Connections : Join the Conversation - The blog of Biomet CEO Jeffrey R. Binder

The California state legislature has dealt a blow to physician-owned companies (POCs), including physician-owned distributorships (PODs).

There's an old saying: if you find yourself standing in a hole, quit digging.

In my last blog, I discussed the potential pitfalls facing hospitals, physicians, and manufacturers that do business with physician-owned distributorships (PODs).

Physician Owned Distributorships (PODs) are a highly controversial business model emerging in the U.S.

Part 3: A solution, not a problem

An influential U.S. Senator once told me, "A lot of people up here think you're the bad guys." Of course, I took exception to that comment, responding that every member of our team devotes every working day to improving the lives of patients.

Part 2: Why spending is not the same as cost

You would think that policymakers, anxious for any good news in a difficult economy, would applaud the growth of the medical device industry and its job creation over the years. But that's not necessarily the case.

Part 1: macroeconomic benefits

The world's healthcare systems seem to be of two minds regarding medical technology and the companies that provide it.

Medical device safety is a hot topic, having recently become the focus of Congressional hearings, news reports, academic publications, and proposals for stepped-up U.S. FDA regulation and review of new devices.

A few months back, Biomet received a call from John Fauber of the Milwaukee Journal-Sentinel. Mr. Fauber writes a regular feature that attempts to expose the supposed evils resulting from the collaboration of surgeons and medical technology companies.

In our last blog, we examined the criticism surrounding industry funding of continuing medical education (CME). In this installment, we turn to industry funding of clinical research, which critics claim creates bias and undermines public trust in medicine.

In April 2009, the Institute of Medicine (IOM) issued a report on financial conflicts of interest in medicine. The report began: "Hardly a week goes by without a news story about conflicts of interest in medicine."¹

This blog kicks off a series about the current narrative emanating from policymakers, academia, and the media. This Narrative (its ubiquity earns it proper name status) focuses overwhelmingly on, to quote the Columbia Journalism Review, "unsavory practices in the medical profession."¹

This year, the U.S. Congress has vexed the nation's physicians like never before. Three times, Congress went on recess without resolving a looming 21.3% pay cut mandated by law. Three times, CMS had to hold physician claims in order to give Congress time to avert a devastating reduction in physician pay. And three times, Congress has failed to come up with a workable long-term solution to what has become an annual farce. It's now mid-year, and doctors still don't know what Medicare will pay them to treat patients.

Gainsharing is the mechanism by which hospitals share supply savings with doctors.  The idea is to align doctors and hospitals in reducing the cost of treatments that require high technology medical devices. The U.S. Department of Health and Human Services Office of the Inspector General (OIG) has consistently ruled that gainsharing is in violation of federal statutes that prohibit reduction of care to Medicare/Medicaid beneficiaries and kickbacks to doctors in exchange for referrals.

The Center for Medicare and Medicaid Services has released its proposed payment ruling for 2011. Orthopedic procedures generally will receive increased reimbursement, as shown in the table below. In aggregate, Medicare payments for all inpatient procedures will be reduced 0.35%, comprising a 0.1% reduction plus an additional 0.25% reduction as mandated by the new health reform legislation.^i,ii

President Obama and Congress have consistently expressed three key goals for the U.S. healthcare reform legislation recently signed into law: expand access, reduce cost per beneficiary, and improve quality.¹ Of these, improving quality is the most problematic, simply because a universally accepted definition of healthcare quality is an elusive ideal.

Recently the U.S. Food and Drug Administration (FDA) regulatory mechanism by which most orthopedic implants reach the U.S. market, known as the 510(k) premarket notification process (hereafter, the 510(k) process), has been questioned. Some critics believe that devices reaching consumers through this process are not thoroughly evaluated, consequently creating a risk to patients.

For years, the government has threatened to shut down physician-owned specialty hospitals (hereafter referred to as "specialty hospitals"). The new health care reform legislation has taken a big step in that direction, mandating a moratorium on new specialty hospitals, and restrictions on the expansion of existing facilities.

The New York Times, under Barry Meier's byline, has recently published several prominent articles that are generally critical of the orthopaedics industry. We have already commented on the first, which misrepresented the industry's position on joint registries. The second, which was actually a cluster of related articles, discussed clinical issues with metal-on-metal hips. While the reporting was generally more accurate in the second instance than the first, it was imbalanced in that it did not proportionately discuss the benefits of metal-on-metal implants.

On April 2, the Times published a third article that was highly critical of the industry for not offering warranties on implants.

In April, 2009, the AdvaMed Orthopedic Sector issued recommended principles in support of creating a United States total joint registry. To help develop the U.S. registry in accordance with the AdvaMed recommendations, Biomet has donated generously to the American Joint Replacement Registry, (AJRR) currently under development by American Academy of Orthopaedic Surgeons (AAOS).

Congressional leaders and the White House are now considering alternate paths to merging healthcare legislation passed in the House and the Senate.¹ The White House has released its version of a compromise bill that it hopes will bridge the gap between the legislative proposals.

American physicians began another year not knowing how much they will be paid for treating Medicare patients. By law, physicians are supposed to receive a 21.3% reduction in 2010 Medicare fees.¹

It is now obvious to any dispassionate observer that a concerted effort to demonize medical device manufacturers is underway.

In his September 9, 2009 speech to Congress regarding healthcare reform, President Obama dangled the possibility of medical malpractice liability reform without committing to a specific course of action.¹

We have posted a video that explains in five minutes the key flaws in government health reform efforts to de-emphasize specialty care. The video is titled "Access Denied: The Approaching Shortage of Specialist Doctors."

In response to readers’ comments, we are providing the second part of our report on physician reimbursement

As part of our advocacy on behalf of our customers and our industry, we find ourselves frequently visiting Washington, D.C.  Biomet recently held meetings with the staff of three senators and three representatives, including in two instances the representatives themselves. Our message to the legislators focused on the importance of preserving patient access to specialty care (see my blog entry “Specialists Under Fire”) and the value of orthopedic surgery.

The hospital industry recently negotiated an agreement with the Senate Finance Committee and the White House to reduce hospital spending cuts by no more than $155 billion over 10 years.  The agreement will no doubt result in hospitals applying additional pressure on suppliers to reduce pricing, including-and perhaps especially-medical devices such as orthopedic implants.

Several readers commented on concerns regarding reimbursement and future patient access to specialists, prompting us to provide the following information on Medicare reimbursement for commonly performed joint replacement and fracture repair procedures.

The Obama administration and Congress have clearly stated that their priority for healthcare reform is to expand access to care for uninsured Americans.

If they succeed, an additional 15% of the population will receive healthcare coverage, which will surely increase the demand for treatment. Policy initiatives should ensure that patients will have access to the doctors who are best equipped to provide treatment.

President Barack Obama, in his press conference of July 22, 2009 stated that the key to controlling U.S. healthcare costs is to allocate resources based on the effectiveness of treatment. While we have some concerns about how the government will measure value, it is hard to argue with the president's position.