Orthopedics braces for increasing demand
Allen Passerallo, Vizient Vice President, Category Management, Orthopedics
Why it matters: Health systems are facing a rising tide of orthopedic demand — outpatient procedure volume is expected to climb 24% over the next decade, just as orthopedic surgeon availability remains constrained. The pressure is real: without strategic action now, access to care may suffer — and with it, patient outcomes.
Elective procedures, from hip and knee replacements to shoulder and ankle surgeries, are surging. These shifts are powered by surgical innovations that enhance safety and shorten recovery, but also by demographic change. Older adults aren’t slowing down; they’re aging well, are more active than ever and living with chronic conditions like osteoarthritis, osteoporosis and obesity. These intersecting trends are fueling a growing and complex patient pipeline.
“We’re going to continue seeing significant growth in orthopedic procedures over the next decade,” said Allen Passerallo, vice president, category management, orthopedics. “It’s the result of aging, comorbidities, longer lifespans and the fact that older adults are staying active with activities like tennis, golf and pickleball — all of which come with risks of injury. Preparing with a sound strategy to embrace the volume that’s coming — through staffing, outpatient investment and value-based care — is critical.”
Strategies to consider:
- Shift procedures to outpatient settings. Hip, knee, spine and shoulder surgeries are increasingly performed in ambulatory surgery centers, and CMS policy changes and payer incentives, including Medicare Advantage mandates, are accelerating this transition. Hospitals should expand ASC partnerships to balance efficiency and maintain access.
- Invest in minimally invasive approaches. Adopt surgical techniques such as minimally invasive hip replacements and scope-assisted spine procedures to reduce recovery times, improve safety and increase patient willingness to undergo needed procedures.
- Implement preventive and non-invasive programs. Encourage use of GLP-1 medications, physical therapy and weight management programs to delay or reduce the need for joint replacement, improving patient outcomes while easing system demand.
- Strengthen orthopedic workforce planning. With surgeon shortages already a concern, health systems should plan aggressively for recruitment, training and staffing to meet future needs. Align staffing models with projected outpatient volume growth.
- Focus on value-based orthopedic care. Deliver high-quality procedures at lower cost by optimizing efficiency in outpatient settings, aligning with payer expectations and supporting sustainable financial models.
Read this blog by Guth and Passerallo to learn more about the hidden economics behind shifting to ACS’s.
Plan for Medicare’s financial squeeze
Lisa Goldstein, Managing Director, Treasury and Capital Markets at Kaufman Hall, a Vizient company
Why it matters: Medicare is entering a period of unprecedented strain as 10,000 people a day age into the program. By 2030, 20% of the U.S. population will be enrolled as the last of the Baby Boomers qualify. This demographic shift, combined with a declining birth rate and longer life expectancy, makes the financial equation increasingly difficult: more enrollees are drawing benefits while fewer workers will be paying into the system.
Hospitals already feel the pressure. Medicare accounts for nearly half of revenue at many facilities, thinning margins as reimbursement lags behind cost growth. “One out of every two patients is Medicare,” said Lisa Goldstein, managing director, treasury and capital markets at Kaufman Hall, a Vizient company. “The more Medicare you have, the thinner your margins will be. That reality together with the One Big Beautiful Bill (OBBB) anticipated to decrease healthcare coverage and increase bad debt constrains systems’ ability to reinvest in services, fund capital projects and maintain financial stability.”
The challenge, however, is not without opportunity. Goldstein stressed that hospitals must treat Medicare pressures as predictable — unlike crises such as COVID — and plan accordingly. “We can pencil out the dollar amount changes and when they’re coming,” she said. “This is not an unknown.”
Hospitals need disciplined financial management, proactive adoption of value-based models, and growth in lower-cost, ambulatory care to sustain access and quality for an aging population.
Strategies to consider:
-
Plan, test, monitor: Boards need to know their numbers.
“Every type of hospital that’s worth their salt has good planning, testing and monitoring,” she
said.
“But we’ve got to do it with a much sharper pencil now.”
- Plan – Build financial impacts into budgets and growth strategies.
- Test – Stress assumptions and evaluate scenarios such as policy changes or new crises.
- Monitor – Track performance quarterly and adjust as needed.
- Understand financial metrics: You don’t need to be an accountant, but you must understand the basic financial metrics hospitals use to budget and make decisions — operating margin, liquidity, cash reserves and debt burden. Leaders should know which metrics they need to improve, and which must be included to guide sound decision-making.
- Embrace growth strategically: Growth is essential to offset rising costs. “As one CEO
said to me
recently, ‘Hospitals need to be like trees, and trees are either growing or dying,’” Goldstein
said. Hospitals must grow revenue at or above expense growth, but with careful consideration of
risk and return.
Growth takes time. Long-term strategies may require upfront investment and bring short-term pain before delivering results. Leaders must understand the benefits, risks, and timelines tied to each growth initiative. - Strengthen ambulatory capabilities: Ambulatory care is no longer optional. With Medicare pushing more procedures outpatient, systems must expand their ability to deliver surgery and other services outside hospital walls. This doesn’t always require ownership of all things ambulatory, but it does demand a cost structure that makes outpatient care efficient and sustainable.
- Evaluate service lines: Reassess low-volume, low-margin offerings while protecting essential community services. Understand where deficits are unavoidable and where adjustments can protect financial health.
- Build and protect cash reserves: “Not-for-profit does not mean we are pro-deficit,” Goldstein said. Reserves are critical to withstand volatility and reinvest in care. Leaders should scrutinize every lever — labor, productivity, supply chain, pharmaceuticals and revenue mix — to maintain and grow cash flow.
- Prepare for value-based care shift: CMS continues to push the shift from fee-for-service to value-based care, with its new mandatory Transforming Episode Accountability Model (TEAM) launching in January 2026 across nearly 200 markets. Hospitals should prepare for bundled payments, ACOs and other population-health models by assessing their readiness for downside risk, including data analytics, clinical protocols and cost management capabilities.
- Stay informed: Boards don’t need to be in Washington, D.C., or at their state capitals, but they must stay informed through leadership teams, hospital associations and industry groups. Policies shift quickly — education and awareness are essential.
Read Goldstein’s recent blog Medicare at 60: A strategic reflection and call to action.