Service Lines: More Knees, More Hips

Jim Molpus, for HealthLeaders Magazine , October 14, 2008
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An aging population that wants to stay mobile could further increase demand for the already busy orthopedic service line. But high device costs, physician alignment issues, and myriad other challenges make ortho success a complicated proposition.

In most ways Tiger Woods is nothing like the rest of us. In one way he is exactly like the rest of us: His joints are wearing out.

"I guess no example tells the story more than Tiger Woods," says John Cherf, MD, orthopedic surgeon at Neurologic and Orthopedic Hospital of Chicago. "He is 32 and has had his fourth knee operation, which is an ACL [anterior cruciate ligament] reconstruction. He has had multiple MRIs and multiple knee rehabilitations at 32. My parents' generation never told that kind of story unless someone had a car accident or fell off a bridge."

Millions of Americans love their mobility and are willing to pay to keep it—at a rate of almost 40 million orthopedic procedures a year (injections included). That rate at least is the driver that leads some to forecast more robust growth in orthopedic procedures in coming years. Illinois-based Sg2 predicts outpatient procedures—already accounting for 93% of the market—will grow 20% by 2017, with inpatient growing 29%.

The business plan also includes a healthy dose of hope that baby boomers will utilize orthopedic services with the same gusto for consuming everything else as they have aged. While some may try to debunk the boomer boom, Cherf believes the numbers are legitimate.

"The musculoskeletal system has a finite life. Our physiological life is much longer than that now. So people who are very healthy in their 60s and 70s are still going to have manifestations of arthritis, overuse symptoms, and a lot of opportunities for them needing care."

Demand may grow, but the orthopedic service line has challenges that other profitable and necessary lines do not: device costs that may eat up half of margins or more, increasing tendency toward granular subspecialization of physicians by procedure, and marketing that requires a dual target audience of physicians and consumers.

Service Line Success Key No. 1:

For better or worse, the practice of orthopedics has become a field of highly skilled technicians. General orthopedic surgeons have been replaced by subspecialists who don't even bother with proper specialty names with a Latin root; they've become the "knee guy" or "the hand guy."

The key to growth in orthopedics is physician alignment, and subspecialization and related labor issues make crafting a physician staff tricky. No model fits all, and often hospitals and health systems have to craft a mixed bag of physician relationships to cover all of the revenue-generating subspecialties.

Chad Aduddell, president of 33-staffed-bed Bone & Joint Hospital in Oklahoma City, part of St. Louis-based SSM HealthCare, has a 51-49 joint venture with a local group, Healthcare Partners Investments, which owns two other hospitals and a surgery center. The joint venture was crafted in 2006 after the previous medical group departed to operate its own center. The JV has worked well, but to grow the business from its current staff of 29 affiliated surgeons, Aduddell says he has recruited among a smaller group of young, independent physicians, many of whom did their residency at nearby University of Oklahoma Health Sciences Center. To gather the subspecialists he needs, Aduddell recruits early—and with a pitch that community hospitals don't have.

"I am much more focused than some of the community hospitals are. They are looking big picture—cardiology, oncology, neurology, and things I am not thinking about. I am focused on, 'I need a foot and ankle; I need a spine,' so I get a leg up on any of the other facilities," he says.

Service Line Success Key No. 2:
Keep physicians happy

There is a happy convergence in orthopedics: Physicians like volume. Margins in orthopedics are often eaten by device costs, so growing the business means getting as many procedures in and out of the OR as safely and efficiently as possible. Orthopedic surgeons also tend to gravitate toward OR suites that get them in and out, often with so-called "flip-flop" scheduling that allows surgeons to operate in one room, move to another prepared patient when finished, then back again.

"An example would be a sports medicine physician doing cases here and being done by 3 p.m., as opposed to a community hospital where he won't let them schedule more than four cases because he will be there until 9 p.m.," Aduddell says.

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