John H. Peloza, MD, is an orthopedic spine surgeon, founder and medical director of the Center for Spine Care and founding physician partner of the Institute for Minimally Invasive Surgery in Dallas, which was recently founded through a partnership between Meridian Surgical Partners and local physicians. He is a leading expert in minimally invasive spine surgery and has helped launch several minimally invasive spine surgery technologies. He is an investigator/researcher in FDA trials, such as MAVERICK total disc replacement, and holds multiple spinal technology patents. He is a spine consultant to the U.S. Ski Team and a member of numerous national and international medical organizations.
Q: Before we get into why you thought it was the right time to open a new ambulatory surgery center, can you describe your view of the current model of healthcare delivery in this country and how we got here?
Dr. John Peloza: The model of healthcare delivery is changing, and it probably won't be the same again. The old days are over, no matter what happens with the [Affordable Care Act]. Healthcare is now being driven by proving improvement in care and a huge drive to cut costs. In order to give a value proposition to somebody to make a decision on healthcare, you need to provide clinical outcomes and costs. You need both; you can't have just one or the other because you can't determine value.
There are several strategies in place in response to these changes. One is an accountable care organization. This is a vertically integrated medical system designed to deliver all medical care across all medical specialties in one location. They depend on efficient centralized administration, contracting, marketing, reduced errors and redundancies, economies of scale and electronic medical records. These ACOs have several problems. No one has ever designed a system that could manage all the different fields of medicine with their inherent complexities and distinctly different pathologies and treatments. Biologic systems respond to interventions differently than mechanical systems. In addition, people have different priorities, goals, and risk tolerance at different phases of life. People also change their minds so that modeling healthcare can be drastically different than modeling an engineering problem. Most people seeking healthcare at any moment in time do not need the resources of these large, expensive, bureaucratic organizations. So far, very few ACO trial models have avoided bankruptcy. However, since the ACOs are integral to the healthcare plan, they will probably be heavily subsidized by the U.S. government at astronomical cost.
Another feature of most of these plans is a capitation payment system. In this payment method, providers are given a set fee per enrolled member (patient) per month at the beginning of a time period (e.g., monthly). The providers are incentivized to do as much nothing as possible because every intervention is a cost that gets deducted from the provider's monthly fee. Costs are controlled by restricting care at the provider level. This was tried in the 1990s without much success because educated healthcare consumers would not buy these plans.
These strategies have gatekeepers in position to determine when and where patients go for their care. These are mostly primary care physicians but they can be physician assistants or nurse practitioners. The problem is that nobody knows enough about all of the fields of medicine to really perform that role well. This is not a knock on PCPs. I know spine. I don't know family practice, general surgery, cardiac surgery or cardiology. For me to make decision in those fields wouldn't be very helpful or effective. So I think that's a reason that model broke down.
Presently, the players are hospitals, insurers, employers and providers. The hospital strategy is to merge and get bigger to control patient access. They're merging huge systems and hospitals, they're buying doctor practices and they're trying to drive patients into their systems in order to exclude non-affiliated providers from their systems and patients. They are trying to build local monopolies in order to gain leverage in contracting with insurers, providers and vendors. They think they're going to get economies of scales and efficiencies and keep their hospital beds full. But the problem is that hospitals have huge overhead costs. They have legacy costs, land costs, facility costs, overlapping administrative and clinical staff costs. They can [make a lot of] cuts but they can't get rid of all of that overhead. Most of their cuts will come at the expense of providers and vendors so they will cannibalize their own product. They will still be large, inefficient dinosaurs that monopolize everything through their networks but still be dependent on keeping expensive beds full.
The insurers are trying to expand their market share. They're merging with insurance companies or healthcare facilities or systems. They're buying medical practices and providers. They're even talking about cooperative entities with healthcare systems to share risks. We'll see how that works out.
The employers are probably just sitting on the sideline to see how it all shakes out to get the best price they can.
Q: What about the government?
JP: Government is the biggest player of all. What government can do is legislate their competition out of business. They can do it by denying a healthcare entity the ability to compete or they'll just require so many mandates that they go bankrupt. You're seeing a lot of that in the healthcare bill. The goal is eventually a single payor, government run and regulated healthcare system. In order to cut costs, the strategy is to ration care — that's the only way they're going to be able to do it. They can ration it through regulation, such as when the FDA just denies an implant, a drug or procedure. The government can do it through evidence-based medicine. They can manipulate statistics and game the system, in order to determine that and intervention doesn't work well enough. Even when they have to acknowledge that something works, they'll just say it's too expensive and not cost effective.
Q: How are physicians viewing these developments?
JP: From a doctor's perspective, there's a lot of doom and gloom out there when they consider that they may be an employee of the government, a hospital system or maybe an insurance company. Doctors see all of their options being eliminated and they're going to be told how to practice medicine by someone who made an algorithm [to determine how to provide care]. They're going to be told what to do by some bureaucrat who is totally unaccountable to the patient.
One of the big things about medicine is that every patient is different .A weakness of evidence-based medicine with a randomized prospective study is that the conclusions often do not apply to specific clinical situations. Without experience, the decisions that come out of an algorithm based on evidence-based medicine don't work. It is essential to have a robust knowledge of the specific medical literature, but to actually do a procedure or surgery you need to know the patient's specific diagnosis, what they're comfortable with in terms of risk and what the doctor can actually do because people have different skill sets. After an intervention, a physician must manage the patient effectively. You have to really take care of people, and that's one on one. I don't think you can systemize that to just one size fits all. It's not very effective.
Q: How does all of this affect patients?
JP: I think people appreciate when you're with them, you talk about all of their options and then you can take care of them before surgery, during the surgery and then particularly afterwards. You don't get that with industrial-type medicine.
When it comes to healthcare, patients want to remain the primary decision makers along with their physicians. They do not want government or insurers to decide the quality or quantity of care they receive. Without the ability to deliver medical care, we will get no innovation on devices, techniques or drugs because there won't be a way to commercialize them. There will be no research and development and medicine will decline like you see in other parts of the world that have embraced either socialized medicine or some capitation system.
Q: Given this outlook on healthcare, as the marketplace is shifting to these big organizations, and considering the economy is struggling and development of de novo surgery centers has flattened, why would you still decide to proceed with building an ASC now?
JP: 80 percent of spine surgery is done in the hospital now. For years we were bound to the hospital because open spine surgery had significant dissections, instrumentation and blood loss. Patients required significant anesthetics, particularly pain management postoperatively. and also a lot of rehabilitation. Only about 20 percent of spine is done in an outpatient setting. However, we have been performing the majority of our spine surgery for years as same-day or overnight admission. All of these cases can now be done in an ambulatory setting The device manufactures have even estimated that within the next 10 years, 80 percent of spine surgery will be done outpatient in an ambulatory setting versus only 20 percent in the hospital. We have positioned our center to provide that care. We participate in evidence-based medicine and record patient clinical outcomes on all of our surgery as if they were in an FDA study. In addition to our ability to do clinical outcomes research, we can control our costs and also follow our costs in order to show that we are the best option for spine care. We're in the position to offer these high quality patient outcomes in a convenient, non-hospital environment at a far lower cost. By our ability to control our quality and costs, we can drive patients, employers and insurance companies into our facility.
Q: Is this approach catching the attention of payors at all?
JP: We've had some interest by people in the insurance industry that if we prove this concept, and we can cut the cost and still provide the high quality, based on evidence-based medicine, and provide a concierge patient experience, they're going to be very interested in bringing their patients to our center. We are cooperating with the insurers because we think we add value. That's why we decided to open this center. We think that after about 15 years of minimally invasive experience that we can actually pull it off.
We're in a unique position to monitor this data — patient satisfaction, outcome and cost. We're in a great position to compete with anyone. We're already proving this concept works, and we're excited to take this to insurers. It is estimated that an ASC can provide a procedure at 65 percent of the cost of a hospital. We can go to an employer and set up a program for them. If the FDA doesn't approve a particular technique or the insurer says they're not willing to cover it, we can provide that care to that [patient] at a reasonable cost and then they have to determine if it's worth it.
Q: What is an example of a technique not approved by the FDA or covered by insurers that patients would be willing to consider paying for out of pocket?
JP: An example would be lumbar disc replacement. A recent publication on the MAVERICK disc replacement shows it's superior to minimally invasive fusion at every point of time postoperatively. The FDA hasn't approved this specific disc even though it was the largest prospective, randomized trial with level I data in the history of spine surgery. It is often difficult to even get the FDA-approved lumbar disc replacements approved for patients because some insurers still have a negative view of lumbar disc replacement as a procedure, but the demand by patients for this technology is tremendous. At an ASC we have the flexibility to provide a reasonable, package cash price to those patients interested in paying out of pocket for lumbar disc replacement procedures.
Q: The Institute for Minimally Invasive Surgery is a joint venture with Meridian Surgical Partners. Why partner with a management and development company rather than opening the facility independently?
JP: I know a lot about spine but I only know a little bit about business. One thing about knowing just a little bit is you can really get hurt … bad. You need a partner that's done it before. The complexity of putting [an ASC] together is significant. You want somebody with a track record who knows how to do it. You're talking about buying real estate, an architect to design it, contractors to build it and somebody to manage it — and that's hiring staff, managing staff, human resources, buying equipment. Meridian gets great prices on everything we bring in here and that's helping keep our costs down. They manage the facility, particularly operations. I need to focus on what I know and not try to manage something that's as complex of a business entity as this.
Q: Did you consider a hospital partner?
JP: The problem with the hospitals is in order to get them involved, they generally want 50 percent of your ownership. They don't provide enough to get that, frankly, in my opinion.
Q: What types of procedures are you performing in the ASC now and do you anticipate performing other procedures in the future?
JP: As minimally invasive surgery has evolved, we started by doing the simplest things and then we just expanded. One of the nice things about my career is we've worked really closely with engineers. The surgeons and engineers would collaborate to make better tools, and as we made better tools we were able to do more type of surgery. We used to say that minimally invasive doesn't mean minimally effective. You had to be able to accomplish the goal of the surgery you would do open with minimally invasive tools.
We started with discectomies, and now we're starting to work through endoscopic tools with fiberoptic scopes, so a 7 mm tube is one way we can do a discectomy. Then we could do partial laminectomies through a tube, and a multi-level surgery through a single portal, and bilateral surgery with a single portal and multi-level bilateral surgery through a single portal. It just got better as our tools improved.
Then we started putting metal into the spine. We put in pedicle screws. We just did a percutaneous thoracic case. Now in the outpatient space you will see TLIFs, PLIFs, posterior percutaneous screw fixation, facet screws and also a DLIF or XLIF procedure through the side through a tube backed up with posterior instrumentation.
We have in our facility an O-arm [Surgical Imaging System from Medtronic], so we have intraoperative CT navigation. That's just lumbar spine. In the cervical spine, we have done several posterior minimally invasive foraminotomies and discectomies. We can do anterior surgical fusions and cervical disc replacements in an outpatient setting.
Eventually we're going to do anterior surgery and we'll be doing anterior lumbar disc replacements [in the ASC].
We're pretty confident we're going to be doing anything except deformity. In terms of degenerative lumbar deformity, we are doing that with minimally invasive techniques now in the hospital. That's probably the last thing we'll conquer as outpatient.
Learn more about the Institute for Minimally Invasive Surgery at www.instituteforminimallyinvasivesurgery.com.
Learn more about the Center for Spine Care at www.centerforspinecare.com.
Learn more about Meridian Surgical Partners at www.meridiansurgicalpartners.com