O&P Point of View: 2010 Outlook

The unstable economy took center stage in 2009 and forced the country to re-evaluate their wasteful business models. Efficiency was demanded from the country’s workforce. Consequently, doing more with less came to define 2009 and it has remained in the forefront of business owner’s minds this year.

A notion exists within the industry that O&P always finds a way to make it through the difficult times. A belief that resiliency always wins out. Despite technological gains and educational advances, this year will undoubtedly test that notion.


According to the American Orthotic Prosthetic Association (AOPA) Operating Performance Survey, the net profit margin (NPM) for all O&P companies has decreased the past 3 years. In 2006, the NPM was 11.1%, 9.8% in 2007 and 8.4% in 2008. All financial trends are pointing to a fourth consecutive year with decreasing profit margins. This decrease is even more troublesome considering Medicare increased fees by 5% in 2009 and 4.1% in 2008. In theory, the O&P industry should have had two of its best financial years. Instead net profit margins declined.

“It strikes me as odd that the industry has not significantly changed the way it delivers its services,” Brian Gustin, CP, chief clinical officer, Bridge Point Medical and AOPA immediate-past president said. “It is almost like we are thinking this is a temporary thing and this will all go back to normal. I just don’t see the environment going back to the way it once was.”

Brian Gustin, CP
Brian Gustin

The question that needs to be asked is if fees were increasing and NPM were decreasing, what was eating up the profit in the middle? Gustin believes the answer lies in the inefficiency of the O&P business. He cites an increase in labor costs, overhead costs and the rising costs of goods sold as the three areas eating up businesses profit margin.

“Start to look at why your business has three sets of paperwork for one patient,” he explained. “[Businesses have] administrative, practitioner and fabrication paperwork. Duplication is wasted time, effort and energy, which is all leading to increasing overhead and labor costs.”

In order to buck the trend, the process in which the industry conducts its business must change. Efficiency, the word that defined 2009, for better or worse, should remain the focus of O&P businesses.

“What I see lacking in the businesses I have gone into and looked at, is that they have no defined processes,” Gustin explained to O&P Business News. “There are no defined repeatable processes that a business can create their efficiencies around.”

Scenario Planning

In order to develop a better business model for 2010, Gustin suggests looking at your company with fresh eyes and from the standpoint of would I buy the business today, I bought 5 years ago? Dig deep into your finances and find the tools available that can compare your business against colleagues in the industry.

AOPA developed the Business Optimization Analysis Tool (BOAT), which is specifically tailored to help business owners better identify and understand their business, according to its Web site.

“It is a way to do scenario planning,” Gustin explained. “If you are presented with a contract from an insurance carrier with a certain percentage discount, you can do scenario planning with the BOAT tool and ask yourself what it means to my business if I accept this contract. You can also ask what it will mean to my business if I do not accept the contract.”

Medicare did not increase fees for 2010 and fee cuts are on the horizon. Businesses must be financially prepared for Medicare cutting fees across the board as much as 10%, according to Gustin.

“That is a real scenario that could very well happen,” Gustin said. “It would behoove people to do a little bit of scenario planning and start to shape your businesses for that eventual fee cut. Even if it never occurs, think of how much more profitable your business would be if it operated in today’s climate under the scenario of a 10% fee cut.”

Gustin fears that practitioners will recognize the declining numbers, but simply blame them on recent economic conditions.

“[Economic conditions] have not truly affected this industry in the last 2 years,” Gustin said. “But the things that are going on in health care reform are certainly going to impact us.”

Health care reform is, as of press time, in legislative limbo. It could be revived, or it could be scrapped. According to Gustin, the costs of Medicare, Medicaid and Social security are unsustainable and cuts will have to be made.

“We are focused and attentive to the changes and planning as best as we can for the future, but when things are so fluid politically, it makes it tough to finalize a plan,” Kristi Hayes, CPed, vice president, Pedorthic Footwear Association (PFA) said. “We are most definitely being cautious and informing our membership with as much information as we can obtain and will continue to do so.”

Net Profit Margins for O&P Industry
Trends are suggesting a fourth consecutive year with decreasing profit margins.
Source: AOPA Operating Performance Survey.

Research and development

Despite the uncertainty of the economy and health care reform, the O&P industry has reason to look forward. Evidence based practice within the profession has become a focal point. The right tools and measures to collect O&P data are currently being developed, including a patient registry that will collect data from across the country and will allow researchers and practitioners the opportunity to mine that valuable information.

“[This year] is likely to be an exciting year for O&P research,” Brian Hafner, PhD, research committee chair, Orthotic and Prosthetic Education and Research Foundation (OPERF), said. “Research efforts focused on O&P outcomes and interventions are underway at numerous, well respected academic universities, hospitals and clinics all over the world.”

The O&P field has formed organizations including OPERF and the Center for Orthotics and Prosthetics Learning and Outcomes/Evidence Based Practice (COPL) to help stimulate research from within the O&P profession, Hafner said.

According to Rhonda Turner, PhD, JD, president of American Association of Breast Care Professionals (AABCP), AABCP is in the final stages of developing an outcomes study that addresses the issue of “inadequate education of a woman’s reconstruction options: surgical and non-surgical (use of an external breast prosthesis.)”

“As we go to the literature in search of evidence, it is common to realize that the information we need simply does not yet exist,” Hafner explained. “Our attention is drawn to research and the need for additional information to support practice in O&P. This is the attitude I now see growing across our profession.”

While the amount of research data is lean, the industry has recognized its need to produce evidence to third party payers.

Scott Cummings, PT, CPO, FAAOP
Scott Cummings

“For years, we have said lets use this device that costs a certain amount and we expect the insurance companies to pay,” Scott Cummings, PT, CPO, FAAOP, president-elect for the American Academy of Orthotists and Prosthetists (The Academy) said. “But they are not doing that anymore. By and large, they are saying show me why. We need the data and that will only come through research.”

Cummings is also encouraged by the latest technological advancements. He cited headline grabbing devices such as the i-Limb, the DEKA-arm, improvements to the C-Leg and the Rheo knee as evidence that the industry is placing a premium on high-tech electronic devices.

Turner discussed recent product innovations from the breast care industry.

“New massage forms and newly developed scar management technology enhance the number and types of products available to certified fitters when providing a woman or man with post-mastectomy services,” Turner said.

Less headline-grabbing innovations have been just as vital to the industry, according to Cummings.

“Something that comes to mind is Otto Bock’s flexible two-part lamination resin. To clinicians, improvements are improvements and this is just an example of more tools for the toolbox. You won’t hear quite as much in the way of headlines, but they shouldn’t be forgotten either.”


Cummings credits the educational institutions and National Commission on Orthotic and Prosthetic Education (NCOPE) for recognizing that the field has been operating with a weak research foundation that needed to be improved in order to spark creativity, innovation and use of the most recent data.

“Technological innovation goes hand in hand with the type of student we are putting out now,” he said. “[The curriculum] seems to be more technologically sophisticated and the students seem to be more focused on understanding research, not necessarily conducting research Additionally, but understanding and utilizing it.”

Educational institutions are encouraging young practitioners to embrace and utilize new technologies as they become available. The expansion of knowledge for the O&P practitioner has led to the implementation of an entry level Master’s degree program.

Jonathan Day, CPO
Jonathan Day

NCOPE is transitioning Commission on Accreditation of Allied Health Education Programs (CAAHEP) accredited programs to an entry level Master’s degree. The transition into entry level Master’s degree programs currently applies to new programs seeking accreditation this year. According to Jonathan Day, CPO, chair for the NCOPE existing CAAHEP, accredited programs will have until 2012 to complete the transition.

According to NCOPE’s Movement to the Professional Master’s In Orthotics and Prosthetics Questions and Answers for the Profession, the Master’s level degree coursework includes evidence-based practice, research (consumers of), ethics (greater depth), neuroscience, clinical pharmacology, disability, diagnostic study and entrepreneurship/business plans. These courses are not offered in a bachelor’s or certificate program’s curriculum.

“The body of knowledge for an O&P practitioner has expanded and the master’s degree is commensurate with the amount of work the students will be required to achieve,” Day said. “This transition should have a positive impact on the O&P industry in that students will have a greater body of knowledge to use when caring for patients.”

According to Day, the degree elevation will bring greater respect to the O&P field as a medical profession. Day believes the master’s degree will translate into more O&P practitioners being a part of rehabilitation team.

Some are not convinced and believe the master’s degree will merely drive up costs.

Claudia Zacharias, MBA, CAE
Claudia Zacharias

“There is always an argument to be made for more education,” Claudia Zacharias, MBA, CAE, president and chief executive officer of Board of Certification/Accreditation (BOC) International said. “There is also an argument that you should not price people out of care and, you should not price individuals who wish to pursue a career, out of pursuing that career.”

Certification and accreditation

As research and development improves, O&P students and new practitioners will be given a broader view of their profession through increased education. Practitioners who pursue an advanced education in the field will need to be properly qualified and credentialed to ensure patient care.

“Patients need to know that they are getting up-to-date expertise and care,” Zacharias said. “I believe there will be new credentials and new levels of credentials as the industry evolves.”

According to Zacharias, credentialing has and will continue to evolve with the times.

“We are not just acting on behalf of the practitioners but also on behalf of the public to ensure excellent patient care,” she said. “That is a shift in credentialing. Practitioners are not only saying ‘I’m qualified’, they are saying ‘I am trustworthy.’”

Certification programs have become more complex and more sophisticated as the profession itself has changed, Catherine A. Carter, executive director, American Board for Certification in Orthotics, Prosthetics and Pedorthics (ABC), says.

Catherine A. Carter
Catherine Carter

“For the profession as a whole, we will begin to see new practitioners educated in topics such as research statistics and methodology, which the practitioner of the future will need to be more involved in,” Carter said.

According to Day, NCOPE has already received inquiries from institutions interested in starting new programs since the announcement of the entry-level Master’s program requirement. As educational institutions transition into entry-level Master degree programs, changes to the eligibility criteria for practitioner examinations will be made.

“The promulgation of appropriate standards, for individual certification and facility accreditation is a constant challenge,” Carter said. “The challenge is to make regulatory, legislative, advocacy, payer, referral and other groups aware of those standards so they can integrate them into specific initiatives.”

Gustin indicated the increasing credentialing issues would seem appropriate upon an initial evaluation, but warns of some down-stream effects to individual practices.

“[This year] will be defined by access to care issues,” Gustin explained. “If we establish rigid accreditation requirements, which define the qualifications necessary to ‘lay hands’ on a patient, then we limit our ability to control our biggest cost factor, which is labor.”

Gustin also mentioned how technology has evolved to a point where lower cost care extenders can be trained and credentialed to perform what has traditionally been performed by practitioners.

“Our educational and credentialing process needs to recognize these care extenders and provide pathways for them as well, or risk patient access or service delays.”

Zacharias agrees and recognizes Gustin’s point.

“A patient with a stomach ache, does not necessarily need to see a surgeon, maybe they see a nurse or a physicians assistant,” she explained.

Future collaboration

In the coming months, the field will hear about the fluidity of the economy, the contentious debate regarding health care reform and the need for more evidence-based practice. Yet, the industry can take solace in knowing that the future remains bright. When speaking with students, Cummings is amazed at their intellect and passion.

“They are really sharp,” Cummings said. “They have a slightly different skill set than practitioners as recently as 10 or 15 years ago. They understand and embrace technology and we are changing the way we deliver the education.”

One of the pleasant surprises emerging, according to Cummings is the collaboration between the different entities in the profession.

“The educational institutions, the research community, the professional and industry organizations and the advocacy groups; I really am optimistic that we’re getting the hang of things and working together and making more progress,” Cummings said. “That is really encouraging.” — by Anthony Calabro

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