Why orthopedics continues to be a lucrative specialty for private equity: Dr. Allston Stubbs weighs in

Allston J. Stubbs, MD, is an associate professor of orthopedic surgery at Wake Forest School of Medicine and an orthopedic surgeon at Wake Forest Baptist Health, both in Winston-Salem, N.C. Here, Dr. Stubbs shares his thoughts on outpatient orthopedics, private equity and more.

Note: Responses have been lightly edited for style and clarity.

Question: What changes or opportunities are you expecting to see for outpatient total joints in the coming years?

Dr. Allston Stubbs: The trend for outpatient total joints is positive over the next five years. Patient preference, provider availability and changes in government regulation will all contribute to the shift in arthroplasty point of care from the inpatient to outpatient setting. Private insurance payers influenced by market forces will look for opportunities to optimize resource utilization for traditional high-cost services like arthroplasty through bundled payment models.

These bundled payment models work best in the outpatient setting in which cost accounting, medical risk and the revenue cycle are more certain. Ultimately, the shift delivers on the goals of all stakeholders to improve access, lower cost and improve quality — the fundamentals of outpatient surgical care.

Q: Are there any kind of overarching trends that you're seeing right now in outpatient orthopedics?

AS: The primary trend in outpatient orthopedics in 2020 is defining exactly what is and isn’t meant by the term "outpatient orthopedic surgery." CMS, providers and hospitals use the term differently. As such, there is confusion as to who, what, where, why and how outpatient orthopedic surgery is being performed. To further cloud the issue, outpatient orthopedic surgery may or may not be completed as same-day surgery.

Fortunately, this confusion has mostly spared the patient and remains a debate among who manages the cost centers and who controls the revenue cycle: hospitals, providers, or other equity partners. With a clearer definition of the term "outpatient orthopedics," one will be able to have comparative metrics that can better assess cost, quality and outcomes among different providers.

Q: How do you hope the ASC industry will change in the coming years?

AS: The ASC industry has the opportunity to evolve into the primary point of procedural/surgical care over the next five years. The speed and efficacy of this transition will depend on alignment of incentives among all stakeholders comprising patients, providers, payers and ASC owners.

While the regulatory environment will play a role, patient choice remains a central tenet of the U.S. healthcare system and ASCs will be the "go to" resource for patients, providers and payers. Finally, ASC risk management will complete the equation of high patient satisfaction by focusing on minimizing errors and waste.

Q: Is there any new technology you're looking forward to on the horizon?

AS: The technology that continues to show the greatest promise into 2020 is "OE," orthobiologic enhanced surgery. More specifically, patients are seeing longer term benefits to joint restoration afforded by orthobiologics over joint replacement surgery. Arthroscopic approaches to joint preservation now outpace open approaches, and the outpatient surgical setting remains an ideal location for patient treatment. Further, technological changes from fiber optic to chip-based surgical high definition imaging are available that dramatically reduce the invasiveness of procedures and surgery. The durability of both OE surgery and chip-based arthroscopic access will be assessed in the coming years.

Q: Do you have any tips or things to know before starting a total joint program?

AS: Before starting an outpatient total joint program, you need buy-in across your team and organization. A good way to begin the process is to do your due diligence on how others have achieved sustainable safety and efficiency. Fundamentally, it goes back to what is in the patient’s best interest. Some systems have perfected "same-day" total joint arthroplasty in an inpatient setting. Other systems have created parallel arthroplasty care pathways that take advantage of outpatient surgical settings with dedicated care teams, an alignment of incentives and group purchasing to control cost. Ultimately, your program should strive to minimize risk and variability and maximize outcomes and safety.

Q: Do you think private equity will have an impact on the orthopedic specialty? Why or why not?

AS: Yes, private equity will have a growing impact on the specialty of orthopedic surgery for the reasons of high growth, low risk and moderate regulation. The drivers of high growth will be the aging and activity of the population as well as access to specialized technology. Over the last 30 years, the division of labor within orthopedic surgery has significantly increased, resulting in an expansion of targeted therapies that restore function and quality of life.

The risks of orthopedic surgery continue to decline based on this division of labor as well as the emergence of smart technology and artificial intelligence. As an orthopedic community, we are fortunate to be at the dawn of a period of human intuition coupled with machine learning. Finally, private equity investment into the orthopedic industry benefits from moderate regulation. Healthcare barriers to entry remain moderate to high, but access to capital is low to moderate. The low risk, high reward relationship for private equity remains intact for the next three years. The future challenge for private equity being exit strategies that protect principle and optimize return in a government-influenced market.

More articles on orthopedics:
DePuy Synthes drives innovation with ASCs, outpatient care top of mind
Orthopedic device company launches 12 systems aimed at ASCs
Orthopedic surgeon pay — key trends to know heading into 2020

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