Orthopedics-focused ambulatory surgery centers (ASCs) are one of the fastest-growing segments of ASCs. Orthopedics simplistically is the diagnosis, treatment, prevention, and rehabilitation of musculoskeletal system injuries and diseases. This specialty is evolving quickly to leverage demographic, payor, and technological marketplace shifts. Though the industry is still highly fragmented across the United States, there is still demand for affiliations with strong orthopedic groups emerging from diverse contexts such as health systems, nationwide ASC operators, and private equity groups. Many orthopedics groups are considering whether now is the right time to pursue an affiliation or acquisition and how much their business could be worth to a potential buyer. Below, are a few of the key trends impacting orthopedics providers in the U.S. We also identify what makes an orthopedics group attractive (Hint: It's not just about the bottom line).
Compared to other specialties, orthopedics was hit disproportionately hard by the deferment of elective procedures during the COVID-19 pandemic and subsequent labor shortages. Through the second quarter of 2023, many markets have stabilized and recovered to pre-pandemic volumes. Over the next decade, orthopedics providers will continue to face unprecedented demand growth fueled by the aging population. Geriatric patients are naturally more susceptible to injury and disproportionally experience degenerative joint conditions compared to younger populations. As the population age shifts and there are continual technological innovations, people will live and work longer, which will create increased demand.
The population-driven demand for orthopedics services is further exacerbated by innovations and regulatory changes in the industry, such as the migration of inpatient-only procedures to ASC settings. It is estimated that moving total joint replacement cases from hospitals to ASCs lowers the cost of care by approximately 40% while maintaining the same outcomes. As a result of this significant savings opportunity, around the beginning of 2019 many commercial payors began requiring cases to be performed in ASCs rather than hospital surgery departments unless the latter were medically necessary due to complications or comorbidities. Medicare is also increasingly willing to pay for ASC procedures. For example, total knee replacements were approved for ASCs in 2020 and total hips were approved in 2021. Although the reimbursement is lower in an ASC than it would be in a hospital setting, according to ASC benchmarking analysis, orthopedics cases are the highest-reimbursing cases performed in ASC settings nationally. Many physicians also prefer operating in a specialized ASC setting where they can control the patient experience and operating room setup and earn returns for driving efficiency in expenses and operational metrics. In response to these opportunities orthopedics-focused ASCs are among the fastest-growing types of ASCs, along with cardiology and pain management. Nationwide, providers are investing heavily in the equipment and unique buildouts required to specialize in orthopedics, such as 23-hour-stay recovery suites.
To read more details about why private equity firms are targeting Orthopedic ASCs, click here.
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