Can a Hip and Knee Adult Reconstruction Orthopaedic Surgeon Sustain a Practice Comprised Entirely of Medicare Patients? Joseph D. Zuckerman MD, Emmanuel N. Koli MD, Ifeoma Inneh MPH, Richard Iorio MD PII: DOI: Reference:
S0883-5403(14)00354-4 doi: 10.1016/j.arth.2014.02.041 YARTH 54009
To appear in:
Journal of Arthroplasty
Received date: Revised date: Accepted date:
29 September 2013 28 January 2014 6 February 2014
Please cite this article as: Zuckerman Joseph D., Koli Emmanuel N., Inneh Ifeoma, Iorio Richard, Can a Hip and Knee Adult Reconstruction Orthopaedic Surgeon Sustain a Practice Comprised Entirely of Medicare Patients?, Journal of Arthroplasty (2014), doi: 10.1016/j.arth.2014.02.041
This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
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1. Department of Orthopaedic Surgery Division of Adult Reconstructive Surgery NYU Langone Medical Center Hospital for Joint Diseases 301 East 17th Street New York, NY, 10003
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Joseph D. Zuckerman, MD1 Emmanuel N. Koli, MD1 Ifeoma Inneh, MPH1 Richard Iorio, MD1
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Title: Can a Hip and Knee Adult Reconstruction Orthopaedic Surgeon Sustain a Practice Comprised Entirely of Medicare Patients?
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Please address all correspondence to: Joseph D. Zuckerman, MD Chair of the Department of Orthopaedic Surgery NYU Langone Medical Center Hospital for Joint Diseases 301 East 17th Street New York, NY 10003 USA Phone: (212)-598-6674 Fax: (212)-598-6793 Email: [email protected]
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Abstract
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Reimbursement continues to decrease for orthopaedic surgeons specializing in total joint replacement (TJR). Practice information from the Medical Group Management Association (MGMA) Cost Survey and Private practice Compensation Survey and CMS locality reimbursement data was used to develop a practice model for a TJR specialist performing 300 TJR per year (66% Knees, 33% Hips, 15% Revision surgery), evaluating 3000 outpatient visits per year based upon, current Medicare reimbursement rates. Our model shows that the anticipated physician compensation is well below the mean compensation reported for a TJR specialist irrespective of geographic location. When MGMA practice expense data are applied to the Medicare-only model, the salary level is unsustainable. Further decreases in Medicare Part B reimbursement will only worsen the disparity.
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Introduction As the demand for total joint replacement (TJR) has increased in the United States, the inflation-
increase insurance coverage of many formerly uninsured patients. This is
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(PPACA) of 2010 will
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adjusted Medicare reimbursements have decreased. The Patient Protection and Affordable Care Act
expected to occur by expanding eligibility for government sponsored insurance (Medicaid) and by
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the utilization of healthcare exchanges which are expected to provide physician reimbursement
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comparable to Medicare rates.1
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Current funding for the Medicare program is annually at risk due to the budgetary pressures on entitlement programs for a deficit challenged Congress.
Total joint replacement is the largest
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replacement is a constant target for cost containment.
Medicare funding for total joint
Diagnosis Related Group (DRG) expenditure for the Centers for Medicare and Medicaid Services
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(CMS).3,4 Historically, private payers and managed care insurance programs have used Medicare
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reimbursement levels as a target for optimal surgeon reimbursement levels in a mature insurance market (California, Massachusetts, Oregon, Minnesota).5
Further projected cuts in Medicare
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reimbursement for TJR and the downstream effects on other healthcare insurance products have the potential to negatively impact access to an adult reconstructive orthopaedic surgeon (AROS) for TJR.3, 4
The purpose of this exercise was to determine the compensation salary level that could be anticipated by an AROS if all of the patients in their practice were reimbursed at a level equal to Medicare fee-for-service (FFS) rates. It is our hypothesis that an entirely Medicare fee-based practice would not be able to sustain a competitive level of physician compensation.
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Materials and Methods Using data from the 2013 Medical Group Management Association (MGMA) Cost Survey (2013
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Interactive Report Based on 2012 Data), 2013 MGMA Physician Compensation and Production
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Survey (2013 Interactive Report Based on 2012 Data) (Specialty Hip and Joint), and Centers for Medicare and Medicaid Services (CMS) locality reimbursement, a calculation was performed to
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determine how much revenue a TJR surgeon being reimbursed solely at Medicare FFS rates could
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generate. The Current Procedural Terminology (CPT) codes analyzed included 27130 for primary total hip arthroplasty; 27134 for revision hip arthroplasty; 27447 for primary total knee arthroplasty;
MA
27487 for revision total knee arthroplasty. For outpatient visits, CPT codes analyzed were 99203 for new patient visit, and 99213 for follow up visits. Level 3 was selected for both new patient and
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follow-up evaluations based upon patient billing data at our institution for adult reconstruction practices. Medicare FFS rates were calculated for four geographic areas: East, Midwest, South, and
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West. For the East, FFS rates for Boston, Manhattan, Philadelphia, and North Carolina were
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averaged: for the Midwest, rates for Chicago, St. Louis, Ohio, and Detroit were averaged; for the South, rates for Atlanta, Miami, and Houston were averaged; and for the West, rates for Los
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Angeles, Colorado, and Seattle were averaged.
The MGMA is a for-profit organization that conducts quantitative and qualitative research to advance the art and science of medical group management.6 MGMA conducts surveys across the United States categorized in four geographic regions (East, Midwest, South and West). Data utilized consisted
of
the
reported operating/overhead expenses (cost of clinical and non-clinical personnel, staff benefits, malpractice insurance and infrastructure costs). We also utilized MGMA data based upon a mixed
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reimbursement model in which Medicare patients comprise approximately 22% of the practices to
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compare physician compensation with a 100% Medicare patient practice model.6
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Based on the hip and knee adult reconstruction practices at our institution, a model was generated to calculate the collections which could be realized by an AROS who performs 300 TJR
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surgeries per year (66% Knees, and 33% Hips of which 15% are revision surgeries) and 3000
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outpatient visits compensated at current Medicare reimbursement rates only-i.e. a practice in which all patients were insured by Medicare. The 3000 outpatient visits consisted of 1000 new patients
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visits of which 300 underwent surgery. The operative patients were assumed to return for three visits during the year: one postoperative (included in the global fee) and two additional follow-ups (total of
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600 follow-up visits). The remaining 700 new patient evaluations were each projected to return for two follow-up visits during the year (total of 1400 follow-up visits). The projected scenario resulted
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in 1000 new patient evaluations, 300 postoperative visits (no charge) and 2000 follow-up visits. This
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projected practice revenue was then factored into two practice models. Model I assumed a straight 50% overhead of the total revenue; Model II utilized MGMA practice expense data for an AROS,
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which may be a more realistic representation of overhead cost. Overhead consisted of all associated operating expenses (business operating staff, front office support staff, clinical support staff, support staff benefits, malpractice insurance and infrastructure).
Medicare revenue generated from 300 TJRs, 1000 new patient evaluations and 2000 follow-up patient evaluations was computed using 2012 Medicare reimbursement rates for the CPT codes analyzed. Total practice operating expenses was obtained from 2013 MGMA Cost Survey. Operating expenses other than physician salary was deducted from practice revenue in each model. The difference was considered physician compensation of which 30% was considered as the cost of
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fringe benefits. The fringe rate of 30% was based in part on the rate at our own institution which includes all health insurance, disability, life insurance benefits and a pension
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contribution. Fringe benefits were deducted from the revenue available for physician
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compensation to determine physician salary.
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Results
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In a Medicare-only practice model, the mean surgical collections (as representative of the four geographic regions) was $491,387, and the mean outpatient collections was $255,990 for a total
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collection of $747,377 assuming 300 TJR (67% Knees, and 33% Hips) and 3000 outpatient visits respectively (Table 1). There was a slight variation in revenue based upon geographic area with the
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highest amount in the South ($753,929) and the lowest in the West ($739,603). Using Model I (50% overhead), a Medicare-only model would provide a mean of $373,688 for physician compensation.
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Assuming a 30% physician fringe contribution, this would result in a mean physician salary of
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$287,453 (Table 2). This also varied slightly for each geographic area. Once again the highest physician salary would be in the South ($289,973) and the lowest in the West ($284,463). For Model
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II, if we apply the MGMA data on operating expenses (mean= $653,124)7 to the Medicare-only revenue model (total mean collections= $747,377), there would be a net surplus of $94,253 for total physician compensation resulting in a mean physician salary of $72,502 (Table 2). Comparison with mean MGMA physician salary data for a Hip and Knee AROS is included in Table 3 for comparison with Models I and II projections.
Discussion The Patient Protection and Affordable Care Act (PPACA) of 2010 will increase insurance coverage of many formerly uninsured patients.
This is expected to occur by expanding eligibility for
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government sponsored insurance (Medicaid) and by the utilization of health care exchanges which are expected to provide physician reimbursement comparable to Medicare rates.1
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This is particularly relevant to Model I, which relies completely on a Medicare reimbursement
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model. Reimbursements for TJR have decreased despite increases in inflation. In 2005, physicians were reimbursed $1,508 for a total knee arthroplasty (TKA), a 38% decrease from the $2,418 8, 9
Comparably, in 2005, physicians were
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reimbursement in 1990 for the same procedure.3,
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reimbursed $1,396 for a total hip arthroplasty (THA), a 46% decrease from the $2,575 reimbursement in 1990.3, 8, 9 This is the exactly opposite to the change that would have occurred if
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the 1990 fees were adjusted based upon inflation. In 2005, inflation-adjusted reimbursement rates should have been $3,667 and $3,905 for total knee and hip arthroplasty respectively to reflect the
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same monetary value as 1990. In 2005, there was actually a decrease in inflation-adjusted dollars of 59% and 64% for total knee and hip arthroplasty respectively.3, 8, 9
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Our calculations indicate that the mean physician salary from our ‘Medicare-only’ reimbursement
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practice is significantly less than the mean salary for a Hip and Knee AROS as reported by MGMA. For Model I the physician salary is approximately 33% of the mean salary reported by MGMA. For
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Model II, when MGMA practice expense data are applied to the Medicare-only reimbursement practice the physician salary is approximately 8% of the mean salary reported by MGMA. The amount available after total operating expenses ($653,124) are deducted from total Medicare collections ($747,377) is insufficient to support an AROS in practice.
We recognize that a Medicare-only reimbursement model is not realistic at present. However, as healthcare financing under the PPACA continues to evolve the mixed reimbursement model (Medicare and non-Medicare insured patients) will be less and less “mixed” further decreasing physician compensation levels. 2013 MGMA data documented that an AROS in practice has
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approximately 22% Medicare patients (inclusive of Medicare FFS, Medicare Managed Care FFS and Medicare Capitated). This percentage can be expected to increase as a result of two factors: the aging
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of our population and the expansion of health coverage that will result for the PPACA.
In addition, if Medicare reimbursements for THR and TKR were to decrease up to 20% as has been
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proposed, it will further decrease the revenue generated from the care provided for Medicare
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patients. This can be expected to ultimately have an impact on patient access to AROS. A recent survey has shown that 49% to 57% of the members of the American Association of Hip and Knee
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Surgeons (AAHKS) would be unwilling to provide care for Medicare patients if a 20% decrease in reimbursement occurred, resulting in an unmet need of 92,650 to 160,818 total joint arthroplasty
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procedures each year.2
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A study of this type does have certain limitations. First, it is based on a Medicare-only
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reimbursement model, which admittedly does not occur today. However, it was selected to emphasize the impact of the decreasing Medicare reimbursement on an AROS practice. Of course,
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we assumed that all fees would be collected, which is also not realistic. Therefore, the amount of calculated revenue in the Medicare-only reimbursement model was the maximum to be expected for the patient volume utilized. Second, our revenue calculation did not include any revenue from inoffice imaging or other ancillary services (physical therapy, advanced imaging, ambulatory surgery centers). This would certainly increase the revenue in the Medicare-only reimbursement model. Similarly the contribution of revenue from ancillary services was certainly included in the MGMA data but the amount and significance of this contribution could not be determined. In a sense, our revenue estimates represented a “worst case” situation – a practice composed entirely of Medicare patients with no sources of ancillary revenue. Although that may not be the situation at present,
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changes in healthcare financing and additional restrictions on physician ownership of ancillary
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services have the potential to move us closer and closer to this model.
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Conclusion
In our Medicare-only practice model the total revenue is inadequate to sustain reasonable physician
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compensation compared to mean physician salary for an AROS as reported by MGMA. As the
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mixed payor model continues to move closer to a Medicare-only model the ability to sustain an AROS in practice will become more and more difficult if not impossible. To provide the necessary
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patient access alternative reimbursement models will be needed.
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References 1. Porucznik MA. Health Care Reform isn’t the only challenge for Orthopaedics. AAOS Now.
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2011; 29.
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2. Iorio R, Davis C, Healy WL, Fehring T, O’Connor MI, and York S. Impact of the Economic Downturn on Adult Reconstruction Surgery: A Survey of the American Association of Hip and
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Knee Surgeons. Journal of Arthroplasty 2010; 25(7): 1005-140.
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3. Fehring T, Odum S, Troyer J, and Iorio R. Joint Replacement Access in 2016: A Supply Side Crisis. Journal of Arthroplasty 2010; 25(8): 1175-1181.
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4. Iorio R, Robb WJ, Haly WL, Berry DJ, Hozack WJ, Kyle RF, et al. Orthopaedic Surgeon Workforce and Volume Assessment for Total Hip and Total Knee Replacement in the United
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States – Preparing for an Epidemic: Orthopaedic Forum. Journal of Bone and Joint Surgery 2008; 90A: 1598-605.
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5. Rana A, Iorio R, and Healy WL. Hospital Economics of Primary Total Hip Arthroplasty:
6. The
Medical
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Evolution from 1990 to 2008. Clinical Orthopaedics and Related Research 2011; 469: 355-361. Group
Management
Association.
Retrieved
August
6th,
2013
from
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http://www.mgma.com/about/ 7. The Medical Group Management Association. 2013 Total Joint Replacement (Hip & Knee) Geographic Impact Analysis: Single Specialty Orthopaedic Provider (per FTE Physician). 8. Fehring TK, Odum S, Griffin WL, Mason JB, McCoy TH et al. The Obesity Epidemic: It's Effect on Total Joint Arthroplasty. Journal of Arthroplasty 2007; 22(2): 71. 9. Friedman SM. Compensation “Inflation Calculator.” Statistical Abstracts of the United States. http://www.westegg.com/inflation/
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Table 1. Total revenue on Medicare-only collections (Non facility price) across four major geographic regions assuming 300 TJR (67% TKAs, 33% THA, 15% of which are revisions) and 3000 outpatient visits.
United States
East
Midwest
South
West
27447 27487 27130 27134
$275,989.90 $55,773.68 $129,178.96 $30,444.19 $491,387
$275,609.10 $55,667.10 $128,992.60 $30,367.05 $490,636
$277,900.70 $56,225.40 $130,089.95 $30,733.50 $494,950
$280,296.00 $56,686.80 $131,206.85 $30,969.30 $499,159
$270,153.80 $54,515.40 $126,426.45 $29,706.90 $480,803
Outpatient Revenue 1000 new outpatient visits (level 3) 2000 follow-up visits (level 3) Total
99203 99213
$109,565 $146,425 $255,990
$110,580 $148,060 $258,640
$107,970 $143,780 $251,750
$109,270 $145,500 $254,770
$110,440 $148,360 $258,800
$747,377
$749,276
$746,700
$753,929
$739,603
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Total Revenue from Medicare Collections
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CPT Code Revenue from surgical procedures 170 Primary TKA 30 Revision TKA 85 Primary THA 15 Revision THA Total
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Table 2. Physician salary assuming 30% fringe contribution after overhead expenses and MGMA practice expenses in a Medicare-only collections model across four major geographic regions. East $749,276
$373,689
$374,638
$653,124
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$72,502 $21,751
South $753,929
West $739,603
$373,350
$376,965
$369,802
$288,183 $86,455
$287,192 $86,158
$289,973 $86,992
$284,463 $85,339
$653,124
$653,124
$653,124
$653,124
$73,963 $22,189
$71,982 $21,594
$77,542 $23,263
$66,522 $19,957
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$287,453 $86,236
Model II Assuming MGMA practice expense Physician Compensation Salary Fringe Contribution (30%)
Midwest $746,700
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Model I Assuming 50% contribution to overhead expenses Physician Compensation Salary Fringe Contribution (30%)
United States $747,377
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Total Medicare-only collections
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United States $287,453 $72,502 $863,104
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Expense Model Model I Model II MGMA Survey
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Table 3. Physician salary calculations for an AROS in a Medicare-only collections model utilizing different practice expense models. Salary is compared with the mean MGMA salary for a Hip and Knee AROS (excludes fringe benefit). Model I: Assumes 50% overhead Model II: Utilizes MGMA practice expense data for an AROS
S0883-5403(14)00354-4 doi: 10.1016/j.arth.2014.02.041 YARTH 54009
To appear in:
Journal of Arthroplasty
Received date: Revised date: Accepted date:
29 September 2013 28 January 2014 6 February 2014
Please cite this article as: Zuckerman Joseph D., Koli Emmanuel N., Inneh Ifeoma, Iorio Richard, Can a Hip and Knee Adult Reconstruction Orthopaedic Surgeon Sustain a Practice Comprised Entirely of Medicare Patients?, Journal of Arthroplasty (2014), doi: 10.1016/j.arth.2014.02.041
This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
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1. Department of Orthopaedic Surgery Division of Adult Reconstructive Surgery NYU Langone Medical Center Hospital for Joint Diseases 301 East 17th Street New York, NY, 10003
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Joseph D. Zuckerman, MD1 Emmanuel N. Koli, MD1 Ifeoma Inneh, MPH1 Richard Iorio, MD1
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Title: Can a Hip and Knee Adult Reconstruction Orthopaedic Surgeon Sustain a Practice Comprised Entirely of Medicare Patients?
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Please address all correspondence to: Joseph D. Zuckerman, MD Chair of the Department of Orthopaedic Surgery NYU Langone Medical Center Hospital for Joint Diseases 301 East 17th Street New York, NY 10003 USA Phone: (212)-598-6674 Fax: (212)-598-6793 Email: [email protected]
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Abstract
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Reimbursement continues to decrease for orthopaedic surgeons specializing in total joint replacement (TJR). Practice information from the Medical Group Management Association (MGMA) Cost Survey and Private practice Compensation Survey and CMS locality reimbursement data was used to develop a practice model for a TJR specialist performing 300 TJR per year (66% Knees, 33% Hips, 15% Revision surgery), evaluating 3000 outpatient visits per year based upon, current Medicare reimbursement rates. Our model shows that the anticipated physician compensation is well below the mean compensation reported for a TJR specialist irrespective of geographic location. When MGMA practice expense data are applied to the Medicare-only model, the salary level is unsustainable. Further decreases in Medicare Part B reimbursement will only worsen the disparity.
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Introduction As the demand for total joint replacement (TJR) has increased in the United States, the inflation-
increase insurance coverage of many formerly uninsured patients. This is
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(PPACA) of 2010 will
T
adjusted Medicare reimbursements have decreased. The Patient Protection and Affordable Care Act
expected to occur by expanding eligibility for government sponsored insurance (Medicaid) and by
SC
the utilization of healthcare exchanges which are expected to provide physician reimbursement
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comparable to Medicare rates.1
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Current funding for the Medicare program is annually at risk due to the budgetary pressures on entitlement programs for a deficit challenged Congress.
Total joint replacement is the largest
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replacement is a constant target for cost containment.
Medicare funding for total joint
Diagnosis Related Group (DRG) expenditure for the Centers for Medicare and Medicaid Services
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(CMS).3,4 Historically, private payers and managed care insurance programs have used Medicare
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reimbursement levels as a target for optimal surgeon reimbursement levels in a mature insurance market (California, Massachusetts, Oregon, Minnesota).5
Further projected cuts in Medicare
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reimbursement for TJR and the downstream effects on other healthcare insurance products have the potential to negatively impact access to an adult reconstructive orthopaedic surgeon (AROS) for TJR.3, 4
The purpose of this exercise was to determine the compensation salary level that could be anticipated by an AROS if all of the patients in their practice were reimbursed at a level equal to Medicare fee-for-service (FFS) rates. It is our hypothesis that an entirely Medicare fee-based practice would not be able to sustain a competitive level of physician compensation.
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Materials and Methods Using data from the 2013 Medical Group Management Association (MGMA) Cost Survey (2013
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Interactive Report Based on 2012 Data), 2013 MGMA Physician Compensation and Production
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Survey (2013 Interactive Report Based on 2012 Data) (Specialty Hip and Joint), and Centers for Medicare and Medicaid Services (CMS) locality reimbursement, a calculation was performed to
SC
determine how much revenue a TJR surgeon being reimbursed solely at Medicare FFS rates could
NU
generate. The Current Procedural Terminology (CPT) codes analyzed included 27130 for primary total hip arthroplasty; 27134 for revision hip arthroplasty; 27447 for primary total knee arthroplasty;
MA
27487 for revision total knee arthroplasty. For outpatient visits, CPT codes analyzed were 99203 for new patient visit, and 99213 for follow up visits. Level 3 was selected for both new patient and
ED
follow-up evaluations based upon patient billing data at our institution for adult reconstruction practices. Medicare FFS rates were calculated for four geographic areas: East, Midwest, South, and
PT
West. For the East, FFS rates for Boston, Manhattan, Philadelphia, and North Carolina were
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averaged: for the Midwest, rates for Chicago, St. Louis, Ohio, and Detroit were averaged; for the South, rates for Atlanta, Miami, and Houston were averaged; and for the West, rates for Los
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Angeles, Colorado, and Seattle were averaged.
The MGMA is a for-profit organization that conducts quantitative and qualitative research to advance the art and science of medical group management.6 MGMA conducts surveys across the United States categorized in four geographic regions (East, Midwest, South and West). Data utilized consisted
of
the
reported operating/overhead expenses (cost of clinical and non-clinical personnel, staff benefits, malpractice insurance and infrastructure costs). We also utilized MGMA data based upon a mixed
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reimbursement model in which Medicare patients comprise approximately 22% of the practices to
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compare physician compensation with a 100% Medicare patient practice model.6
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Based on the hip and knee adult reconstruction practices at our institution, a model was generated to calculate the collections which could be realized by an AROS who performs 300 TJR
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surgeries per year (66% Knees, and 33% Hips of which 15% are revision surgeries) and 3000
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outpatient visits compensated at current Medicare reimbursement rates only-i.e. a practice in which all patients were insured by Medicare. The 3000 outpatient visits consisted of 1000 new patients
MA
visits of which 300 underwent surgery. The operative patients were assumed to return for three visits during the year: one postoperative (included in the global fee) and two additional follow-ups (total of
ED
600 follow-up visits). The remaining 700 new patient evaluations were each projected to return for two follow-up visits during the year (total of 1400 follow-up visits). The projected scenario resulted
PT
in 1000 new patient evaluations, 300 postoperative visits (no charge) and 2000 follow-up visits. This
CE
projected practice revenue was then factored into two practice models. Model I assumed a straight 50% overhead of the total revenue; Model II utilized MGMA practice expense data for an AROS,
AC
which may be a more realistic representation of overhead cost. Overhead consisted of all associated operating expenses (business operating staff, front office support staff, clinical support staff, support staff benefits, malpractice insurance and infrastructure).
Medicare revenue generated from 300 TJRs, 1000 new patient evaluations and 2000 follow-up patient evaluations was computed using 2012 Medicare reimbursement rates for the CPT codes analyzed. Total practice operating expenses was obtained from 2013 MGMA Cost Survey. Operating expenses other than physician salary was deducted from practice revenue in each model. The difference was considered physician compensation of which 30% was considered as the cost of
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fringe benefits. The fringe rate of 30% was based in part on the rate at our own institution which includes all health insurance, disability, life insurance benefits and a pension
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contribution. Fringe benefits were deducted from the revenue available for physician
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compensation to determine physician salary.
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Results
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In a Medicare-only practice model, the mean surgical collections (as representative of the four geographic regions) was $491,387, and the mean outpatient collections was $255,990 for a total
MA
collection of $747,377 assuming 300 TJR (67% Knees, and 33% Hips) and 3000 outpatient visits respectively (Table 1). There was a slight variation in revenue based upon geographic area with the
ED
highest amount in the South ($753,929) and the lowest in the West ($739,603). Using Model I (50% overhead), a Medicare-only model would provide a mean of $373,688 for physician compensation.
PT
Assuming a 30% physician fringe contribution, this would result in a mean physician salary of
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$287,453 (Table 2). This also varied slightly for each geographic area. Once again the highest physician salary would be in the South ($289,973) and the lowest in the West ($284,463). For Model
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II, if we apply the MGMA data on operating expenses (mean= $653,124)7 to the Medicare-only revenue model (total mean collections= $747,377), there would be a net surplus of $94,253 for total physician compensation resulting in a mean physician salary of $72,502 (Table 2). Comparison with mean MGMA physician salary data for a Hip and Knee AROS is included in Table 3 for comparison with Models I and II projections.
Discussion The Patient Protection and Affordable Care Act (PPACA) of 2010 will increase insurance coverage of many formerly uninsured patients.
This is expected to occur by expanding eligibility for
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government sponsored insurance (Medicaid) and by the utilization of health care exchanges which are expected to provide physician reimbursement comparable to Medicare rates.1
T
This is particularly relevant to Model I, which relies completely on a Medicare reimbursement
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model. Reimbursements for TJR have decreased despite increases in inflation. In 2005, physicians were reimbursed $1,508 for a total knee arthroplasty (TKA), a 38% decrease from the $2,418 8, 9
Comparably, in 2005, physicians were
SC
reimbursement in 1990 for the same procedure.3,
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reimbursed $1,396 for a total hip arthroplasty (THA), a 46% decrease from the $2,575 reimbursement in 1990.3, 8, 9 This is the exactly opposite to the change that would have occurred if
MA
the 1990 fees were adjusted based upon inflation. In 2005, inflation-adjusted reimbursement rates should have been $3,667 and $3,905 for total knee and hip arthroplasty respectively to reflect the
ED
same monetary value as 1990. In 2005, there was actually a decrease in inflation-adjusted dollars of 59% and 64% for total knee and hip arthroplasty respectively.3, 8, 9
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Our calculations indicate that the mean physician salary from our ‘Medicare-only’ reimbursement
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practice is significantly less than the mean salary for a Hip and Knee AROS as reported by MGMA. For Model I the physician salary is approximately 33% of the mean salary reported by MGMA. For
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Model II, when MGMA practice expense data are applied to the Medicare-only reimbursement practice the physician salary is approximately 8% of the mean salary reported by MGMA. The amount available after total operating expenses ($653,124) are deducted from total Medicare collections ($747,377) is insufficient to support an AROS in practice.
We recognize that a Medicare-only reimbursement model is not realistic at present. However, as healthcare financing under the PPACA continues to evolve the mixed reimbursement model (Medicare and non-Medicare insured patients) will be less and less “mixed” further decreasing physician compensation levels. 2013 MGMA data documented that an AROS in practice has
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approximately 22% Medicare patients (inclusive of Medicare FFS, Medicare Managed Care FFS and Medicare Capitated). This percentage can be expected to increase as a result of two factors: the aging
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of our population and the expansion of health coverage that will result for the PPACA.
In addition, if Medicare reimbursements for THR and TKR were to decrease up to 20% as has been
SC
proposed, it will further decrease the revenue generated from the care provided for Medicare
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patients. This can be expected to ultimately have an impact on patient access to AROS. A recent survey has shown that 49% to 57% of the members of the American Association of Hip and Knee
MA
Surgeons (AAHKS) would be unwilling to provide care for Medicare patients if a 20% decrease in reimbursement occurred, resulting in an unmet need of 92,650 to 160,818 total joint arthroplasty
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procedures each year.2
PT
A study of this type does have certain limitations. First, it is based on a Medicare-only
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reimbursement model, which admittedly does not occur today. However, it was selected to emphasize the impact of the decreasing Medicare reimbursement on an AROS practice. Of course,
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we assumed that all fees would be collected, which is also not realistic. Therefore, the amount of calculated revenue in the Medicare-only reimbursement model was the maximum to be expected for the patient volume utilized. Second, our revenue calculation did not include any revenue from inoffice imaging or other ancillary services (physical therapy, advanced imaging, ambulatory surgery centers). This would certainly increase the revenue in the Medicare-only reimbursement model. Similarly the contribution of revenue from ancillary services was certainly included in the MGMA data but the amount and significance of this contribution could not be determined. In a sense, our revenue estimates represented a “worst case” situation – a practice composed entirely of Medicare patients with no sources of ancillary revenue. Although that may not be the situation at present,
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changes in healthcare financing and additional restrictions on physician ownership of ancillary
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services have the potential to move us closer and closer to this model.
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Conclusion
In our Medicare-only practice model the total revenue is inadequate to sustain reasonable physician
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compensation compared to mean physician salary for an AROS as reported by MGMA. As the
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mixed payor model continues to move closer to a Medicare-only model the ability to sustain an AROS in practice will become more and more difficult if not impossible. To provide the necessary
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patient access alternative reimbursement models will be needed.
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References 1. Porucznik MA. Health Care Reform isn’t the only challenge for Orthopaedics. AAOS Now.
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2011; 29.
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2. Iorio R, Davis C, Healy WL, Fehring T, O’Connor MI, and York S. Impact of the Economic Downturn on Adult Reconstruction Surgery: A Survey of the American Association of Hip and
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Knee Surgeons. Journal of Arthroplasty 2010; 25(7): 1005-140.
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3. Fehring T, Odum S, Troyer J, and Iorio R. Joint Replacement Access in 2016: A Supply Side Crisis. Journal of Arthroplasty 2010; 25(8): 1175-1181.
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4. Iorio R, Robb WJ, Haly WL, Berry DJ, Hozack WJ, Kyle RF, et al. Orthopaedic Surgeon Workforce and Volume Assessment for Total Hip and Total Knee Replacement in the United
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States – Preparing for an Epidemic: Orthopaedic Forum. Journal of Bone and Joint Surgery 2008; 90A: 1598-605.
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5. Rana A, Iorio R, and Healy WL. Hospital Economics of Primary Total Hip Arthroplasty:
6. The
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Evolution from 1990 to 2008. Clinical Orthopaedics and Related Research 2011; 469: 355-361. Group
Management
Association.
Retrieved
August
6th,
2013
from
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http://www.mgma.com/about/ 7. The Medical Group Management Association. 2013 Total Joint Replacement (Hip & Knee) Geographic Impact Analysis: Single Specialty Orthopaedic Provider (per FTE Physician). 8. Fehring TK, Odum S, Griffin WL, Mason JB, McCoy TH et al. The Obesity Epidemic: It's Effect on Total Joint Arthroplasty. Journal of Arthroplasty 2007; 22(2): 71. 9. Friedman SM. Compensation “Inflation Calculator.” Statistical Abstracts of the United States. http://www.westegg.com/inflation/
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Table 1. Total revenue on Medicare-only collections (Non facility price) across four major geographic regions assuming 300 TJR (67% TKAs, 33% THA, 15% of which are revisions) and 3000 outpatient visits.
United States
East
Midwest
South
West
27447 27487 27130 27134
$275,989.90 $55,773.68 $129,178.96 $30,444.19 $491,387
$275,609.10 $55,667.10 $128,992.60 $30,367.05 $490,636
$277,900.70 $56,225.40 $130,089.95 $30,733.50 $494,950
$280,296.00 $56,686.80 $131,206.85 $30,969.30 $499,159
$270,153.80 $54,515.40 $126,426.45 $29,706.90 $480,803
Outpatient Revenue 1000 new outpatient visits (level 3) 2000 follow-up visits (level 3) Total
99203 99213
$109,565 $146,425 $255,990
$110,580 $148,060 $258,640
$107,970 $143,780 $251,750
$109,270 $145,500 $254,770
$110,440 $148,360 $258,800
$747,377
$749,276
$746,700
$753,929
$739,603
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Total Revenue from Medicare Collections
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CPT Code Revenue from surgical procedures 170 Primary TKA 30 Revision TKA 85 Primary THA 15 Revision THA Total
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Table 2. Physician salary assuming 30% fringe contribution after overhead expenses and MGMA practice expenses in a Medicare-only collections model across four major geographic regions. East $749,276
$373,689
$374,638
$653,124
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$72,502 $21,751
South $753,929
West $739,603
$373,350
$376,965
$369,802
$288,183 $86,455
$287,192 $86,158
$289,973 $86,992
$284,463 $85,339
$653,124
$653,124
$653,124
$653,124
$73,963 $22,189
$71,982 $21,594
$77,542 $23,263
$66,522 $19,957
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$287,453 $86,236
Model II Assuming MGMA practice expense Physician Compensation Salary Fringe Contribution (30%)
Midwest $746,700
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Model I Assuming 50% contribution to overhead expenses Physician Compensation Salary Fringe Contribution (30%)
United States $747,377
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Total Medicare-only collections
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United States $287,453 $72,502 $863,104
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Expense Model Model I Model II MGMA Survey
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Table 3. Physician salary calculations for an AROS in a Medicare-only collections model utilizing different practice expense models. Salary is compared with the mean MGMA salary for a Hip and Knee AROS (excludes fringe benefit). Model I: Assumes 50% overhead Model II: Utilizes MGMA practice expense data for an AROS
