Prosthetics Versus Orthotics: Considering Opportunity Costs to Challenge a Financial Paradigm
September 2016 Issue
Having been a prosthetist for about seven years, I have heard it said that the real money in O&P is generated by prosthetic deliveries. I've blindly accepted this premise until recently, when I gained hands-on experience regularly fitting off-the-shelf (OTS) orthotic devices. While you may quibble with the specifics of some of my assumptions, hopefully you'll find the conclusions worthy of consideration from both a financial and professional perspective.
Leaving typical overhead costs out of the equation, I generated some back-of-the-napkin comparisons between the estimated financial gains from delivering a single K2-level transtibial prosthesis to a Medicare beneficiary versus delivering a variety of OTS orthoses, assuming the expenditure of an equivalent number of clinical hours for both scenarios.
In this situation, based on appropriate L-codes, let's assume the prosthesis would bill out for about $8,700. After deducting an estimated $2,000 for fabrication labor and materials, parts, componentry, liners, socks, and a shrinker, the result would be what I will loosely call a gross profit for this delivery of about $6,700. Included in this prosthetic delivery, but not in these costs, is the commitment of about 12 clinical man-hours, assuming that the prosthetist will see this patient 12 times during the first year of their relationship, including all pre- and post-fitting appointments, averaging one hour per appointment.
Unfortunately, we prosthetists are not directly compensated for all of our clinical time. In this case, excluding the one delivery appointment, it could be argued that this clinician was not reimbursed for the other 11 patient encounters that were linked to providing this device, creating opportunity costs for those 11 clinical hours. These opportunity costs exist because, in a perfect world, they are hours that could have been used to generate revenue from other activities, such as delivering OTS orthoses.
For example, most OTS orthoses can be easily fit in 20 minutes or less, plus about five to ten minutes for charting. Based on this assumption, this same clinician can deliver 22 OTS devices during those 11 nonrevenue-generating hours. Assuming an average reimbursement of $250 for each OTS orthosis and an average cost per device of $60, the delivery of 22 OTS orthoses would generate about $4,180 in gross profit [($250 - $60) x 22].
Considering all of this, is it accurate to say that this single transtibial prosthesis delivery generated $6,700 in gross profit, as initially stated? Or, when you deduct the opportunity costs calculated above, was the real gross profit actually closer to $2,520, the difference between $6,700 and $4,180? Carrying this line of thinking one step further, would this clinician-given ideal circumstances-have benefitted more financially by delivering 22 OTS devices instead of this single transtibial prosthesis, because those combined OTS deliveries would have generated about $4,180 in gross profit versus the $2,520 from the single prosthetic delivery, after deducting the lost delivery opportunity costs created by the 11 nonbillable clinical (prosthetic) hours?
I'm not sure what the correct answer is to this hypothetical question, as there are many variables to be considered in terms of how prosthetic care should be compensated professionally versus how it really is, as well as the way in which opening our minds as O&P professionals can benefit the bottom line. I can say with certainty, however, that this mental exercise has altered my perspective on the value of OTS orthotic fittings and how they contribute to the overall operation of an O&P practice.
Pete Seaman, CLP, provides compassionate patient care at Master's Orthotics & Prosthetics, Silverdale, Washington. He can be reached at .