Consolidation Ripples Out From Florida

Alan Marks, MD

Florida is a leader in the consolidation trend, topping the nation in the number of practices that have closed, merged, or been acquired in recent years, according to the Community Oncology Alliance (COA). Most practices have affiliated with hospitals or joined large groups like Florida Cancer Specialists & Research Institute, one of the nation's biggest physician-owned oncology networks.

Florida has changed so dramatically in part because it has a large population of older residents on Medicare, making providers particularly sensitive to CMS policy changes that reduce revenues, increase compliance costs, and increase consolidation pressures. After California it has the most cancer patients. In addition, seniors there are generally fitter and better able to tolerate treatment than in other places, further expanding the number of patients, said Alan Marks, MD, past president of the Florida Society of Clinical Oncology.

“Our seniors are healthier than the same age-group population in, say, New York,” Marks said. “We don’t think anything of taking an 85-year-old and giving them chemotherapy here in Florida, because chronologically they’re 85, but they’re out there playing golf and tennis and swimming, and physiologically they’re in their 60s.”

Yet many of the same pressures that eliminated small practices in much of Florida are present everywhere, such as high drug costs, declining reimbursements, more complex payment models, and younger physicians’ preference for employment rather than entrepreneurship. Large groups and networks are growing in Colorado, New Jersey, New York, Tennessee, and Texas. Oncologists continue to sell their practices to hospitals, and leading cancer centers are spreading their brands through joint ventures.

At the same time, variations in state laws and local markets result in diverse types of consolidation. In areas where size does not confer a significant advantage, small providers may remain independent for some time. While oncologists in some states are following Florida’s lead, in others they are taking a different path.

Competing for growth

“At present, we are not seeing the same scale of consolidation elsewhere as we are seeing in Florida,” said Constantine Mantz, MD, chief medical officer at 21st Century Oncology, which has 144 centers in 17 states. However, “large oncology practices and networks will continue to grow throughout the country as physicians seek alignments with larger entities to better meet their operational needs.”Small practices are disappearing nationally due largely to hospital acquisitions. In the Sunshine State, however, a leading player is Florida Cancer Specialists & Research Institute, a physician-owned mega-group that has grown over three decades to 206 physicians and 100 offices. Florida Cancer Specialists & Research Institute practices are concentrated on the West Coast and in Central Florida around Orlando, with one in the Panhandle and none in Jacksonville or Miami.

21st Century Oncology, also based in Florida, has about 100 oncologists around the state, the majority of them radiation oncologists. US Oncology’s numbers have fallen over the years as some practices have ended their affiliations with the company, but it still has 26 oncologists along with other specialists. Other than Florida Cancer Specialists & Research Institute, the biggest independent practice group is Integrated Community Oncology (ICON) in Jacksonville, also known as Cancer Specialists of North Florida, with 31 oncologists at nine locations.

Jacksonville is one market that illustrates the competitiveness and volatility of oncology in Florida. Marks’ former practice, for example, was sold to Baptist Health System in 1992; bought back its independence in 2003; and became part of 21st Century in 2008, in order to satisfy payer requirements for access to radiation therapies. Last year, 21st Century’s Jacksonville group merged with the University of Florida Health (UF Health).

Baptist Health, meanwhile, wanted to rebuild its oncology program after losing Marks’ group, so it became a member of the MD Anderson network and opened a cancer center. The Mayo Clinic, which has had a presence in Jacksonville since 1986, acquired and then sold a local hospital, and created a cancer center complex. ICON was formed by physicians who left US Oncology about 15 years ago in response to changes in the company’s revenue-sharing system. The city of 870,000 residents now has four major oncology providers and no small groups, Marks said.

“Jacksonville is probably one of the most competitive oncology markets there is,” said Marks, who retired in 2014.

Other Florida cities have seen similar consolidation. Ocala’s two main independents agreed to mergers, one with Florida Cancer Specialists and the other with a hospital, Marks said. In Daytona, two hospitals dominate the market. The University of Miami looms large over its region, but Baptist Health absorbed a large former US Oncology group there, partnered with Memorial Sloan Kettering (MSK), and is building the Miami Cancer Institute. Florida’s sole NCI-designated comprehensive center, Moffitt Cancer Center, dominates Tampa, and Florida Cancer Specialists & Research Institute also has three locations there.

Small practices haven’t completely disappeared. Marks said a few serve Miami’s immigrant community, or remote areas far from cities, and he knows of older oncologists who maintain unprofitable solo offices as a sort of hobby. Florida Cancer Specialist CEO Brad Prechtl said pockets of practices with 1 to 5 physicians remain.

“Some practices, given their dynamic and their market—if they’re the only medical oncologist in that market—it might be easier for them to survive than when there’s competition,” he said. “Those practices are typically stagnant, and seeing declining reimbursement and increasing costs and decreasing physician compensation.”

“They seem to be reaching out to us recently,” Prechtl added. “The majority of independent practices out there in the state of Florida are assessing whether or not they can continue to survive, and more of them are considering some sort of affiliation.”

Prechtl said Florida Cancer Specialists continues to grow and is also creating a new organization, American Oncology Network, to replicate Florida Cancer Specialists & Research Institute's structure in other states. He said physicians outside of Florida have for several years been asking Florida Cancer Specialists & Research Institute to expand to their areas.

ICON CEO Bob Phelan, whose practice has 31 oncologists, said groups need to be that size or larger to thrive in the current cost and regulatory environment. Those that survive stand to benefit if CMS someday reforms the 340B drug discount program, which makes cancer treatment lucrative for hospitals despite their overall higher costs, he said.

“Eventually the government will realize we’re the cheaper providers, and they’ll stop the hospital incentives,” Phelan said. “Once the hospitals see their drug spend creep up, the independent guys will be in the driver’s seat and practices like mine will be successful. We’ll get even more guys wanting to join us.”

Another highly consolidated state is Texas. Texas Oncology, a US Oncology affiliate, has at least 420 oncologists, more than a third of those in the state. After Florida, Texas has reported the most mergers and acquisitions in the last eight years, though relatively few of them have been acquisitions by hospitals, according to COA’s 2016 practice impact report.

Large practice groups have also formed in a number of other states. Rocky Mountain Cancer Centers in Colorado, also a US Oncology affiliate, has 53 physicians at more than 20 sites. Tennessee Oncology has 80 doctors at more than 30 locations. In New Jersey, Regional Cancer Care Associates (RCCA) has recently grown into a mega-group of 100 oncologists and expanded into Maryland and Washington DC, with further growth in those areas and into Connecticut being planned.

Much like Florida Cancer Specialists, RCCA works to preserve community oncology by giving practices a way to become more cost-efficient and withstand pressures to join hospitals. CEO Terrill Jordan said those pressures vary around New Jersey, with some private practices likely to remain autonomous and others being pushed hard to sell out.

“There’s one hospital system in particular that’s very aggressive, I would say to the point of being predatory in terms of independent practices, and ultimately seeks to run all the physicians into the hospital employment model,” he said. “There are others that are more open and collaborative with the practices and don’t necessarily seek to advance that model.”

Jordan also noted the growing presence of name-brand national cancer centers that are partnering with New Jersey providers and spending heavily to advertise their programs. Last month MSK signed a 10-year agreement with Hackensack Meridian Health and earlier last year MD Anderson inked a partnership with Summit Medical Group.

In New Jersey, Florida, and other areas where practice networks are growing, the consolidation trend is driven by competition for profit and enabled by relatively friendly regulatory environments. In places lacking those elements, the Florida model is unlikely to be emulated.

California has a huge patient pool, for example, but state law prohibits non-physician ownership of practices, leading to complicated workarounds and limited network formation. In much of the country, meanwhile, sparse populations, poverty, and the concentration of specialty care in medical centers means there are few independent providers left to consolidate and no profit motive to do so.

Sanford Health, in the Dakotas, has energetically built up its cancer services over the last few years. But despite covering 250,000 square miles, the nonprofit health system as a whole has 23 medical oncologists, nine radiation oncologists, 10 breast radiation physicians, and one gynecologic oncologist, according to its website. COA says North and South Dakota together have just seven community oncology practices.

Sanford is one of the nation’s largest health systems, and it’s expanding: it recently opened a breast health center and is building a hospital and a genomics lab. But Sharon Hunt, Sanford’s executive director of cancer, doesn’t focus much on competition and profit; her priorities are increasing access to clinical trials, integrating and managing new, complex treatments, addressing psychosocial and survivorship needs, and meeting growing demand from a far-flung, aging population while under financial constraints.

"Our region is mostly integrated health systems. It’s difficult in the Midwest to be a standalone practice anymore,” she said. “Our patients are so spread out that for us to provide oncology services, you have to either have a vibrant outreach program, so I can go to those small towns where those patients are, or I have to have good videoconferencing, and all of that comes at a price. It really takes a large infrastructure to be able to serve that.”