Reflections on the 2026 AAOS Annual Meeting: Day One
Direct to Employer, AI, and Consolidation
Once again I enjoyed moderating a session at the AAOS Annual Meeting this year. Most of the papers were presented by medical students, all of whom did an excellent job discussing their research. The bar to become an Orthopaedic Surgeon is significantly higher than when I was a med student (now almost 20 years ago). I barely knew if I was coming or going in med school. Definitely bodes well for our profession.
On another note, the vibe in New Orleans is notably different than what I experienced in Las Vegas at HTLH in October. HLTH was long on…well, vibes…and short on data. Not sure I heard mention of power analyses, p-values, or methodologically rigorous studies of any kind, really. You could also argue that medicine has a quantity over quality issue when it comes to the “publishing industrial complex.”
I understand (now) that scientific rigor isn’t the main goal of HTLH. It’s also true that a lot of interesting and important innovation remains too far on the fringes of traditional healthcare. Both are technically healthcare conferences, but they seem worlds apart. Just an observation (and perhaps a judgement) having attended both.
Here are some random, half-formed thoughts inspired by things I heard and saw today.
Direct to Employer (DTE) Contracting
When you get in an echo chamber, you forget that direct employer contracting isn’t on the radar of many Orthopaedic Surgeons. It should be. Everyone knows you need an ASC strategy. But, to remain competitive in a challenging reimbursement landscape, you probably need a DTE strategy too.
Right now, the demand side of the market seems to be more robust than the supply side. My MBA tells me that makes for a seller’s market. But I don’t think that will last forever. As supply (i.e., providers seeking direct contracting relationships) increases, leverage shifts to the demand side. The result could be another race to the bottom, just like everything else in healthcare.
The key is to constantly stay ahead of the curve. What comes after ASC migration and DTE? Selling joint replacements and spine fusions on a futures market (not my idea, hat tip to Dutch Rojas)? A nationwide marketplace? Radical transparency?
Final thoughts — it’s still unclear to me how big this market is. MSK is the biggest employer spend. Providers need a sustainable mechanism to leverage the quality of the services they provide. But both sides of the market feel too fragmented to be meaningful.
PCPs as Gatekeepers of Specialty Care
CMS really seems to want to keep patients away from specialists. Whether it’s LEAD, ACCESS, or ASM, the core thesis seems to be that specialty care = high cost, low value, unnecessary care. Maybe that’s a little unfair. There is something to be said for keeping patients away from outlier specialists — the overutilizers and low performers. But, keeping patients away from those best qualified to diagnose and manage their conditions isn’t doing right by patients. We still haven’t figured out the right balance of access and incentives. The “avoid specialists at all costs” approach isn’t it.
We Have AI Too
AI discussions are inescapable, even at an Orthopaedic Surgery meeting. The main difference is that the level of hype and doomerism is toned down a bit. AI for medical coding and billing is OK — not terrible, not great. Based on a couple of papers presented this morning, medical coder/biller jobs are safe…for now.
One of the biggest problems is that things move so fast in tech that, by the time you publish your study, you’re two model generations behind. It’s still not clear to me if AI saves time and money or is neutral on both accounts. Early studies are mixed.
One random thought: what happens if AI instantaneously determines if you’re delivering evidence-based, high-value care? What if it says you aren’t? Who’s right? Can an employer or payer deny treatment/payment on those grounds? Will AI companies have to choose a side? If so, will they follow the Golden Rule: they who have the gold make the rules?
Declining Reimbursement = Increased Utilization
Across Orthopaedic subspecialties, inflation-adjusted reimbursement is down about 30%. Data suggests that utilization up. Correlation does not equal causation. One explanation is that our population is both aging and looking to stay active later in life. Demand is naturally increasing. However, another possible explanation is that increased utilization is a natural and expected reaction to declining reimbursement. No matter the cause, if this trend continues, we are paradoxically increasing the cost of care by paying less for professional services. (Not to mention second order effects like consolidation).
Medicare Opt Outs
Only about 1.5% of Orthopedic Surgeons concentrated in certain markets (Califronia, Florida, NYC). Skews towards older surgeons, surgeons who have industry relationships. What is the critical mass of opt outs before access becomes an issue? Before Medicare takes notice? Who’s to blame if surgeons opt out, CMS or surgeons?
Higher reimbursement is associated with consolidation, not quality. Is competing on quality viable? How do you find high quality providers in highly consolidated markets? We still haven’t figured out how to properly find and reward high quality care.
Consolidation and Redefining “Independence”
Mostly intuition here, but it feels like Ortho consolidation has plateaued. We may be in the midst of a philosophical change, moving away from the standard PE PPM roll up strategy. Interest rates have come down a little, but so have valuations. Exit timelines of existing platforms have stretched, regulatory/reimbursement headwinds remain, and ASC arbitrage is now table stakes. I’m guessing sponsors have learned that Ortho isn’t the same as Ophthalmology or Dermatology.
Which isn’t to say traditional independent practice is making a comeback. One of the most salient points of a late afternoon session was that the definition of “independence” is changing. Joint ventures are a new twist on the traditional PE model, bringing together surgeons, capital backers, and third parties in a more equitable structure (for instance HSS + General Atlantic + Legent). PELTO continues to grow as an alternative MSO. Family offices, with their longer timelines and potentially “softer” approach, may be an attractive option for some.
It’ll be interesting to see what moves, if any, the Ortho device industry makes. In other specialities, vendors like McKesson and Cardinal Health have made moves in other specialities. MSK implant companies have traditionally been pretty conservative and cautious. They don’t like to play favorites with surgeons and don’t want any extra DOJ scrutinty. But, given the current state of the Ortho market, the opportunity must be tantalizing. (Great session by Gary Herschman and Dana Jacoby.)
On a related note, Johnson & Johnson is spinning off its MSK division, Depuy Synthes. Too bad I didn’t bring my checkbook with me.