be wise and work together.

Nuff said.