AAOS Bulletin - February, 2006

Centers of Excellence: An evolving concept—and controversy

By James J. Hamilton, MD, and Steven E. Fisher, MBA

The term “Center of Excellence” first came into general use in 1991 when the Centers for Medicare & Medicaid Services (CMS) started its Medicare Participating Heart Bypass Center Demonstration project. Initially, designation as a “Center of Excellence” had nothing to do with providing excellent health care; instead it described hospitals participating in the project, which had lowering health care costs as a primary goal

A hospital was deemed a “Center of Excellence” if it teamed up with CMS (then known as the Health Care Financing Administration, or HCFA) to negotiate a package price for an episode of care. That package price combined physician and hospital fees into a single payment to the hospital. The hospital then distributed shares of the payment to all the providers involved in the provision of care (including the hospital itself). This was seen as a way of “aligning the interests” of physicians and health care institutions.

From the beginning, physicians had concerns about the designation. When a proposal to expand the demonstration project to total joint replacement was developed in 1996, the AAOS issued a position statement opposing the designation of hospitals as “Participating Centers of Excellence” and the use of the term as a marketing device. In part, the statement read:

The American Academy of Orthopaedic Surgeons continues to believe that the hospitals participating in this demonstration project cannot be deemed “Participating Centers of Excellence” because there is no conclusive evidence to show that they are better providers of care than nonparticipating facilities. The use of this term by HCFA is a serious misrepresentation to Medicare beneficiaries and an egregious violation of the public trust.

The AAOS Board of Directors even authorized the preparation of legal documents for a possible request for a court injunction to prevent the use of the term in connection with the demonstration project. The Academy’s letter to then Secretary of Health and Human Services Donna Shalala pointed out that “There is nothing to suggest that HCFA has gathered any data to determine what constitutes a ‘center of excellence’ as it relates to joint replacement surgery.”

Although slated to begin in early 1997, the hip and knee replacement demonstration project never got under way. By 1999, budget constraints caused by issues surrounding Y2K and the Balanced Budget Act forced another delay. A proposal to revive the project in 2001 was abandoned a year later, in part because the agency’s proposed bundled payment was so low that it didn’t cover either the physicians’ or the hospitals’ costs.

Nonetheless, the term “Center of Excellence” has persisted. Other government agencies—including the National Institute of Allergy and Infectious Disease, the Health Resources and Services Administration and the National Women’s Health Information Center—use it in conjunction with their initiatives. Many academic health care institutions have set up “Centers of Excellence” in one or more specialty areas, including orthopaedics. Recently, the AAOS has received a number of inquiries from private practitioners who are interested in using the designation.

What’s in a name?

For the term “Center of Excellence” to have any meaning, it must be more than simply a self-designated marketing tool to attract more patients. Consumers who see the term may readily conclude that the “Center” has subjected itself to, and successfully “passed,” a certification protocol conducted by an official and independent screening entity.

The majority of institutions and their physicians develop Centers of Excellence to more successfully integrate and carry out three primary missions: provision of clinical services, teaching and research. Their intent is to create high-quality products that can be offered to patients, employers, payers and others at a competitive price. Although marketing the products is clearly a necessity, this is ancillary to the creation of the Center, not central to it.

Given the absence of any official criteria developed by a third party, it is up to each institution to decide what constitutes a “Center of Excellence.” Ideally, every institution should establish, and widely disseminate, formal guidelines in this regard. The existence (and consistent application) of creation and performance standards are what confer credibility on a “Center of Excellence,” not the simple use of the words in its name. At a minimum, this guidelines document should contain the following sections:

1. Purpose of the Center

2. Benefits to patients, payers, employers, participating physicians and the institution

3. Criteria for establishing the Center

4. Procedures to create a Center

5. Elements required to propose the formation of a Center

6. Organization of the Center

7. Nature of financial and other support that will be provided by the institution

8. Center assessment and life span

Following is a sample set of guidelines tailored for a hypothetical orthopaedic center in a medical school environment. The guidelines presuppose that the physicians are employees of the hospital/health care institution and not in an independently constituted solo or group practice. Physicians in private practice who wish to designate their practices as “Centers of Excellence” would need to modify these guidelines appropriately, but should clearly identify the purpose, benefits and criteria used to justify the designation.


The purpose of the [ABC Medical Center’s] Orthopaedic Center of Excellence Program is to:

• Provide superior musculoskeletal care to patients in the [DEF] metropolitan area.

• Encourage multidisciplinary collaboration between departments, including Orthopaedics, Physiatry, Rheumatology, Radiology and Physical Therapy.

• Provide opportunities to integrate clinical care with teaching and research.

• Engage in clinical research to determine which treatment modalities yield the best results.

• Promote the Center’s services to the public, payers, employers and grantors of research funding.


The Orthopaedic Center of Excellence Program shall produce the following benefits for the [ABC Medical Center]:

• An interdisciplinary approach to diagnosis and treatment of musculoskeletal problems

• An efficient system for treatment of patients dependent upon their diseases, disorders and conditions

• The provision of both surgical and nonsurgical solutions to patients’ problems

• The objective assessment of different treatment modalities to determine their benefits

• Efficient use of resources

• A competitively priced product that can be marketed to payers and employers

• Demonstration of decreased period of disability with more rapid return of function for its patients

• A high level of patient satisfaction


The following criteria for establishing the [ABC Medical Center’s] Orthopaedic Center of Excellence must be met:

• It must enhance the orthopaedic and related services of the [DEF] metropolitan area.

• The Center of Excellence must build on the [ABC Medical Center’s] strengths.

• It must be collaborative and serve as a mechanism for the creation of a multidisciplinary community of scholars specializing in the musculoskeletal specialties.

• It must demonstrate the potential for attracting support from outside parties for research.


The procedure outlined below must be followed to create an Orthopaedic Center of Excellence:

• There must be demonstrated support for the idea of a Center of Excellence at the department and medical school level, as indicated by letters from the Orthopaedic Department Chair person and Dean.

• There must be a formal written request to the Associate Vice Chancellor for Research containing the elements described in the next section, “Elements required to propose the formation of a Center.”

• The proposed Center Director must make a presentation regarding the proposed Center to the Associate Vice Chancellor and the Vice Chancellor for Academic Affairs

• The Vice Chancellor for Academic Affairs will approve or deny the proposal, or he or she may request additional information.

• Notification will be forwarded to the requesting party.


Elements required to propose the formation of a Center include:

• A Mission Statement that includes the purpose of the Center, its focus and the way in which it dovetails with the mission of [ABC Medical Center]

• Demonstration of why the Center is needed and the market for the services of the Center

• Definition of the Center’s goals and the activities it would engage in

• A list of the space, facilities and equipment required and how these would be funded

• A clear delineation of the Center’s organization and governance

• Responsibilities of the administration and support staff

• A proposed budget for the Center for the first three years with the criteria/metrics used to assess the achievement of goals (meeting budget, patient satisfaction surveys, etc.)

• A discussion of how the activities of the Center will be sustained after the initial years of support


Within the [ABC Medical Center], the Orthopaedic Center of Excellence will be organized under the following guidelines:

• The Center Director will be appointed, with a term specified in the appointment letter.

• Upon approval, the Center Director shall create a set of operating guidelines addressing the internal governance and membership criteria for the Center as well as identify an internal/external advisory group.

• The Center may not offer any form of course, academic program, degree or certificate.

• The Center must provide an annual report of activities to the Vice Chancellor for Academic Affairs, as well as to its members, the advisory group and other stakeholders.

Financial support

The [ABC Medical Center] will provide the following financial and other support to the Orthopaedic Center of Excellence:

• A stipend for the Director of the Center

• Access to secretarial and other administrative, clerical and clinical support

• Compensation to the Director’s home department, using associate faculty rates

• Operational funds (salaries and expenses, travel, etc.)

• Funding for a graduate assistant or release time for other faculty

• Duration of funding (specify period)

• Expectation of the Center becoming self-sufficient at end of support

Assessment/life span

Anticipated assessment criteria and the expected life span of the Orthopaedic Center of Excellence in the [ABC Medical Center] follow:

• The Orthopaedic Center of Excellence is intended to have an indefinite institutional life.

• As stated above, it will not receive funding from the [ABC Medical Center] beyond the start-up period.

• Every three years, the Center must undergo a comprehensive program review.

• The Center will remain in existence only as long as it is deemed to be fulfilling its purpose and performing the functions for which it was established.

• If the Center ceases to accomplish its objectives, or if the objectives may be met more effectively some other way, or if there is insufficient funding from internal or external sources, the Center may be discontinued at the discretion of the Vice Chancellor.

The evidence-based connection

With the increasing emphasis on evidence-based guidelines and pay-for-performance standards, any health care professional who adopts the appellation “Center of Excellence” must have strict standards and the facts and figures to substantiate that title. Although a growing body of evidence indicates that certain surgical procedures exhibit a “volume-outcome” relationship in which a higher volume of patients undergoing a particular procedure at a hospital is associated with better outcomes for those patients, such a relationship is not a predictive one. Hospitals and providers should be using an array of measures in addition to “volume” to assess their quality of care.

James J. Hamilton, MD, is chairman of the department of orthopaedics at the University of Missouri in Kansas City and chairman of the AAOS Academic Business and Practice Management Committee. He can be reached at james.hamilton@tmcmed.org or (816) 404-5404. Steven E. Fisher, MBA, is the AAOS manager of practice management affairs. He can be reached at sfisher@aaos.org or (847) 384-4331.

The Bulletin welcomes your comments on this issue. Send your letter to the Editor, Bulletin, AAOS, 6300 N. River Rd., Rosemont, Ill. 60018. Fax (847) 823-0668 or e-mail aaoscomm@aaos.org

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