COA: Trend of Oncology Practice Closures, Consolidations Softens

Ted Okon

The report builds on regular studies that COA has been doing since 2008 to track the health of the independent oncology clinic population in the United States. COA has previously stated that practices are seriously concerned that current reimbursement rates for drugs and chemotherapy administration are inadequate and threaten the viability of their practices. Many have cited declining reimbursement, cost burdens, and competition as reasons for allying or merging with other practices, hospitals, and other entities.

Ted Okon, executive director of COA, said the struggles of independents also reflect the difficulties of competing with hospitals that have the advantage of 340B drug program participation, which enables hospitals to obtain drugs at deep discounts. Okon said the report adds color and depth to earlier research from COA showing that hospitals have already captured a huge chunk of the chemotherapy infusion business from independent clinics. Whereas 90% of commercially insured chemotherapy infusion was done in physician offices in 2004, by 2014 nearly 60% of commercial infusion was being done in hospital outpatient centers, an April study said.²

While independents continue to decline as a species, there does appear to be some light easing of the trend, which may be partly because of participation in value-based care models that have led to greater efficiencies, Okon said. More mergers among practices can be expected as they band together for strength against hospital expansion, he said.

“There are more practices that are working together and are doing payment reform,” he said. “There’s going to be more consolidation of practices that are working amongst themselves. You’re going to see more fallout in terms of the hospital setting, although that’s softened a bit. I think you’ll see some more clinic closings, although that has also softened a bit. But I think all bets are off if CMS doesn’t change the Medicare Part B (payment revision) model and if we can’t get it stopped legally or otherwise. You will see huge consolidation then.”

Since COA began maintaining statistics, 380 independent clinics have closed, 609 practices have formed alliances with or been acquired by hospitals, and 157 practices have merged with or been acquired by other entities.

An interactive map published with the new report on closures paints a stark picture of how these trends are affecting practices in individual states. In California, for example, 30 practices have closed since 2008, 40 have reported episodes of financial struggle, 26 have been acquired by hospitals, and 15 have merged. In Oklahoma, by contrast, just one clinic has closed since 2008, 18 have experienced financial struggles, and four have been acquired by hospitals. In Alaska, just two practices have experienced financial struggles, according to the report, but the low numbers are more a reflection of how rare independent practices are in Alaska, Okon said.

The largest number of community clinic closures have been in Florida, 37; Texas, 36; and Michigan, 34.

Come January 1, some of the impetus for hospital acquisitions may be removed, as signing of the Budget Act of 2015 set the clock ticking on hospitals’ ability acquire distant practices and continue billing at hospital rates at those locations. However, Okon speculated that 340B drug discounts will continue to stoke merger activity as the potential profits for hospitals are enormous. “The billing out of services pales in comparison to the billing out of drugs at 340B hospitals,” he said.

The 340B advantage has provoked extreme competition with community clinics, he added. “I received an email the other day from an oncologist who said that the local hospital, which is 340B, because they won’t sell (to the hospital) is cutting off their referrals. The hospital owns most of the primary care. This is the reality today. It’s hardball tactics because 340B provides a huge incentive.”

In its analysis of the report, COA said that consolidation and hospital acquisition place a burden on the nearly 20% of Americans living in rural areas. If a local clinic closes, these residents have to travel much farther for care that may be more expensive. “A morning treatment evolves into a daylong excursion. Access-limiting consolidation and closures make that scenario increasingly prevalent.”

“Treatment advances like oral drugs and immunotherapy have the potential to save lives. That will not matter if patients can no longer afford care or if care simply disappears from their community,” said Bruce J. Gould, MD, president and medical director of Northwest Georgia Oncology Centers in Marietta, Georgia, and president of COA.

References

1. COA. 2016 Community Oncology Alliance practice impact report. 2016. http://www.communityoncology.org/2016-coa-practice-impact-report/. Accessed October 4, 2016.
2. Milliman. Cost drivers of cancer care: a retrospective analysis of Medicare and commercially insured population claim data 2004 - 2014. 2016. http://www.communityoncology.org/pdfs/studies/Trends-in-Cancer-Costs-White-Paper-FINAL-20160403.pdf. Accessed October 4, 2016.

The tide of closings, mergers, and acquisitions among independent oncology clinics remains strong but appears to be tapering a bit, according to a report from the Community Oncology Alliance (COA).¹ Since 2014, roughly 65 practices across the country have merged with or been acquired by a hospital, whereas 67 practices have closed their doors. The report also stated that since 2008, 390 practices have found themselves struggling financially at one time or another.