The Affordable Care Act and Orthopaedic Trauma Neil M. Issar, BSc* and A. Alex Jahangir, MD, MMHC†

Summary: The Affordable Care Act has resulted in a dramatic governmental restructuring of the healthcare insurance market and delivery system. Orthopaedic traumatologists must be aware of the law’s impact on their clinical practice, finances, and overall business model. This includes the effect of accountable care organizations, the Independent Payment Advisory Board, and the Physician ValueBased Payment Modifier program, as well as the impact of the Affordable Care Act’s grace period provision, medical device excise tax, and cuts to funding for the Disproportionate Share Hospital program. Key Words: Affordable Care Act, DSH, Orthopaedic Trauma, physician value-based payment modifier (J Orthop Trauma 2014;28:S5–S7)

INTRODUCTION The Affordable Care Act (ACA) enacted major changes to the laws governing health care in response to the need for comprehensive health reform to expand coverage, improve quality, and control costs.1,2 This required a dramatic governmental restructuring of the healthcare insurance market and delivery system.3 The law incentivizes adoption of a model in which healthcare practitioners, especially specialists such as orthopaedic trauma surgeons, reduce costs by shifting to value-based reimbursement, such that delivery of the highest quality outcomes at the lowest possible cost becomes the public standard.4 Although health care quality assessment and improvement have been fundamental elements of the practice of medicine for many decades, they were historically safeguarded voluntarily and rarely focused on costs.5,6 The ACA adds a new dimension to these efforts by authorizing various value-based payment and delivery reforms that fundamentally change the way in which medical care is delivered, evaluated, and financed.5

to help reduce costs and increase the value of delivered care.7 An ACO involves a network of physicians and hospitals created to share the responsibility of providing care for a group of patients and incentivized to keep patients healthy. ACOs encourage clinical practices in which providers keep costs low and patients healthy by sharing savings from efficient care. The corollary is that physicians also assume the risk of sharing any losses that are incurred from providing more costly care. It is unclear how specialty surgical practices such as orthopaedic trauma surgery will function in an ACO world. Specifically, it is unclear how the delivery of trauma care will be impacted by the creation of ACOs as the most appropriate trauma center may not be within the patient’s ACO. Additionally, many of the quality benchmarks focus on prevention and management of chronic diseases, resulting in primary care physicians being the central figure in most ACO models.


One of the core tenets of the ACA is development and expansion of the accountable care organization (ACO) model

The Independent Payment Advisory Board (IPAB) is an entity housed within the executive branch of government and consists of 15 members appointed by the President and confirmed by Senate.5,8 The creation of the IPAB has been trumpeted as a critical mechanism for slowing increases in healthcare spending, but it is also controversial because of concerns about its unrestricted power and its potential to arbitrarily limit patient access to necessary care.8 Beginning in 2015, if healthcare expenditure growth exceeds set targets, the IPAB will make obligatory recommendations to cut spending in Medicare.8 If Congress does not move to pass legislation, the Secretary of the Department of Health and Human Services is legally required to implement the IPAB’s recommendations. The IPAB’s lack of public accountability and its intention to curb Medicare spending have been points of concern. In particular, the American Academy of Orthopaedic Surgeons (AAOS) is concerned about the impact that IPABdirected cuts will have on patient access to musculoskeletal care and about the ability of the IPAB to focus on long-term delivery system reforms due to the yearly spending targets that must be met.

Accepted for publication July 17, 2014. From the *Vanderbilt Law School South, Nashville, TN; and †Department of Orthopaedic Surgery and Rehabilitation, Vanderbilt Orthopaedics, Nashville, TN. The authors report no conflict of interest. Reprints: A. Alex Jahangir, MD, MMHC, Department of Orthopaedic Surgery and Rehabilitation, Vanderbilt Orthopaedics, 1215 21st Avenue South, Medical Center East, Suite 4200, Nashville, TN 37232-8774 (e-mail: [email protected]). Copyright © 2014 by Lippincott Williams & Wilkins

Under the ACA, physicians will now be responsible for collecting and reporting quality indicators about patients. Furthermore, physicians’ performance will be evaluated by their adoption and use of quality standards in clinical practice. To promote the goals of lowering costs and improving patient care, the ACA also strongly emphasizes a transition



J Orthop Trauma  Volume 28, Number 10 Supplement, October 2014 |


Issar and Jahangir

J Orthop Trauma  Volume 28, Number 10 Supplement, October 2014

toward value-based purchasing models. This model is a drastic departure from the Hospital Inpatient Quality Reporting Program and the Physician Quality Reporting System, which tied reimbursement only to the reporting of performance on quality metrics.9 Under the value-based purchasing model, Medicare reimbursement will be tied directly to the achievement of certain cost and quality benchmarks, including those related to patient satisfaction.5 Additionally, the Center for Medicare and Medicaid Services will reduce Medicare payments to hospitals for services related to preventable readmissions and hospital-acquired conditions.

DISPROPORTIONATE SHARE HOSPITAL PROGRAMS The ACA includes provisions to reduce payments under the Medicare and Medicaid Disproportionate Share Hospital (DSH) programs beginning in 2014. These programs, which pay out approximately $22 billion every year, partially reimburse many hospitals for uncompensated care provided to low-income and uninsured patients.10 Scheduled reductions to the Medicaid DSH program will total $18.1 billion between 2014 and 2020.11,12 Conversely, reductions to the Medicare DSH program will be determined by a new formula that begins with a 75% decrease from current levels and then reimburses funds on the basis of the percentage decreases in states’ uninsured rates.10 DSH reductions could create considerable financial deficits for hospitals in states that forego the ACA’s Medicaid expansion. This is especially troublesome for orthopaedic traumatologists who treat many uninsured and low-income patients. In addition, a coverage gap will remain in such states, because the insurance exchanges created by the ACA were intended to serve patients who have incomes greater than 100% of federal poverty level with patients earning less becoming eligible for Medicaid.13 States opting out of Medicaid expansion could thereby have patients with incomes less than 100% of federal poverty level uncovered by Medicaid, and simultaneously ineligible to buy discounted insurance through the exchanges.13 These patients would remain uninsured and become the primary beneficiaries of uncompensated hospital care.10 In other words, hospitals in nonexpansion states could face an alarming decline in DSH funding despite seeing little or no change in the amount of uncompensated care provided, which would directly affect compensation for traumatologists and other physicians responsible for the provision of this care.

PHYSICIAN VALUE-BASED PAYMENT MODIFIER The ACA requires that Center for Medicare and Medicaid Services implement a Physician Value-Based Payment Modifier (PVBM) for Medicare patients. Under the PVBM, Medicare physician payments will be adjusted to reflect performance using quality data from the Physician Quality Reporting System and cost data from Medicare feefor-service claims.14 In 2015, the PVBM will be applied to group practices with 100 or more eligible providers, and it will expand to individual and small group practices with 10 or more providers in 2017.15 The PVBM can provide a maximum



bonus of 2% of Medicare fees to physicians who perform well on quality and cost metrics, but it can also impose a penalty of 1% to those who perform worse than average or who choose not to be involved in the program.15 The metrics being used in the PVBM may be too focused on the primary care sector and may make it difficult for orthopaedic traumatologists to be successful using the benchmarks.15 In addition, physicians who work in smaller practices may not have the organizational affiliations needed to measure and improve the quality and cost of care, and will therefore be penalized for nonclinical metrics.15


The ACA includes a 90-day “grace period” for people with government-subsidized coverage purchased through a state’s insurance exchange. If an enrollee falls behind on their premium payments, insurers must cover their medical bills for 30 days. But for the next 60 days, insurers may hold off paying the claims, and ultimately deny them if the patient does not catch up on his or her premiums. In this case, physicians would not receive payment for their services. If the insurer ends up canceling the policy after 90 days, physicians can bill patients directly but will then face the difficulty and uncertainty inherent in direct collection of payments from patients. The grace period provision transfers a majority of the fiscal risk to physicians and health care providers where it had traditionally been a role for insurers. The American Medical Association provides resources to educate and advise physicians regarding the ACA grace period provision, and orthopaedic traumatologists should be aware of how insurers will notify them if their patients enter the grace period.16

MEDICAL DEVICE EXCISE TAX The ACA also implemented several new taxes in 2013. One that directly affects orthopaedic surgery is the 2.3% medical device excise tax levied on medical devices including orthopaedic trauma implants.17 Although increased tax revenues are expected to generate over $20–$30 billion to offset the costs of the ACA, the taxes have negatively affected employment at device manufacturers.17–19 For example, Stryker announced that it would lay off 1170 employees in response to anticipated ACA costs in November 2012.20 In the long-term, the tax could affect research and development budgets, negatively affecting innovation and educational budgets.19 Moreover, once current purchasing contracts with hospitals expire and are renegotiated, the increased cost of orthopaedic implants could be passed on to consumers.17

HITECH ACT AND “MEANINGFUL USE” The Health Information Technology for Economic and Clinical Health Act was enacted to move toward value-based healthcare. Physicians must be aware that the goal of Health Information Technology for Economic and Clinical Health Act is not adoption alone, but “meaningful use” of Electronic Health Records—their use by providers to achieve significant Ó 2014 Lippincott Williams & Wilkins

J Orthop Trauma  Volume 28, Number 10 Supplement, October 2014

improvements in care.21 The legislation ties payments specifically to the achievement of specific advances in health care processes and outcomes, including active exchange of health information and the collection of clinical quality metrics to assess performance.5 The total incentive payment is lower for those who take longer to meet the requirements and, starting in 2015, the bonuses turn into penalties if meaningful use of Electronic Health Records has not been achieved.5 The AAOS has extensive information on implementing an EMR and applying for incentives without harming physician productivity or a practice’s business model.22

SHIFT TO HOSPITAL EMPLOYMENT As the mandates on reporting quality data can potentially be more challenging and costly for a private practice physician, smaller private groups will most likely need to collaborate or merge with larger groups to combine resources and improve the value of the care provided to maintain long-term solvency.23 From 2004 to 2010, the percentage of respondents to the biannual AAOS member survey who are in solo private practice dropped by 28%, whereas the percentage of respondents who are hospital employed increased by more than 300%.24 Bundled payment models, quality incentive contracts, and other capitated payment schemes continue to gain popularity and will be necessary to drive down healthcare costs. Hospitals are anticipating these changes by building integrated delivery systems through the acquisition of physician practices and freestanding ancillary businesses.23

CONCLUSIONS Overall, the ACA marks the beginning of shift from producer-centered, volume-driven payment models to patientcentered, outcomes-driven models to slow rising healthcare costs while improving the quality and value of care. It is vital for orthopaedic trauma surgeons to understand the law’s impact to their clinical practice and business models to continue to provide high-quality patient care. REFERENCES 1. Bonnyman G, Garr T. Obamacare: cautionary lessons from the Tennessee prequel. J Health Care Poor Underserved. 2014;25:xxv–xxxi. 2. DeBoer MJ. Access without limits? Revisiting barriers and boundaries in the post-affordable care world. Conn L Rev. 2012;44:1239–1280. 3. Selker HP, Wasser JS. The Affordable Care Act as a National Experiment: Health Policy Innovations and Lessons. Springer; New York: 2014. 4. Dyer DP. Navigating the perfect storm: what you need to succeed during health care’s transformation. AAOS Now. 2014;8.

Ó 2014 Lippincott Williams & Wilkins

The Affordable Care Act and Orthopaedic Trauma

5. Groman RF, Rubin KY. Neurosurgical practice and health care reform: moving toward quality-based health care delivery. Neurosurg Focus. 2013;34:E1. 6. Keckley PH, Coughlin S, Gupta S. Issue Brief: Value-based Purchasing: A Strategic Overview for Health Care Industry Stakeholders. Washington, DC; Deloitte Center for Health Solutions; 2011;1–13. 7. Kocot SL, et al. Early experiences with accountable care in Medicaid: special challenges, big opportunities. Popul Health Management. 2013; 16(suppl 1):S4–S11. 8. Vaida B. The IPAB: the center of a political clash over how to change Medicare. Kaiser Health News. 2012. Avaliable at http://www. 9. Adams R. Washington health policy week in review: hospitals closely watching quality initiatives. Commonw Fund. 2011. Avaliable at http:// 10. Graves JA. Medicaid expansion opt-outs and uncompensated care. N Engl J Med. 2012;367:2365–2367. 11. Kleinman J. AM last page: health insurance expansion impact on patients, states, and providers. Acad Med. 2014;89:368. 12. Mitchell A. Medicaid Disproportionate Share Hospital Payments. Washington, DC: Congressional Research Service; 2013. 13. Courtney-Brooks M, Pelkofski EB, Engelhard CL, et al. The Patient Protection and Affordable Care Act: impact on the care of gynecologic oncology patients in the absence of Medicaid expansion in Central Virginia. Gynecol Oncol. 2013;130:346–349. 14. VanLare JM, Blum JD, Conway PH. Linking performance with payment: implementing the physician value-based payment modifier. JAMA. 2012; 308:2089–2090. 15. Chien AT, Rosenthal MB. Medicare’s physician value-based payment modifier—Will the tectonic shift create waves? N Engl J Med. 2013;369: 2076–2078. 16. AMA. AMA Issues Grace Period Guide to Assist Physicians. 2014; Available at: Accessed April 6, 2014. 17. Bumpass DB, Samora JB. What can we expect from PPACA in 2013? AAOS Now. 2013;7. 18. Sethi MK, Jahangir AA, Obremskey WT. The Affordable Care Act and Medical Devices: what you need to know as an orthopaedic surgeon. AAOS Now. 2011;5. 19. Prabhakar AM, Harveym B, Hirsch JA, et al. Medical device excise tax: implications for interventional radiologists. J Vasc Interv Radiol. 2013; 24:795–796. 20. Chiaramonte P. Medical giant Stryker cuts 1,170 jobs, citing ObamaCare. 2012; Available at: medical-supply-giant-stryker-corp-makes-pre-emptive-strike-against-pending/. Accessed April 6, 2014. 21. Blumenthal D, Tavenner M. The “meaningful use” regulation for electronic health records. N Engl J Med. 2010;363:501–504. 22. Barber TC. Meaningful use incentives: the money is on the table. AAOS Now. 2012;6. 23. Koonsman G. What’s your practice worth? Today’s environment drives practice value. AAOS Now. 2013;7. 24. Tongue JR. Orthopaedic economics 101. AAOS Now. 2013;7. |


The Affordable Care Act and orthopaedic trauma.

The Affordable Care Act has resulted in a dramatic governmental restructuring of the healthcare insurance market and delivery system. Orthopaedic trau...
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