The Evolving Business of O&P
September 2012 Issue
In the last decade or so, the O&P industry has been buffeted by the same winds of rising costs and shrinking reimbursements that have been blowing traditional healthcare practice models if not entirely out the window, at least closer to the exit.
O&P practitioners and owners face their own unique challenges, especially in the areas of compliance, education, technology, and reimbursement. Rapid changes are nothing new for the profession, but in the past, only one or two of these areas seemed to be in turmoil at once. Today, all of these areas are in play, pushing and pulling the way O&P practices do business. The O&P EDGE asked practice owners in several regions across the United States how their operations are evolving in the wake of these forces. While individual circumstances are unique, their answers speak to common trends throughout the O&P industry.
Maximizing Payment, Building Efficiencies
When Jeff Brandt, CPO, founder and chief operating officer of Ability Prosthetics & Orthotics, headquartered in Gettysburg, Pennsylvania, began working in O&P nearly 20 years ago, he didn't think it was hard to get paid for the work he did for patients. Now he has geared his operation to expect payment delays and claims denials from commercial insurance providers and Medicare.
"Even when you do everything you're supposed to, you can wind up waiting nearly 12 months in some cases to get paid," he says.
It's particularly frustrating when a payer covers all but one code, but that code just happens to be a third of the claim, Brandt adds. As a result, few practices today have a "cash cushion" to rely on until receivables come in. Ability works hard to shorten that time lag, and they're not shy about recruiting patients to help.
"We're fierce advocates for our patients and will do whatever it takes to get them what they need," he says. "They're usually happy to help us out in return. We get them to call their provider at the first denial. We have to remind them not to think the insurance provider is their friend, but it's good for patients to understand that insurance isn't free and that they need to advocate for themselves, too."
In addition to maximizing income, Brandt also stresses the importance of minimizing internal costs through increasing efficiencies. For Ability, that means a paperless office. Since opening in 2004, Ability has been using OPIE Software. Computerized operations have become even more critical as the practice has grown to 11 offices that span five states and three Medicare regions. Each Ability office is staffed with a certified orthotist and a certified prosthetist; information technology operations are supported by the central office and one server.
What Ability doesn't do is on-site fabrication. Everything is sent to a central fabrication facility, which allows practitioners time to keep current on technology and focus on compliance, patient care, and outcomes. "If you want to focus on outcomes, you have to create time somewhere," Brandt says.
"Back in the 1990s, when I was working for a large O&P practice, we only sent jobs to central fabrication when we were too busy," Brandt says. Because the practitioners didn't work with central fabricators regularly, they "didn't have a relationship with [them] and then wondered why [the fabricators] never got it right."
Ability has developed a list of about 35 fabrication companies they use regularly, which the company has categorized by areas of expertise, shipping requirements, and so on, to help practitioners choose the right vendor to fabricate the patient's device. The practitioners talk with the technicians frequently to ensure that the device meets their specifications so that they can deliver it to the patient with confidence, Brandt says.
Because payers are increasingly basing reimbursement on contracted fees, Brandt says he sees the profession moving more toward outsourced fabrication in the future. As a result, he would like to see orthotist and prosthetist education and training programs include a greater focus on developing communication skills.
Regulation Is Good for Business
Charles Kuffel, CPO, FAAOP, is the owner of Arise Orthotics & Prosthetics, Blaine, Minnesota. Arise runs on a traditional mom-and-pop model. Kuffel sees patients in one location and fabricates prostheses and orthoses, and his wife, Teri Kuffel, Esq., serves as vice president, managing the business side and the company's ten employees, three of whom are dedicated to administration and billing. Kuffel got into the profession 15 years ago after a stint in the military, becoming certified after completing the O&P education program at Northwestern University Prosthetics-Orthotics Center, Chicago, Illinois, and practicing for several years.
At this point, the Kuffels have no plans to grow their practice further. They receive about 75 percent of their patient referrals from other practices in the Blaine Medical Building where the couple opened Arise in 2007.
As business owners, the couple takes an active interest in where the industry is headed. Kuffel is the treasurer of the National Commission on Orthotic and Prosthetic Education (NCOPE), and Teri is the Minnesota state representative of the American Orthotic & Prosthetic Association (AOPA). Both are also involved with their state O&P groups. Teri spends time at the Minnesota House of Representatives working on legislation that could impact O&P practices.
"Today it is essential to have a relationship with your state Medicaid department and your state legislators [and] respond forcefully when bills come up," she says. "Years ago, this simply wasn't necessary." Teri has helped to draft bills for insurance fairness for individuals with amputations and for O&P licensure. She recently helped defeat a proposal that would have cut Medicaid prosthetic coverage for adults in Minnesota.
While it might sound counterintuitive, the Kuffels maintain that more consistent regulations can be good for the profession. "We started out as part owners of a practice in Arizona, where there is very little insurance regulation," Kuffel says. "That makes the environment for contracts very competitive, which pushes reimbursements down for everybody. In Minnesota, which is more highly regulated, we are mainly concerned with ten to 12 contracts, but in Arizona we had to have three times that as a starting point."
The Kuffels support the increased entry-level O&P practitioner educational requirement to a master's degree, which becomes effective January 1, 2013, and state licensure, which is slowly gaining ground. Both of these changes will elevate the profession in the eyes of insurers and regulators, they agree.
"You need the advanced education to keep up with the technology and business," Kuffel says.
And while he agrees with Brandt that the trend is going away from on-site fabrication, he sees this as "a mixed bag." "If you can build it yourself, you can troubleshoot a device when a patient brings it in for a repair," he says. "Students who [start a residency at our facility] may be more book-smart, but their training is de-emphasizing hand skills. If you've never poured plaster, it's harder to communicate what you want the finished product to be. There's only so much you can write on a piece of paper."
Building a device yourself also means that "you don't have to ship it out to central fab," he adds. "As off-site fabrication costs increase to match lowering reimbursements, O&P companies will be forced to find new business strategies."
Another change that will help the profession prosper in the future is decoupling O&P from durable medical equipment for reimbursements and regulation, he says.
"We have to fight tooth and nail to get new codes when we start providing new technology," Kuffel says. "Our cost of goods keeps increasing while we may not have a way to bill for the device [until new billing codes are approved]. More than any time in the past, we are finding it more common to 'hope for payment.' Then again, we get to make really cool stuff that significantly helps change the lives of some really nice people."
Focusing on the "Business" in O&P Family Business
The O&P industry is far past the days when a kid graduating from high school could choose between making cabinets or prostheses. It's probably safe to say that Rod Cheney, CPO, thinks his father Ron's decision to make prostheses more than half of a century ago was a good one. Today, Cheney is executive vice president of the firm his father and three colleagues purchased in 1972. American Prosthetics & Orthotics, headquartered in Clive, Iowa, now employs 68 people across eight offices.
It's still very much a family business, with Cheney's father, his uncle Gary Cheney, CPO, FAAOP, and his brother Brent Cheney, CO, all involved, but there are now eight employees in the company's internal insurance department who are dedicated to working with payers.
Cheney grew up in O&P and has seen plenty of changes over the years. The practice provides a mix of orthotics and prosthetics, but because a significant number of their patients have diabetes, Cheney says they have more orthotic patients. From a financial standpoint, reduced reimbursements have resulted in the need to see a greater volume of patients in order to receive the same amount of income as in past years.
"On the prosthetic side, all the new technology is great, but we struggle with the fact that it outruns reimbursement," he says, echoing Kuffel's concerns. "We concentrate on providing the most appropriate technology for the patient."
In Iowa, O&P practitioners are licensed by the state podiatry board, and Cheney says the board has been very supportive of the industry, "because they are tired of the same things [we are]. They're working on rules to protect the patient, but the horse is out of the barn with anyone providing off-the-shelf orthotics."
Cheney received a business degree at the University of Iowa, Iowa City, before he decided to join the family practice. Now he's glad he has the business background and says he doesn't see how practices that don't have someone with business training can survive in the future.
"It used to be that Dad saw patients and made limbs, Mom did the books, and Junior was the tech, and if you made a little money, that was all right," he says. "Today, if you don't do your financials and keep on top of the budget, you wake up one day wondering what your business is worth. Then how do you retire?"
He's not even sure a solo practitioner could set up a successful practice right out of school today.
"The business model is different [than in the past]," Cheney says. "To get contracts, you need to show that you have wide coverage, which is why we have eight offices-we even cover part of Illinois. You also need to have relationships with physicians and hospitals, and those take time to develop."
Cheney says he sees young practitioners who complete a residency at his firm who want to set up their own facility in two to five years. He advises them to take their time and work for someone else to learn the business and, most importantly, to build up what Brandt calls the cash cushion-nine to 12 months' capital on hand-to keep the doors open while they're waiting for those delayed reimbursements.
As a business owner, Cheney questions the economic impact that the entry-level practitioner education requirement will have on small practices.
"Does that mean the pay grade will be higher for people with a master's degree but without experience?" Cheney wonders. "It's difficult to understand how we'll be able to afford higher wages when reimbursements are going down."
To help keep the regulatory side of the business running smoothly, Gary Cheney has become a full-time compliance officer at the company, which is a newly created position at American P&O.
"If audits weed out bad players, I'm all for it," Cheney says. "We're in compliance, but I get the feeling that it will be the good players who will feel the grief. If you ignore it, you're in trouble. Why would a facility forgo payments that were being recouped for services that were done in compliance in the first place?"
A Team Approach to Incorporating New Technology
Bill Sampson, CP, president of Sampson's Prosthetic & Orthotic Laboratory, Schenectady, New York, is a second-generation owner who has worked for the practice his father, William Sr., founded since 1985. He says his late father had a hard time retiring at first but eventually dropped into the office less and less.
"I miss his advice, but when he was looking at his watch when he was here, I knew he was ready to fully retire," Sampson says.
Sampson is nowhere near retirement. While he is concerned about reduced reimbursements and increasing regulations, he's enthusiastic about the rapid advancements in O&P technology and what it allows him to offer his patients.
"All of our practitioners are trained on advanced technologies...because that's what patients are looking for," he says.
Technology is also driving Sampson's relationships within the medical profession. In the spring, he formed Northeast Advanced Surgery & Prosthetics (NASP), Schenectady, with plastic surgeon Jerome Chao, MD, FACS, to provide targeted muscle reinnervation (TMR) procedures and upper-limb myoelectric prosthetic technologies. Chao was on the surgical team for the first TMR procedure performed in 2002 on Jesse Sullivan in Chicago. Since then, more than 60 patients have undergone the procedure in the United States. Sampson has worked with Chao on three TMR cases in the Albany area and is scheduled to begin on a fourth.
"We decided we could work as a team through NASP to guide patients and their families through the process," Sampson says. "First the patient has to be evaluated to see if he would be a good TMR candidate, not just from the prosthetic side but from the surgical side. Then we have to determine whether there is the commitment to the six to eight weeks of therapy needed to develop the muscles after the recovery from surgery before we can even start to fit the prosthesis, and then the months required to learn to use it. It could be six months before everything is up and going. We work with everyone on the care team to ensure the best possible outcome for the patient."
Sampson says that the research being done on technologies like TMR has the O&P profession on the right track, but he admits reimbursement is a challenge. The collaboration needed to make it successful is just as important.
"About ten years ago, I noticed that my patients had a better outcome if I had a closer relationship with the surgeons and therapists," he says.
Technology has also helped to make Sampson's five-office operation more efficient. A paperless system speeds communication, and Sampson stays in touch with his 25 employees by phone, e-mail, and text message in addition to seeing seven or eight patients a day. He even makes greater use of technology in the exam room, running the software that communicates with the various powered hands, elbows, ankles, and knees right on his laptop. Computer-savvy is essential for practitioners to be able to adjust increasingly sophisticated devices for patients, Sampson notes.
As important as technology is to today's O&P practice and will be in the future, it's important to maintain face-to-face interactions, he adds. He makes it a point to have a weekly sit-down meeting with his practice administrators and travels to each office regularly to see how his practitioners are interacting with patients.
Regardless of how the winds of change impact O&P, in the end, running a successful business is "about having a good rapport and doing a lot of listening-with patients and employees alike," Sampson concludes.
Kate Hawthorne is a freelance writer living and working in Fort Collins, Colorado. She can be reached at