The Changing Landscape: Manufacturers Enter the US Clinical Care Market
May 2020 Issue
In the past few years, Ottobock and Össur have quietly been making inroads into the O&P clinical care market in the United States. The companies, which collectively have more than 150 years of O&P experience, share a goal of becoming involved with and entering the US O&P healthcare arena.
"Consolidation is occurring across all healthcare sectors in the US, including O&P. Our primary goal is to ensure that the O&P industry remains healthy, with owners that have the best interests of patient care facilities and the patients we all serve," says David McGill, manager of US Clinics for Össur,
who has been with the Iceland-based company for 14 years.
The business of O&P is rapidly evolving not only in North America, but globally as well, according to Brad Ruhl, managing director, Ottobock North America, Austin, Texas, who has been with the company for 32 years.
"We're watching private equity enter the North American healthcare market much like it has in other countries around the world," says Ruhl.
The general trend of vertical integration in the United States is happening in large part due to the financial pressure on all healthcare sectors and the resulting changes to the reimbursement system, says McGill, who adds that Össur owns "an extremely small percentage," of the overall US O&P market.
"All healthcare providers now have to scale processes and compete against each other in a more complex and integrated environment," he says. "We're responding to this market shift by providing an avenue for O&Ps that wish to partner with or sell to a like-minded company."
Ruhl says Ottobock's decision to enter O&P care in the United States is driven by the effort of advancing patient outcomes and preserving choice
for the patient and the clinician. "Unlike those [private equity] companies, we're in it for the long haul and our involvement in patient care is rooted
in a commitment to fuel growth and foster a prosperous environment for the O&P industry that we've helped build."
In January, the American Orthotic and Prosthetic Association (AOPA) held its O&P Leadership Conference with the theme of "Transforming O&P Together."
In a letter to conference attendees, AOPA president Jeff Lutz, CPO, said, "Whether you think the O&P industry needs to be turned on its head or a few minor tweaks are needed, we can all agree there needs to be some level of change."
One of the sessions brought together a handful of industry leaders who provided insight on the profession's changing landscape along with a future-looking perspective that will likely have a significant impact on O&P.
"There's no doubt that manufacturers acquiring patient care facilities is changing the dynamics of the profession," says Eve Lee, MBA, CAE, AOPA executive director.
AOPA is working to ensure that these imminent changes have the best impact on the profession and its patients, Lee says. Specifically, AOPA is advocating for the passage of the Medicare Orthotics and Prosthetics Patient-Centered Care Act, which would help distinguish O&P from durable medical equipment (DME), Lee says. Through work with the Centers for Medicare & Medicaid Services (CMS) and the US Food and Drug Administration, AOPA provides feedback and guidance to ensure that polices, regulations, as well as funded research are based in evidence and promote access to patient care, she says.
Acquisitions in the US
While Ottobock and Össur each have a diverse outlook and purpose for entering clinical care in the United States, the companies report being united on one front: to offer the best in terms of patient outcomes, say Ruhl and McGill.
"Our approach begins and ends with the patients we serve," McGill says. "The most important consideration for Össur is ensuring that we improve patients' mobility. We believe Össur can achieve this objective in different ways and our experience over the last year-plus has confirmed our hypothesis."
Ruhl agrees. "For us it's about advancing patient outcomes and preserving choice for both the patient and the clinician," he says. "For more than 100 years, our mission has been simple, we help people maintain or regain their mobility."
Ruhl also recognizes that being able to balance entering the US clinical care market with manufacturer sales is a point under scrutiny. "We should recognize that consolidation and creating industry efficiencies like this has occurred in many other industries than O&P, we as an industry are just now starting to experience it."
In addition, managers of the patient care facilities that Ottobock and Össur have acquired will continue to operate their businesses as they always have, Ruhl and McGill say.
"They preserve and uphold the best interest of clinical care services and their patients. Ottobock has done nothing to change this, and Ottobock will act to help competition and make the industry more efficient," Ruhl says.
Össur acquired Virginia Prosthetics & Orthotics (VPO), Roanoke, Virginia, in October 2019.
Doug Call, CP, VPO president, says the transition was smooth. "With the expanded platform, [the purchase] created a greater opportunity for all our employees, some who have been with us for 25, 35, 40 years. They were fully behind it," Call says. "We've been blessed. There's not a better case scenario."
Collaboration is the primary role Össur has with VPO, says Call, who is part of the operations team and represents the Atlantic region. "I am still responsible for day-to-day management of VPO," he says. "I am still running VPO as I always have and have been encouraged to do so by Össur."
Össur purchased Next Step Bionics & Prosthetics, Manchester, New Hampshire, in November 2019.
"My experience since the acquisition has been nothing but positive," says Matt Albuquerque, CPO, founder and president. "One thing that has been most comforting is how employees have understood the value of and embraced the decision. We have the full autonomy to manage our region while still being part of a bigger vision."
Össur's ownership has also provided thorough analytics and guidance to optimize Next Step's clinical outcomes, Albuquerque says.
Ottobock invested in Ability Prosthetics & Orthotics, Exton, Pennsylvania, in January.
Jeff Brandt, CPO, CEO, and founder of Ability P&O says his experience since the acquisition has been excellent. The Ability management team continues to lead, manage, and operate the business, he says. The board includes employees from Ottobock and Ability, who govern the company alongside the executive team, Brandt says.
"We have a strong multinational strategic partner who is learning from us how patient care is delivered in the US and informing us of best practices utilized in their global markets," he says. "We work very well together with a level of mutual respect that is collaborative and fun."
The Ottobock investment has not affected the day-to-day business at Ability P&O, Brandt says. "Ability continues to operate as it has prior to the investment," he says. "Ottobock has maintained its promise to the Ability team that operations would remain ‘business as usual' and they have been true to their word."
Ottobock also invested in Scott Sabolich Prosthetics & Research, Oklahoma City. Ottobock reported that, like Ability P&O, the management team at Scott Sabolich remains intact and active.
New Ownership, Impact and Change
One advantage to an alliance between manufacturers and clinical care facilities is to bridge the gap between manufacturers and patients, clinicians say.
"Manufacturers had some disconnect from where the patient care truly happens," says Matt Bulow, CP, Bulow Orthotic & Prosthetic Solutions,
Bulow O&P was Össur's first purchase in the United States in 2018. "Now, we are moving to models where the manufacturers should have better insight as to what patients truly want and need as well as what tools clinicians will need to help them reach their goals," Bulow says.
Össur's goal in its emerging ownership in clinical facilities in the United States is simple and, according to McGill, boils down to a straightforward concept: The best product wins. "This isn't an empty slogan," he says. "You can speak to any of the clinicians in the patient care facilities we own, and you'll hear the same thing: they fit what's most clinically appropriate for their patients. Period."
Ruhl says clinicians working in the patient care businesses Ottobock has invested in make their own choices. "They are free to choose the products that provide the best outcome for the patients they serve, irrespective of the supplier or the manufacturer," he says.
Ruhl uses Ottobock's purchase of Cascade Orthopedic Supply, Chico, California, last year as a primary example. "Just as clinicians have freedom of choice with product selection, any patient care business we invest in will also have the freedom of choice when it comes to where they source selected products," he says. "With Cascade, we plan to leverage their expertise in ecommerce and supply chain management to drive efficiencies, which we hope will lead to increased access to products and lower costs to customers."
Ruhl also added that Ottobock believes its new partnership with Cascade could help US-based suppliers open new international markets and expand the reach into Ottobock's global clinical network.
John ‘Mo' Kenney, CPO/L, FAAOP, Kenney Orthopedics Prosthetics and Orthotics, Nicholasville, Kentucky, says, "Since manufacturers have never owned O&P providers in the US, I suspect they don't know or understand how to be good providers in general yet in the US. As they learn, don't you think that it behooves them to concentrate on more and better-quality research?" Kenney, who spoke at the AOPA leadership conference in January, continues, "Keep in mind that they are getting paid now by the same payer sources that we have been for decades. I say, ‘welcome to the party.'"
Kenney says it's also up to the smaller O&P facilities, which make up about 70 percent of the field, to stop worrying about the "what ifs" and concentrate on what they can do to help advance the industry. "Apathy is our biggest threat," he says. "So get active [in the field] as much as possible with volunteering for things that help improve our profession. I expect the same from the manufacturers as well."
Can a manufacturer's involvement in clinical care, however, impede fair competition in the marketplace?
It's possible, specifically by limiting the availability of new products to independent providers, says Sam Liang, president, Hanger Clinic, Austin, Texas.
"Also if a manufacturer-owned O&P facility placed an emphasis on using primarily components and products that they manufacture, they could decide to use the margin on their products to offer a lower rate to payers, putting independent providers at a disadvantage," Liang says. "Payers have constantly reduced O&P rates over the years and it's becoming increasingly difficult to run a profitable business."
Liang also sees a potential negative impact when it comes to patients. Specifically, clinicians need the freedom of choice to use the latest innovation for patients regardless of the manufacturer, he says.
"Clinicians' choice of what devices they use will be influenced and potentially limited. If you are owned and paid by a manufacturer, there inherently exists a conflict of interest that can't be avoided of what device should be fit on a patient. Clinicians should not be put in a position of having to use products where clinical data would indicate there is a better option," says Liang.
In addition, the structure of how O&P care is delivered could change if consideration is given to developed markets outside the United States, where manufacturers run patient-care facilities, Liang says. "O&P has been commoditized with annual bidding/tenders that separate out componentry and services," he says. "In those markets, the reimbursement is low, and clinicians have a limited ability to use a broader choice of componentry. If we look at what is currently occurring in the US with manufacturers providing care in the non-custom orthotics segment, we're getting a glimpse of what can happen on a broader scale.
"It has created a fragmented service model, the commoditization of the category, raised investigations from the Office of the Inspector General, and catalyzed competitive bidding," he says.
Vertical Integration, Disadvantages
The association between manufacturer and O&P provider negatively impacts innovation for two reasons, according to Liang.
First, manufacturers are deploying their capital and resources in patient care versus innovation and research and development, Liang says. Their management time, resources, and focus are now diverted to running clinics versus developing the next generation of devices, he says. "Are manufacturers signaling that there is no more innovation in O&P?" Liang asks.
Second, the research and development cycle benefits from collaborating with clinicians who have experience on a broad range of devices and therapies, and who are free of any unconscious bias or conflicts of interest, Liang says. "Clinicians need to be agnostic in their reviews of technology to collaborate with manufacturers to develop and provide what's best for the patient," he says. "Patients do not stand to benefit when clinicians are unable to be truly impartial in terms of product selection and the generation of objective clinical outcomes," Liang says.
Brandt disagrees. The perceived disadvantages would be fleeting, he says.
"The short-term reactions of independent companies making public statements [about boycotts] are myopic and ill-informed. [It is] the manufacturers who are investing in the profession to advance the standard of care," Brandt says. "[Boycotts] will only cause the patients to suffer in the short-term."
The O&P field is ready for change, Brandt says.
"The market is demanding it of us, payers are pushing us toward change, and CMS is driving that change," he says. "Capital deployment is needed to meet these challenges and the manufacturers are utilizing their dollars to invest and support those changes."
The disadvantages are the perception that a manufacturer's ownership in facilities will decrease the options available to patients, Albuquerque says."This perception is incorrect and the best product for the patient wins every time, regardless of the manufacturer," he says.
Bulow believes as long as facilities stick to "patient comes first, and the best product wins," he doesn't anticipate there to be difficulties. "Culture, care, and people are key, and they continue to be our priorities," Bulow says.
Vertical Integration, Advantages
Some O&P facilities see a brighter side to vertical integration.
Call views the impact of manufacturers entering clinical care in the US as positive. "With reimbursement models and methods being sure to change in the future, having a larger platform of resources will further strengthen companies like ourselves in the healthcare arena," Call says.
The Össur and VPO relationship has gotten off to an encouraging start, according to Call. "Össur's not telling us how to run the business. They've been open to critiques and extremely supportive," he says. "They want what's best for the patient."
Ultimately, VPO's goal in patient care is to fit the best device—regardless of the manufacturer, Call says. "We will utilize whatever is most appropriate for a particular patient to allow for the best possible outcome and timeliness," he says.
Albuquerque concurs. "As an independent business owner before the acquisition, the biggest challenge was addressing the fact that expenses are increasing faster than reimbursement," he says. "Being owned by a manufacturer provides support that would have otherwise been unavailable to me as an independent business owner."
Manufacturers entering clinical care in the United States has other advantages, Albuquerque says, particularly when it comes to human resources, IT, and finances. "Having help in those areas does two things; it helps us to focus on clinical outcomes, and it helps with longevity and sustainability for the facilities involved."
Össur has provided resources to Next Step including leadership training, clinical education, and access to other facilities' best practices, Albuquerque says.
Patients are the ones who benefit from that partnership, Bulow says. "We are creating more opportunities for more people through our growth," he says.
An example of their collaboration came in February when a prosthetist from SRT Prosthetics & Orthotics, Indianapolis, and the Bulow facility in West Columbia, South Carolina, gathered at Bulow's facility in Nashville. "We were able to give two transhumeral and two hip disarticulation amputees detailed and personal care by sharing expertise from multiple clinicians. Obviously, all the clinicians benefitted as well from the idea-
sharing teamwork," Bulow says. "I've been doing this for 30 years and I learned so much that week."
OPS Network, AllClaim Program
There has been speculation in O&P that Össur's Orthotic and Prosthetic Services (OPS) Network is used as an avenue to acquire clinics. According to Christian Robinson, senior vice president, Össur Americas, the goal of the OPS Network is to offer services to improve patient care, outcomes, and business performance, as well as to provide collaboration opportunities for the membership.
While all Össur clinics are members of the OPS Network, the majority of OPS members are independent O&P facilities, Robinson says. "OPS is designed to allow independent O&Ps to remain successful and independent in today's complex and competitive environment," he says.
Össur's Reimbursement and Regulatory resources are "generally" available to facilities industry-wide and OPS members have increased access to these resources, Robinson says.
And does Ottobock's previous relationship with clinics through its AllClaim program affect its entering the clinical care market in the US?
The answer is no, says Ruhl.
The AllClaim billing program is managed by Otto Bock Orthopedic Services, another independent business that is positioned to serve any O&P clinic in need of outsourced expert billing services, Ruhl says. "Our investment in patient care has no impact on this business or the clinics who turn to
AllClaim billing program for reimbursement support," he says.
Is the Verdict in?
How will the involvement of manufacturers in US clinical care impact the independent O&P clinical market in the next three to five years?
Ruhl believes Ottobock's involvement in patient care will help strengthen the clinical care market and help preserve the industry.
In addition, Ottobock's presence will help keep a focus on delivering the outcomes needed to elevate the standard of care and increase access to technology, he says. "It is important to us that we uphold the valued traditions of companies that have played significant roles in the development of this important but often overlooked segment of the healthcare market," Ruhl says. "At the end of the day our goal is to fuel opportunity and growth for this industry, which will positively impact independent O&P businesses that share like-minded
values and focus on patient outcomes."
Liang says in the coming few years, independents will need to decide whether they want to focus solely on patient care and operate free of conflicts of interest, generating and making decisions based on objective clinical outcomes, or align with a manufacturer where limited device selection could be introduced into the mix over time. "Based on this, the market will bifurcate into truly independent or device-centric providers," he says. "Given these developments, it would be difficult to consider an O&P provider owned by a manufacturer to be truly independent."
O&P needs to be a clinically driven profession, free from financial influence to objectively collect, and publish outcomes that guide the decision-making process on what's best for the patient, Liang says. "At Hanger Clinic, we've made it clear to our clinicians that we will be defined by the outcomes we generate, not by the devices we deliver," he says. "Manufacturers' involvement in clinical care simply clouds the profession's ability to accomplish this."
McGill was also one of the speakers at the AOPA leadership conference. He spoke on the evolution of manufacturer involvement in clinical care in the United States. "As I said then, the verdict is already in, we don't need to wait three to five years," he says.
Consider what has happened in every major market where vertical integration has already occurred—Scandinavia, Germany, France, and the United Kingdom, McGill says. "In each, there are traditional O&P companies and vertically integrated organizations thriving side-by-side and, frequently, complementing each other," he says. "The existence of one is not destructive to that of the other."
McGill says such can also be the case in the United States. "We will have a robust independent O&P market and vertically integrated organizations," he says.
Liang, however, isn't convinced. "As an O&P company that has been in patient care for over 155 years, we understand the US healthcare landscape extremely well. Therefore, I can't think of any material benefit, as running patient care facilities in the US market is not a core competency for manufacturers."
The US healthcare system is structured differently than other places worldwide, Liang says. "In the US healthcare market, there is no major profession or market where the manufacturer is also a healthcare provider, as that would create a host of medical, ethical, and conflicts of interest," says Liang. Due to the inherent conflict of interest that exists, as sales and profits of manufacturers fluctuate, Liang remains skeptical that the "best product wins" philosophy currently espoused by manufacturers will always be supportive.
It matters little whether a board-certified practitioner works for a manufacturer or an independent facility in the United States because they are
regulated, according to Kenney. "If regulation criteria are met and there is shoddy patient care, most consumers will move on to quality. I always tell our practitioners that we all went to the same O&P schools in this country.
Better quality care will differentiate you," says Kenney, who believes that manufacturers can provide a larger entity to help combat issues that smaller, independent facilities often struggle with.
Kenney adds that current independent owners who have exit strategies may benefit from a manufacturer's involvement. "They can bring an industry-
dedicated potential buyer to the table," he says. "It could be more attractive of an acquisition and may increase marketability and comparables."
Finally, Liang says it is up the O&P profession to decide who will define its future—will it be a clinically driven profession, or will other external
parties, namely manufacturers or payers, define it?
"At Hanger, [we'd rather] continue to collaborate with manufacturers to improve healthcare through innovation versus compete with them," Liang says. "Ultimately, it is truly up to the clinical community to define the outcomes for our patients and set the destiny for our profession."
Betta Ferrendelli can be contacted at firstname.lastname@example.org.
Editor's note: The O&P EDGE reached out to a variety of independent O&P facilities for inclusion in this story, but they declined to comment.