Healthcare Reform and Spine Surgery

Expenditures and Spinal Disorders

Medical expenditures in the United States have increased steadily over the past 60 years. In 1960, the National Health Expenditure Accounts began measuring healthcare expenditures for goods and services, including public health activities and private and personal expenditures for healthcare. In 1960, healthcare expenditures in the United States totaled $24.7 billion for a population of 186 million people, or a total of $133/person/year. By 2018, total healthcare expenditures had increased to $3.6 trillion, or $11,172/person/year. The per capita costs of healthcare in the United States exceed those of other Western industrialized nations, and are disproportionately high compared with the observed health and disease burden of our population. As an industry, healthcare accounts for 17.7% of our gross domestic product. As a public expense, healthcare accounts for $1.34 trillion in expenditures, or 28% of the federal budget. ^,

The surgical management of spinal disorders cost an estimated $85 billion in 2005 based upon Medical Expenditure Panel Surveys. Martin et al. reported an increase of expenditures for spinal disorders of 48% between 1997 and 2006, with prescription medications, inpatient procedures, and emergency visits accounting for the largest proportion of the change. Despite the significant increase in expenditure for spinal disorders, there was evidence that the overall spine health of the population in the United States had worsened over the decade. The overall costs for management of spinal disorders from 1984 to 2014 in the United States increased 129% in total direct treatment costs, to an estimated $315 billion, with spine surgeries being one of the most costly procedures per case in the healthcare economy. There is significant variability in rates of spine surgery, even in demographically very similar areas. There is strong evidence that what you get regarding treatment for spinal disorders depends upon who you first see––the primary providers or surgeon signature. Triage to a physical therapist as a first approach to nonspecific low back pain may have significant cost savings compared with triage to a surgeon. ^, Within spine surgery, there is tremendous variation in costs of care and surgical approach for common lumbar degenerative conditions. There is an overall lack of strict guidelines or evidence for treatments for lumbar spine disease, which is a major challenge for the adoption and enforcement of value-based payment models. The disassociation between expenditures and outcomes of care underlies the need for further analysis of cost drivers and cost effectiveness of specific interventions.

Payment Models in Spine Surgery

An examination of current and evolving payment models of care can provide a structure for understanding the factors in our health economy that are significant in driving utilization patterns, as well as economic incentives that may drive choice. In a fee-for-service (FFS) healthcare economy, the economic incentives include supply-driven demand and volume-based (rather than value-based) incentives. FFS has been the predominant payment model in the US healthcare system for many years, well into the 1980s. The FFS healthcare model was even called a “guild system” because it allowed practices almost complete control over what care they provided and what fees they charged, giving physicians maximum control over their own income by increasing services provided. Regulations that prevented insurer controls or other limitations of care choice helped perpetuate this model. In all FFS models, each care item provided to a patient is billed for at the source of care, and paid for most commonly by a third-party federal, state, or private insurer. The separation of the patient from the cost of care leads to a disassociation of cost and demand. The patient who is uninsured is the party who is most incentivized to pursue cost-effective care and who is most at risk for the excessive costs of care. In 2007, nearly two-thirds of all personal bankruptcy in the United States was because of medical debt.

The Center for Medicare and Medicaid Services adopted the FFS payment model at the foundation of a national insurance system in the United States in 1961 as a natural outgrowth from when patients paid for their own services, and at a time when many elderly people received an inadequate amount of care services. FFS payment had the clear effect of creating a strong financial incentive to encourage more services, as supply-driven demand. Although the Medicare and Medicaid system has been an essential government healthcare program for our elderly and disabled population, with the huge growth of US healthcare as an industry over time, the growth of expenditures has become unsustainable. US healthcare spending grew from 5.6% of the gross domestic product (GDP) in 1965 to 17.7% of the GDP in 2018, reaching spending of $3.6 trillion or $11,172 per person, over twice the cost per capita of Canada and other western industrialized nations. Despite paying more per capita for healthcare, the United States lags most of the western industrialized world in population health metrics, including access to healthcare and quality of care indices.

Unsustainable rates of rise in healthcare costs led to the development of several methods to curb the growth in healthcare expenditures, as well as the first methods intended to curb demand for healthcare within the current FFS payment structure. Initially, strategies focused on controlling high prices by adopting payment limits on drugs, devices, physician services, and hospitals through diagnosis-related group (DRG)–based payments. However, the incentives of FFS models to increase volume of services, often regardless of proven benefit, continued to be a strong driver and subsequently increased the rate of healthcare spending overall. As a result, in the 1990s structural changes such as managed care systems and A. Enthoven’s concept of “regulated or managed competition” were adopted to change these FFS incentives.