ICL Illuminates the Cost-value Equation in Orthopaedic Care
During the Instructional Course Lecture “Costing for the Clinician: How to Understand Cost in Orthopaedic Care,” moderator Brian Cunningham, MD, FAAOS, discussed the challenges of identifying the costs associated with orthopaedic care.
During the Instructional Course Lecture (ICL) titled “Costing for the Clinician: How to Understand Cost in Orthopaedic Care,” moderator Brian Cunningham, MD, FAAOS, vice chair and director of inpatient orthopaedics at Methodist Hospital in Minneapolis, Minn., led a lively discussion on the factors impacting costs associated with care of musculoskeletal conditions.
The event also featured presentations from Joseph Levy, PhD, assistant professor at Johns Hopkins Bloomberg School of Public Health; Prakash Jayakumar, MD, PhD, assistant professor in the Department of Surgery and Perioperative Care and director of clinical research and outcome measurement at the University of Texas at Austin Dell Medical School; and Karl M. Koenig, MD, MS, FAAOS, associate professor, chief of orthopaedic surgery, and executive director of the Musculoskeletal Institute at Dell Medical School.
“The challenges with cost in orthopaedic care are so rich and so complicated,” Dr. Cunningham said during his introduction. One of the challenges in the cost-value equation to care is the multitude of perspectives that come into play (i.e., payer versus patient versus clinician versus hospital). For the clinician, Dr. Cunningham noted, a major challenge is the limited education for orthopaedic surgeons regarding costs despite an interest in the business side of orthopaedic care. “More and more resident want training on these topics. They want to understand the business and the economics,” he said.
Principles and challenges of cost
Following Dr. Cunningham’s introduction, Dr. Levy tackled the question of why orthopaedic surgeons should care about cost. According to Dr. Levy, “Accurately capturing and understanding the costs and effects [of treatment] can aid in the discussion of value” from both the clinician’s perspective and the individual patient’s perspective. Cost data, despite limitations in availability and measurement, can be leveraged to inform clinical practice, aid patient-level decision making, and influence payment and policy changes.
He explained that the “price” of something in well-functioning markets is an estimate of cost. “Unfortunately, healthcare is not a super well-functioning market,” he quipped. Dr. Levy expanded by noting that, in well-functioning markets, buyers and sellers have perfect pricing information, allowing for efficiency and transparency in the shared decision-making process.
Some of the challenges associated with cost data, as detailed by Dr. Levy, include billing for services, outpatient utilization, work loss, and economic evaluation in the United States. Billing data is often lacking, and the cost-to-charge ratios are imprecise. The generalizability of outpatient claims data to derive cost estimates is low, and claims data typically only offer information about a small subset of privately insured patients.
Time-driven, activity-based cost
Dr. Jayakumar began by emphasizing the importance of defining total costs of care, referring to the idea as “mission critical.”
“Value-based healthcare strategies are at the forefront of people’s mind,” Dr. Jayakumar said. “The aim is to refocus on patient-centered health outcomes that matter relative to the costs of achieving these outcomes.”
More commonly used cost accounting models work from the top down and are based on reimbursement, Dr. Jayakumar explained. “While relatively simple to calculate, the method can be inconsistent, and it doesn’t really support cost reduction.”
Time-driven, activity-based costing (TDABC), however, is a bottom-up approach. TDABC is based on cost of care pathways and which resources are used by patients. TDABC consists of seven steps: identifying the medical condition; defining the care-delivery chain; developing process maps; obtaining time estimates; estimating cost of resources; estimating capacities and capacity cost rates; and calculating the total cost of patient care.
“Aligning reimbursement with clinical and quality costs is essential,” he stated. “The basics principles of TDABC are not rocket science, and it can be pretty easily done in a simple, cost-effective way.”
Integrating cost data into clinical decision making
Rounding out the ICL was Dr. Koenig, who discussed the integration of cost data into clinical and patient-centered decision making. “I think the things we do in orthopaedic surgery are some of the most important things ever done in medicine,” he began, “and we have got to stay at the forefront.”
A real-world approach to cost consciousness can be executed in a few simple steps, Dr. Koenig explained. First, surgeons should ask themselves questions such as, “What are my comparative costs?” Additionally, clinicians should take into account factors such as surgical costs (e.g., OR time, types of implants used, etc.) and clinical costs (e.g., biologics, casting versus splinting, etc.). Understanding these factors will help orthopaedic surgeons establish a baseline of costs, Dr. Koenig explained.
Surgeons should also consider the exploration of costs and cost-saving strategies. He noted strategies such as being aware of available cost-saving resources, gaining access to cost data, and normalizing discussions of cost with the clinical team, OR managers, and vendors.
One of the key takeaways, according to Dr. Koenig, is that “patients come first.” Surgeons should be mindful of avoiding waste, recognizing that costs should inform utilization, eschewing the fear of outside societal perspectives, and understanding technological innovation prior to changing the focus of one’s practice.
