Reimbursement

Most physicians have an understanding of professional billing. Physicians are reimbursed based on Current Procedural Terminology codes (CPT codes). Each CPT code is attached to a relative value unit (RVU) that determines the reimbursement amount that a physician receives. There is continuous pressure on CPT codes. Adjusting values for reimbursement is often a “zero-sum” game where an increase in one code may result in a decrease in another. Further, the advent of minimally invasive surgery, the transition to outpatient surgery, and decreasing length of stay will inevitably lead to devaluation of CPT codes.

Where physicians generally have glaringly scant knowledge is hospital reimbursement. Hospital reimbursement typically falls into several categories based on contracts. One type of contract is “cost-plus” where the hospital will receive a percentage payment at their costs. Another model is percent of charges. In this model, the hospital is paid a percentage of their charges. Alternatively, a hospital may be paid a per diem rate regardless of services provided. A common model for this, even for commercial insurance companies, employs the use of Medicare Severity Diagnosis Related Groups (MS-DRG). These are a group of less than 500 codes used to define each hospitalization. For example, MS-DRG 455 is Combined Anterior/Posterior Spinal Fusion without complications or major comorbidities. This DRG captures cervical, thoracic and lumbar combined anterior and posterior fusions. Each DRG is assigned a relative weight to calculate the reimbursement amount. In these contracts, the hospital must submit a bill for more than the contracted amount to receive the full contracted amount. If the charges for a particular procedure reach a certain threshold, an “outlier” payment may be triggered. In many commercial contracts, the hospital may be reimbursed percentage of charges at the outlier threshold. These payment methods may set up differing incentives. For example, in a DRG based payment model with a $100,000 outlier, any charge above $100,000 may be paid at 65% to 70% of charges. It is estimated that 30%-50% of commercial spine surgeries hit the outlier limit. Thus with a surgery with a base payment of $50,000, if the total charges are $150,000 the hospital will be paid an additional $35,000 for a total payment of $85,000. If the hospital encourages use of less costly supplies, they will only decrease their payments and may lose money on a given surgery if the cost savings is not enough. In the above example, if the hospital reduced charges to $99,999 their payment would be $50,000 rather than $85,000.

Ambulatory Surgery Centers

ASCs are specialized facilities focusing on same-day surgical care in an outpatient setting. They can provide a more efficient means of surgical care for routine procedures without planned inpatient admission. Spine surgery performed in ASCs has grown dramatically over recent years due to its advances in surgical and anesthetic techniques.

ASCs offer physicians ownership opportunities, allowing them to use their expertise to improve efficiency, optimize patient experience, and be cost-effective. Facility fees at ASCs are estimated to be around 70% of those in the hospital setting. It follows that total costs for an anterior cervical discectomy and fusion (ACDF) at an ASC are less than half of inpatient ACDF. The cost-cutting that ASCs provide can be attributed to their ability to achieve better efficiency through specialization of care, smaller facility size, and perioperative process improvement.

The importance of decreased healthcare spending cannot be understated. However, these savings must be accompanied by similar or improved patient outcomes in surgical facilities to provide better value in our healthcare system. Multiple studies have shown that both lumbar and cervical spine surgeries can be performed in the ASC setting with similar outcomes as those performed at hospitals. ^{, ,} Studies have also shown high patient satisfaction with spine surgery performed at ASCs.

Today, lumbar discectomy, lumbar laminectomy, cervical foraminotomy, and anterior cervical discectomy and fusion (ACDF) have become common in ASC settings. ^, Minimally invasive lumbar fusions have also been shown to be successful when performed at ASCs. ^, There are significant challenges with ASCs due to different laws in each state governing their creation and their operation. For example, there are multiple states in which by rule all patients must be discharged home on the same calendar day, thus making a 23-h stay impossible.

Barriers to Expansion

In 2010, the Affordable Care Act (ACA) was enacted, and new restrictions were placed to prevent the formation of new POHs and the expansion of preexisting POHs. Proponents of these restrictions argue that POHs have an inherent conflict of interest that can compromise patient care through self-referrals, overutilization of services, the ability to “cherry-pick” healthier patients, and decreased quality of care. In reality, POHs often offer better care, lower costs, and offer physicians direct oversight of all hospital operations.

Notably, the restrictions on POH apply only to facilities seeking reimbursement for Medicare services. A POH can still be created if it does not treat patients covered by Federal insurance plans (Medicare, Medicaid, Champus, etc). Given that a substantial population of spine surgical patients are over the age of 65, opening a POH without Medicare has significant obstacles. As an example, a study investigated 13 POHs in Texas that opened between 2011 to 2015, after the effective date of the ACA. All of those POHs had been sold or were part of bankruptcy filings by 2016.

A significant barrier to expanding healthcare facilities in certain states is a certificate of need (CON). States that have CON legislation require permission to be granted by the state to healthcare providers to open new medical facilities, expand existing facilities, or add certain medical services or technologies. They require new medical facilities or technologies to display a clinical need before the state government approves. CON legislation was originally introduced to control healthcare costs, increase healthcare quality, and improve access to care for low-income families. New York was the first state to introduce the CON program in 1967. In 1974, congress passed the National Health Planning and Resources Development Act that required states to implement CON requirements to receive funding through certain federal programs. Every state besides Louisiana implemented CON laws at that time. Experience has demonstrated CON laws do not accomplish these goals and, in fact, decrease competition for large, established hospital systems, and severely limit the ability of independent physicians to engage in facility ownership. For a majority of the country, CON laws significantly decrease physicians’ ability to develop new facilities. These programs are targets for change that could potentially decrease healthcare spending. The slowed or prohibited expansion of competing medical facilities in states with CON programs further allows large healthcare systems to avoid competition and create higher costs. Given these multitude of issues, many states have removed CON programs or revised their current programs over recent years to increase medical facility expansion.

Hospital Consolidation

A recent trend in the United States healthcare system is increased hospital consolidation. Hospital systems can consolidate in two ways: horizontal or vertical consolidation. Horizontal consolidation is when two hospitals offering similar services merge into one larger entity, while vertical consolidation is when a hospital merges with other healthcare entities to create a larger system. Hospitals that have undergone horizontal consolidation have been shown to increase healthcare prices, increase healthcare spending, and decrease healthcare wages. Similarly, systems involved with vertical consolidation have been associated with increases or no change in healthcare prices and increases in healthcare spending. One study found that hospitals that acquire physician practices increase prices for services by an average of 14.1% post-acquisition.

One potential benefit of large integrated healthcare systems is that they allow for better coordination of care for patients, which has been a critical issue in the US healthcare system. Better coordination creates convenience for providers and patients and may prevent quality deficiencies. However, large hospital systems can create functional oligopolies in many regions. The decrease in competition allows hospitals to drive prices higher at the expense of the consumer. Hospitals typically charge more for services, such as MRIs, under the argument that they have higher overhead costs that necessitate higher fees. If the goal of our healthcare system is to decrease healthcare prices and spending, the rise in consolidation seen over recent years is counterproductive to that effort.

Private Equity

Recently, private equity groups have started to play a role in healthcare. Private equity firms aim to buy a majority stake in healthcare businesses, increase the value over time, and sell for a profit years later. In 2019, the total disclosed value of private equity deals in healthcare was $78.9 billion, up from $23.1 billion in 2015. For private equity firms to gain a return on their investment, they use strategies to increase value, such as decreasing costs, increasing consolidation, and increasing prices and volumes. Many changes private equity ownership makes for a hospital can help improve efficiency and cost-effectiveness. A study investigating hospitals acquired by private equity showed that they were associated with more significant increases in net income and hospital charges compared to matched hospitals not owned by private equity. While private equity ownership may lead to increased profits for the hospital, it begs the question of whether quality patient care is given high value. There is conflicting evidence in the literature about how patient outcomes are impacted at private equity-acquired hospitals.

Complications/Safety

A multicenter study was performed comparing 10,032 propensity-matched patients undergoing lumbar decompression surgery found that outpatient surgery had similar readmission rates, reoperation rates, and patient-reported satisfaction as inpatient surgery at 30 days and 3-month postoperatively. Another study focusing on complications following lumbar discectomy found inpatient surgery had a significantly higher rate of complications than outpatient surgery (5.4% vs 3.5%, P =.007), even after adjusting for confounding variables. Similarly, 1- to 2-level ACDFs have been shown to have lower 30-day morbidity and return to OR in the outpatient versus inpatient setting.

Patient Selection

Although outpatient spine surgery is safe and cost-effective compared to inpatient surgery, it requires proper patient selection. Identifying patients at high risk for adverse events is crucial to protecting patient safety. Much of the hesitation surrounding the shift toward more outpatient spine surgery is due to these risks, which is why understanding risk factors for complications can better improve patient selection for outpatient surgery.

Pugely and colleagues found that advanced age, diabetes, and operative times longer than 150 minutes were predictors of postoperative complications following lumbar discectomy. Other factors that may make a patient less preferable for outpatient surgery include high body mass index and comorbidities such as chronic obstructive pulmonary disease or coronary artery disease. The most common reason for patients needing conversion to inpatient following an outpatient ACDF was pain management (80% of patients).

Many studies comparing outpatient versus inpatient spine surgery have a selection bias toward younger, healthier patients in those undergoing outpatient spine surgery. ^, This is likely because younger and healthier patients typically have better outcomes in the outpatient setting and represent a population that benefits most from outpatient surgery. Further studies are needed to better understand the safety of outpatient surgery in the older population and patients with comorbidities.

The age of outpatient and ASC spine surgery is upon us. Studies continue to show that these settings can provide similar or improved quality at a lower price than traditional inpatient or hospital surgery. Additionally, refined multimodal anesthesia will continue to promote this change. As this shift continues, being mindful of patient selection and building up slowly is paramount to success.