Ambulatory surgical centers (ASCs) are continuing to change the landscape of the orthopedics device markets, for better or for worse. Recently, our orthopedics analysts got together to discuss the impact that ASCs are having on their various areas of focus.
René: Physician owned ASCs are a completely different business model to what happens in hospitals; but unfortunately there’s very little reimbursement in ASCs. Reimbursement will probably get better in time, but it will be an uphill battle.
Brady: The emphasis will be on movement towards “one-stop shop” solutions. Device manufacturers need broad product portfolios to support effective bundling that can ultimately benefit an ASC’s bottom-line. It will be difficult for small and niche competitors to succeed in this growing market for this reason.
René: By and large, this is very true; at the same time, does anyone think there is place for such a thing as products that are made with ASCs in mind, which could perhaps help some small manufacturers? After all, all ASC procedures are what would be performed in hospitals, but, not every device used in a hospital will wind up being used in ASCs. This is because certain indications just won’t be treated in ASCs. From the spine perspective for example, devices made for the cervical spine have solid penetration into ASCs, therefore if I was a manufacturer, I’d make sure that I had something in my portfolio that would fit into this bucket, the devices that can be used anywhere.
Lexie: Considering the ASC-spine surgeons you’ve spoken with lately, what sorts of spine procedures have they been focusing on? Or are they limited to what’s covered under the new ASC reimbursement codes?
René: For spine it’s mostly single level procedures; inherently these are minimally invasive and relatively simple surgeries. Reimbursement doesn’t really drive the procedures as yet, probably because coverage on the whole is relatively poor.
Lexie: From what I’ve seen covering endoscopy and imaging markets in the past, it is slightly different, most of the initial uptake is driven by insurance coverage. Reimbursement is made favorable for ASC- or office-based procedures to move them out of hospitals and save money. There are a lot of endoscopy procedures, especially colonoscopies done out of ASCs. As soon as that reimbursement is in place and ASCs are adopting – med device companies then adapt their products and strategies to sell to these facilities. Sometimes an ASC will need slightly different devices than a hospital e.g. smaller, more compact capital equipment and definitely it’s a big change for companies to go from calling on fewer, bigger buyers to more dispersed and price conscious buyers.
Kristina: I do think there are parallels to be drawn between the ortho and dental and aesthetic markets. As manufacturers vie for reimbursement, there may be greater onus on manufacturers to increase the presence of their salesforce and to drive down prices in order to remain competitive. This is something we see in both the dental implant and facial injectable markets, where both procedures are elective and therefore reimbursement doesn’t exist.
Valentina: In the sports medicine device space, surgeons at cost-constrained ASCs with smaller budgets and lower reimbursement prefer to perform procedures that require fewer products. For example, double-row rotator cuff repairs and double-bundle knee ligament reconstruction techniques are less of an option in those facilities, thus limiting penetration of such techniques and further restricting patients from receiving necessary treatments. While outpatient volumes are expected to strongly grow and shrinking reimbursement levels as well as new payment models continue to affect orthopedic physician practices, industry sources voice their opinions that orthopedic surgeons must look for new revenue opportunities, such as developing orthopedic urgent care and after-hour clinics, entering into management services arrangements with hospital partners, etc as out-of-network reimbursement is disappearing and competition is becoming more intense.
René: So overall, good or bad for the device industry’s bottom line? I guess it’s a question of, presumably negative impact on prices versus maximizing possible volumes. I am leaning towards this being good for the overall market, at least in the distant future; there will of course be growing pains as more procedures move to the ASC setting. Eventually though, once reimbursement has improved and performance of these procedures are normalized, I think the overall market will benefit.
Lexie:It’s hard to say whether it will ultimately be better for manufacturers’ bottom lines but I don’t think this train is stopping. Makes sense for any procedure that can be performed outside of a hospital to be performed at a less costly site. So it’s hard to imagine reimbursement not continuing a shift toward supporting ASC procedures, which will help make things easier. That said, suppliers end up having to keep customers at so many more sites happy and many times selling non-premium products.
Interested in learning more? View our Spectrum Report on How Shifting Procedural Site of Service Affects Competitive Strategy in Orthopedics.