The double-edged sword of private equity in orthopedics: OrthoNOW's Dr. Alejandro Badia weighs in

 

Alejandro Badia, MD, is the founder of the OrthoNOW orthopedic walk-in clinics. Dr. Badia specializes in hand and upper extremity surgery, and is a fellow of the American College of Surgeons. Here, Dr. Badia shares his thoughts on private equity in orthopedics, outpatient total joints and more.

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

Question: What changes or opportunities are you seeing for outpatient total joints this year?

Dr. Alejandro Badia: I think we're going to witness a paradigm shift in how a lot of orthopedics is done, particularly elective orthopedics. And I think joint replacements are trying to be the epitome of that. It's hardly ever an emergency. It's something that's scheduled. But I think that market forces have brought this to us. I will say it's frustrating for me because I basically only do outpatient surgery, even big surgeries. I've been doing shoulder replacements, including reverse shoulder replacements, which is considered a really big surgery. I've been doing them outpatient for about eight years now. So I've kind of been ahead of that curve.

One of the frustrations has been related to treating arthritis in the base of the thumb. I cannot do surgery on a Medicare patient in my surgery center because Medicare won't reimburse an ASC for an implant. And now what's happening is Medicare did a big about-face and said, "OK, we're going to allow now reimbursement for knee replacements." Which is still a big surgery, right? But the prosthesis is relatively expensive, and now they're going to cover it. But they still won't cover thumb arthritis procedures even though they cost less than knee replacements.

That's not a fair playing field. And furthermore, if we're serious about actually saving money on our $4 trillion healthcare bill, one of the places to start would be to completely change that law. I could do a lot more wrist surgeries if I didn't have to take them to the hospital. I just refer those patients out now. I don't have the bandwidth to make special trips to the hospital.

Q: Do you see reimbursement changing for ASCs in the coming years?

AB: Yes, I think it is going to change because the fact that knees and now, amazingly, hips are going to be covered, hopefully will bring legislation that will encourage more surgeries moving to ASCs because all the studies have shown that it's much more cost-effective. That doesn't mean hospitals aren't needed. Big spine surgery, complex hip, obviously all the cardiac surgery, most abdominal big surgeries have to be done in the hospital. And that's great. But we have to move away from that because it is too costly. Studies have shown that there's better quality in a surgery center. Why? Because it's the same team of people doing the same surgeries day after day. The infection rate is near zero, as opposed to the hospital. We all know about nosocomial or hospital-acquired infections. That adds a huge cost to the healthcare economy when somebody gets an infection and the readmission and all the things that brings with it.

Q: How are you hoping the ASC industry will change in the coming years?

AB: Well, one of the things I'm involved in, and there's a lot of traction for this now, is the concept of specialty walk-in centers for nonacute injuries. If surgery is not needed for a patient with a nonacute injury, staff at the specialty walk-in center know very well how to put on a cast, which in most emergency rooms they don't because that's not what they do. They're taking care of really sick people, and so they just splint it and send it along. That is an incredibly costly phenomenon that continues to occur.

The concept of the OrthoNOW centers that we started is that 70 percent of our patients don't need urgent care, but they have easy access to orthopedic specialists if they need to be seen.

Q: Do you have any tips for starting a total joint program at an ASC?

AB: Yeah, I think it's important to either partner with a national company that has experience in outpatient joints or visit a center that has that expertise. The surgeon needs to be efficient. Some of us are fast, some of us aren't. The fast ones are better for an ASC because there's generally less blood loss. There is less anesthesia exposure. The center can lose money if they're spending an inordinate amount of time. And it's not a criticism, it's just that people are different. Just like a surgery center is not going to give a surgeon two or three rooms to work in if they're very slow because you're tying up another valuable OR time. So all of these things need to be taken into account. I don't think it's necessarily for everybody, but it is certainly to our surgeons and surgery centers that can do very well with this.

Q: Do you think private equity will have an impact on the orthopedic specialty in the coming years?

AB: Private equity is interesting because it's a double-edged sword. A lot of these groups are going into healthcare because they see the money and that's great. We all want to make money. But I think it's really important to realize that healthcare is the vital part of society. If they bring value to it, that's great. I think a lot of times the problem with private equity is they look only at the low-hanging fruit. I've had this experience myself. They say, "OK, well what's your EBITDA? What's your yearly return?" And then they calculate a multiple, and they basically want to make money off our work.

That can be good and bad. I think we're seeing it in orthopedics like we saw it in dental, radiology and dermatology. And I think us as orthopedic clinicians need to stay engaged in the process in order to maintain the quality. But I think we bring a lot of value as well.

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