The Evolution of Anesthesia Care for Total Hips
Summary:
Medicare Guidelines limiting the place of service for a number of common procedures changed in 2020. Of these, the total hip has been the most significant. The migration of these cases from inpatient to outpatient venues proves to be a useful and relevant case study.
As the premier provider of outsourced billing and management information to anesthesia practices nationwide, we constantly monitor changes in production, performance and profitability for our clients. As significant developments unfold, we are always trying to assess their strategic and financial impact. While many coding and payer policy changes may prove to be relatively insignificant, more often than not there are underlying market factors that may be of consequence to the ongoing viability and success of our client practices. We are of the belief that forewarned is fore-armed.
Ever since the Medicare guidelines changed relative to cases that can be performed on an outpatient basis, we have been monitoring the migration of total hips from traditional inpatient venues to outpatient facilities. We have compiled data for all our clients that have been with us since 2016. As the chart below indicates, everything changed in 2020; this transition in venue represents a tectonic shift with regard to where and how total hips are performed. The question is: what does this mean, and how will it affect practices over time?
Our clients have shared with us that three factors have encouraged this shift. The first is economics. From a payer perspective, the ability to perform these procedures on an outpatient basis represents a significant cost savings, as the incidental charges for hospital care are eliminated. Medicare guidelines were once a limiting factor but this is no longer the case, which is the second factor explaining the dramatic shift in 2020. Interestingly, Covid-19 has also been a meaningful factor since the risk of infection is perceived to be much less in an outpatient setting. For a number of years, anesthesia practices have been preparing for and anticipating this inevitable shift by developing new pain management protocols for total hips. With regard to the profitability of anesthesia care, payer mix is always the prime determinant. Medicare cases are paid at a considerably discounted rate, which explains the disparity between inpatient and outpatient rates per case. Historically, the percentage of Medicare patients has been higher in the inpatient setting than the outpatient setting, since the older, high risk patients with co-morbidities would continue to be handled in the inpatient setting. But, with the migration of more cases to an outpatient environment, the Medicare percentage is going up. This data represents a compilation of data for a significant sample of practices from across the country. The overall number of total hips has been increasing each year except 2020, the year of the pandemic. The peak occurred in 2019.
As indicated below, these rates are reflective of the impact of Medicare, which is increasing for all venues as the American population ages. We note that in 2019 there was a significant delta between in- and outpatient venues, which is now closing. Apparently, it is a matter of time before there is little or no difference in the Medicare population for total hips in each venue.
To the extent that total hips used to represent a fairly profitable inpatient case, their migration to outpatient venues is furthering an unfortunate trend. As one client put it, "now the hospital has only the sick patients, not clinical candidates for outpatients, which makes hospital work depressing, with less reimbursement and inevitably more complications." The data presented thus far represents overall averages of all the clients included in this study. What is striking, though, are the differences from one practice to another. There are a number of factors that may encourage the migration of orthopedic cases to outpatient venues. Orthopedic surgeons who have a controlling interest in surgery centers have a strong incentive to perform total hips in their own facilities. Obviously, outpatient facilities need to be prepared for such cases. Each of the practices included below reflects the unique factors for a distinct market. Time will tell what percentage of outpatient cases each of these practices will ultimately achieve.
A total hip procedure is a major case. The base value is eight units. Average case times are just over two-and-a-half hours. Some surgeons are faster than others. Some may even be able to perform the procedure in an hour and a half. While it is true that the majority of these cases are performed on Medicare patients and are paid at a significantly discounted rate, one might conclude that doing them on an outpatient basis would be a positive development. The question, though, is whether this lost volume gets replaced by other types of cases in the hospital. The real challenge has to do with coverage and call requirements. Declining inpatient volumes make call less profitable and more onerous. This trend is likely to continue. If you would like an analysis of this trend for your practice, please contact your account executive or reach out to us at info@anesthesiallc.com.