Key Steps for ASC’s to Maximize Quality and Profitability of Total Joint Replacements
Total joint replacement surgeries are projected to grow rapidly in the coming years, and there will be a significant migration of these cases from the inpatient to the outpatient setting. Consider the following:
• The number of hip and knee joint replacement surgeries performed in an outpatient setting is expected to grow 73% from approximately 1.1 million today to approximately 1.9 million by 20261
• Approximately 51%, or 969,000, of primary hip and knee joint replacement surgeries will be performed in an outpatient setting by 2026—up from just 15% in 2016, or 165,000, according to Sg2 Research.1This is an increase of 487%.
• The number of ASCs offering outpatient joint replacements increased from 25 in 2014 to more than 200 in 2017.2
• The movement of surgical procedures from an inpatient setting to an outpatient setting saves commercial payers $38 billion and CMS $2.5 billion annually, according to an Ambulatory Surgery Center Association (ASCA) study.3
• Private equity investments in orthopedic practices are expected to grow significantly in the next five years, according to a report from healthcare investment bank Edgemont Capital.4 This growth is highly correlated with the dramatic growth in complex orthopedic procedures and the significant movement of these procedures from inpatient to ASCs.
As an ASC leader, however, it is critical to understand that “opportunity does not waste time with those who are unprepared,” words of advice from Idowu Koyenikan, the author of “Wealth for All: Living a Life of Success at the Edge of Your Ability.”5 Preparation is especially important when considering what is at stake with joint replacement surgeries. Indeed, with a joint replacement procedure, your facility will spend thousands of dollars on the implant, use considerable staff hours to perform the surgery and take up valuable operating room time. As such, you need to make sure you are collecting enough money to cover your expenses, realize a solid profit and position your center for additional growth.
More specifically, to successfully handle total joint surgeries, your ASC needs to:
1: Get payers onboard. Convincing payers that total joint procedures belong in the ASC environment is job number one. Providing real-world examples of cost savings can be convincing. While reimbursement varies on a hospital by hospital, and on an ASC by ASC basis, it is common to see 30% to 50% cost savings for payers when a total joint procedure is done at an ASC rather than at the hospital—a savings of billions of dollars annually for payers.
2: Go straight to employers. Entering into direct-to-employer contracts with specific companies could help bring more total joint procedures to your facility. Consider approaching larger employers and offering them a discount for employees in need of total joint surgery in exchange for encouraging employees to choose your ASC.
3: Understand your data. Understanding inpatient costs in the local market, as well as how much it costs to build and operate a total joint program, can help you get a handle on exact total costs. With this information, you can then negotiate contracts that produce a margin with a significant impact on your bottom line.
4: Develop world-class clinical protocols. It is important to leverage the experience of the most seasoned orthopedic surgeons and their top staff members to recreate or even improve upon the clinical processes and protocols that were developed in the inpatient and/or hospital outpatient departments. This relates to staffing, communications and best practice protocols, and should include surgeons, anesthesiologists and front-office team members, as well as pre-op, intra-op and post-op nurses.
5: Recruit the right patients. Outpatient joint replacement surgery is a viable, and often preferable, option for middle aged, non-obese patients who do not suffer other significant medical conditions and who have strong at-home support systems in place. Patients with the following contraindications should not be considered for outpatient joint replacement surgery: BMI greater than 35, age over 60, chronic obstructive pulmonary disorder, diabetes, cardiovascular disease, smoker, high risk of history of deep vein thrombosis/pulmonary embolism, anticoagulant therapy, anemia and difficult surgery due to deformity.
6: Get front desk staff up to speed. Front desk staff members need to know how to secure proper total joint replacement pre-authorizations from payers for each total joint procedure. As such, they need to ensure that patients meet all pre-surgery requirements. In addition, they should obtain a preauthorization for a variety of codes, as the surgeon may need to change or modify course after surgery begins.
7: Understand the payer and its requirements. Your front desk staff needs to make sure they identify the correct payer contract for each procedure. While the current procedural terminology (CPT) code will be the same under each contract, it is likely that the implant will be treated differently from contract to contract. For example, one contract might include payment for the implant in the overall rate for the procedure, while another might pay for the procedure, plus pay a certain amount for the implant, including shipping, handling, and taxes. It is important to note each contract is different so your coders can link each patient’s procedure to the proper contract to ensure that they are coding correctly and billing appropriately--and that your ASC ultimately gets paid exactly what it is due.
8: Understand that the financial stakes are high. Implants used in total joint replacement surgeries are expensive. The average implant cost for total joint surgeries are several thousands of dollars each, which is 5 to 10 times more than the average implant for other less complex procedures. This is why coding mistakes can have a significant impact on revenue.
9: Be ready to justify your efforts. Because total joint procedures are expensive, you need to be ready to supply medical records to payers as requested. Indeed, payers often will want to ensure that patients received an MRI or other imaging tests and participated in more conservative treatments, such as physical therapy, before undergoing surgery. Authorized personnel should be able to comply with such medical record transfers in a timely manner.
10: Utilize a patient financial counselor. A financial counselor can help patients see the financial advantages associated with having a procedure performed in an ASC versus in the hospital. For example, a counselor may evaluate a patient’s benefits and find that it would cost them nearly double to have the same procedure performed in a hospital rather than in an ASC. The financial counselor can also explain the other tremendous benefits of an ASC, such as personalized attention, ease and flexibility of surgery scheduling, and lower infection rates. With such powerful data in front of them, patients are more likely to feel good about making informed decisions.
11: Put your patient advocate hat on. Make sure your registration packets include an appeal authorization form. This form allows your ASC to make an appeal on the patient’s behalf if the payer doesn’t offer the agreed-upon payment to avoid burdening patients if payment disputes arise. Minimizing the patients’ personal involvement in such disputes has a significant impact on patient satisfaction.
12: Use a fine-toothed comb to review financial performance. Because total joint surgeries are big ticket items, it is important to conduct a monthly audit to ensure that each procedure was coded, billed and paid correctly. If you uncover any discrepancies, drill down to see where the mistake originated and then file an appeal if warranted. Pay particularly close attention to implant billing, since implants are expensive items that could represent 25% to 30% of your overall total joint surgery reimbursement and payment for them is closely tied to very specific contract stipulations. Remember, your center is required to buy these implants upfront. This means if you are not paid correctly, your ASC will take a direct out-of-pocket loss.
In the final analysis, those ASCs that have done the work up front will be well-positioned to reap the significant financial rewards of total joint surgeries migrating from hospitals to ASCs.
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1. Vizient. Outpatient Joint Replacement: An Unnecessary Concern or Market Reality? https://newsroom.vizientinc.com/newsletter/research-and-insights-news/outpatient-joint-replacement-unnecessary-concern-or-market-rea
2. Advisory Board. Hospitals may lose total joint replacements to ambulatory providers. Here's what they're doing about it.https://www.advisory.com/daily-briefing/2017/08/10/joint-replacement
3. Ambulatory Surgery Center Association. Study: Commercial Insurance Cost Savings in Ambulatory Surgery Centers. https://www.ascassociation.org/advancingsurgicalcare/reducinghealthcarecosts/costsavings/healthcarebluebookstudy
4. Edgemont. Edgemont 2018 Orthopedics Outlook Report. https://www.edgemont.com/insights/edgemont-2018-orthopedics-outlook-report/
5. Good Reads. Wealth for All Quotes. https://www.goodreads.com/work/quotes/48666706-wealth-for-all-living-a-life-of-success-at-the-edge-of-your-ability