The Changing World of Oncology Practice

Economic pressures are forcing many oncologists to leave small private practices.

Oncologists are under enormous economic pressures that are changing the configuration of community oncology. These pressures include increasing costs, decreasing reimbursements, more patients (many uninsured or underinsured), drug shortages, clinical pathways, the burden of regulatory compliance, the cost of technology, and a host of other issues.

Although most of the changes have been incremental, eroding at the traditional private practice, they are ultimately forcing many oncologists into larger institutional organizations and putting small private practitioners on the endangered species list.

Thomas L. Whittaker, MD

The Community Oncology Alliance (COA) has tracked the financial health of 1042 community practices. The organization reports a 40.6% increase in the number of practices that have been acquired by another organization or merged into hospitals. In a 2011 report, COA noted 315 practices that had been acquired by hospitals and 11 practices that merged or were acquired by another organization. Another 199 practices closed, and 369 reported they are in a financial bind.

“Trying to manage a practice independent of a hospital or another large system is becoming impossible,” said Thomas L. Whittaker, MD, FACP, a hematologist/oncologist at Central Indiana Cancer Centers, which has partnered with Indiana University Health. “The financial risks are too high, and financing is driving the change.”

Most experts agree that future oncology practices will look very different from practices 20 years ago.

Jeffery C. Ward, MD

“The solo or small group practices are going to go away,” said Jeffery C. Ward, MD, a medical oncologist at Puget Sound Cancer Centers, an affiliate of the Swedish Cancer Institute in Edmonds, Washington. Ward sees two types of private practice affiliations emerging: those that are part of a hospital or academic institution, and those that are part of a large cancer management network.

The road well traveled

Cancer treatment used to require inpatient care. Chemotherapy was inelegant, and it was difficult to manage the nausea and side effects. As antiemetic regimens and shorter drug infusions were developed, cancer care evolved to outpatient care, said Whittaker, who is also president of the Association of Community Cancer Centers (ACCC).

Money also had a hand in this change, after the federal government instituted a formula to pay for oncology drugs—the Average Wholesale Price (AWP) + n. This allowed profits on the administration of infusion drugs, providing a supplemental income to oncology practices.

Dean H. Gesme, Jr, MD

“The margins on those drugs became larger and larger to the point where an oncology practice depended upon them to sustain and maintain the size of a practice,” said Dean H. Gesme, Jr, MD, FACP, FACPE, a medical oncologist with Minnesota Oncology, part of the US Oncology Network. “The large infusion room, the number of nurses—this entire infrastructure was based on the global amount of revenue coming into the practice.”

At one time, it was estimated that 80% of cancer patients received their chemotherapy regimen in a community practice, and 50% of the practice’s income came from buying and administering drugs, according to a 2001 article in the Journal of the National Cancer Institute.

Having set up this payment system, the government and other payers began chipping away at it. The Medicare Modernization Act changed AWP to Average Sales Price (ASP) in 2005, which provided little or no margin on the chemotherapy drugs.

“

The bigger we get, the better negotiating we can do with our payers. We’ve given up on Medicare. The government will pay what it will pay.”

—Dean H. Gesme, Jr, MD

“Now, reimbursement is based on ASP, which covers the cost of most, but not all drugs, but does not add significant profit to the bottom line for running a practice,” said Elaine Towle, CMPE, director, consulting services, Oncology Metrics, a division of Altos Solutions.

“We’re seeing oncologists looking to leave their current community practice for financial safety and being lured into institutional settings,” Gesme said.

Elaine Towle, CMPE

The cost of drugs

Drug reimbursement, and now drug shortages, have influenced operating budgets and staffing, said Towle, who coauthors the National Oncology Practice Benchmark reports published by the Journal of Oncology Practice. “Payers are increasingly seeking ways to get a better handle on the drug spend. One of the ways they do that is by requiring prior authorization or precertification, frequently on an individual drug basis. If you have 20 chemotherapy chairs and you must precertify drugs on even half of that patient population, the overhead has to increase dramatically.

“Drug shortages also affect staffing. When you have a patient that needs chemotherapy, and you realize you don’t have the drug on hand, you need someone on your staff to figure out how to get it. Is there another source? Or do we need to go back to the clinician and say, ‘We can’t get drug A for Mrs. Jones. How are you going to change your treatment plan?’ That is another layer of complexity that takes people to manage,” said Towle.

Towle’s survey has found that labor costs have increased, while revenue is flat or down, and she thinks that most of that labor is to manage reimbursements and drug shortages.

Survival of the fittest

In the new oncology world, bigger is better because the largest practices can negotiate the best reimbursements with third-party payers and the best prices on oncology drugs, said Ward, who is also the chair-elect of the American Society of Clinical Oncology (ASCO) Clinical Practice Committee and associate editor of the Journal of Oncology Practice.

Gesme agreed, saying that practices must reach a “critical mass” to leverage contracts. “The bigger we get, the better negotiating we can do with our payers. We’ve given up on Medicare. The government will pay what it will pay. Our leverage in private practice is in negotiating with private payers,” he said, noting that his 60-doctor practice is looking to add physicians from several specialties.

“If we can get a large enough group of specialists together, then we will be able to negotiate very well with third-party payers,” said Gesme.

“The definition of community practice is clearly changing,” said Towle. “Five or ten years ago if you said community practice, you were talking about a physician-owned private practice. Now when you say community practice, it is less clear what you mean because it might be a physician-owned practice, a hospital-owned practice, a large oncology network— there are all kinds of arrangements out there. My definition of community practice is anyone who provides oncology services in the community setting, and ownership differentiates one from another.”

What Impacts Business Decisions

Oncologists in 102 US practices reported three leading pressures affecting their business decisions.

Source: From the National Oncology Practice Benchmark Report (J Oncol Pract. Nov 1, 2011:65s-66s).

Other drivers

The backlash may have backfired, though: As payers squeeze oncologists on the drug spend, they push them into larger institutions. However, it costs payers more to treat patients in a hospital than in an office.

“We are at that tipping point where the payers realize that they have been penny-wise and pound-foolish in beating the medical oncologists to the point where they are changing their practice locations. Many of us are feeling embattled and cannot sustain a practice that we feel comfortable with in the community environment,” Gesme said.

Cancer care is expensive. The 2011 Medco Drug Trend Report estimates that the cost of cancer care in the United States may rise from about $125 billion in 2010 to about $207 billion by 2020. Eighteen percent of people aged 65 and older report they have cancer, and as the population ages, oncologists expect the prevalence to increase.

Enter healthcare reform. No matter what the Supreme Court finds concerning the constitutionality of healthcare reform, the healthcare system is undergoing change—and third-party payers are driving much of that reform.

“As drugs are more expensive, I think the reimbursement structure will have to change,” Whittaker said. “I have a patient that I am giving IV therapies because he doesn’t have a prescription benefit. I can’t treat him with an oral equivalent, because he cannot afford the thousands of dollars a month it would cost for the drug, but his insurance will pay for IV drugs. We want to give the best possible care, but we have to make it work for the patient.”

Ward and Gesme also see changes coming in the reimbursement structure, but they said the changes will be incremental—just like all the others—rather than sweeping.

“Very little happens in medicine and politics that is not an incremental change. How did we get where we are? It was incremental changes,” Gesme said.

“There are many possible reform models, but the most promising center on an invoice to replace ASP and a management fee to replace the ‘n’ in ASP + n,” said Ward. “I think after you get rid of ‘buy and bill’ chemotherapy, then you need to get into a model that pays in a way that incentivizes us to act efficiently and requires us to meet quality measures.”

The cost of cancer care in the United States may rise from about $125 billion in 2010 to about $207 billion by 2020.

Individualized therapies and biomarkers that target cancer pathways characterize today’s cancer treatment. The pressures and complexity of cancer care will require that the delivery of care be more evidence-based.

“There are treatment protocols that have been shown to be efficacious. I think these pathways will keep people on track,” Whittaker said. “Treating beyond what is scientifically sound is troubling and costs money. If we are able to offer the standard of care and track what that care has done, we will be able to improve our outcomes.”

Along those lines, reformers are looking at accountable care organizations (ACOs), a type of structure that affects both the payment and delivery of medicine. In an ACO environment, reimbursements are tied to quality metrics that reduce the total cost of care. Although the model is geared toward primary care medicine, oncologists see a place for oncology patient-centered medical homes (PCMHs), which would perform under a similar system.

“If I were in private practice and looking for a model for the future, I would want to be in a patient-centered medical home. I would not want to be responsible for the cost of drugs, but I would be willing to assume responsibility for my patients’ emergency room care, for their hospitalizations. I think those are the places where money can be taken out of the system without diminishing the quality of care,” Ward said.

PCMHs could be the perfect place for cancer survivors. The positive side of cancer care today is that more patients are living longer, productive lives. There were about 13.8 million cancer survivors in 2010, and Medco predicts there will be 18.1 million by 2020.

However, these patients often have residual problems that require consistent follow-up by knowledgeable specialists. The PCMH could be the answer.

Oncology Business Models Are Changing the Patient Coordination Process

Impact of changing reimbursement on community oncology practices

N=1042 practices tracked 2008-2011

Source: Community Oncology Alliance. Community Oncology Cancer Care. Practice Impact Report: Documented Impact on Community Oncology Practices. March 31, 2011 update. NOTE: 2012 update currently pending.

©Copyright 2011. DK Pierce & Associates, Inc. All rights reserved.

“The patient-centered medical home will have a positive effect,” said Whittaker. “It is geared to be patient-centric and evidence-based. I think an oncology medical home will be able to fit within the ACO framework, but it will take a big organization to do that.”

Survivors will add to the challenges for practices, said Towle. “Many times, survivors want to stay connected to their oncologist, but how does an oncologist, who is already busy caring for current and new patients coming into the practice, care for long-term survivors?

“Physician extenders could provide better care to more patients in this challenging economic environment. A well-trained oncology nurse practitioner or physician assistant can be a real asset to a practice and can help physicians become more efficient,” she said.

Physician extenders can be a helpful addition to a practice, but physicians hope that these and other changes don’t infringe on the relationships that they develop with patients.

“My concern is that oncology will be less personalized. What I truly love about my practice are the relationships we develop with our patients. My concern over the next few years is that we will have fewer oncologists—many oncologists are retiring—and we are going to have a lot more patients, especially with healthcare reform.

“If we have everyone insured—and I think everyone should be insured—that will mean a lot more patients seeking care. I worry that we will not have the personal touch,” Whittaker said.

Ward agreed, saying he is also concerned that supervising physician extenders will take away from being able to practice medicine himself. “I understand the need for the model. If I supervise three physician extenders, I could easily do three times the work I do now, and I would do it for less,” he said. “But I enjoy the relationships I have with patients.”

Best of times, worst of times

No matter what drives the form of oncology practices in the future, the oncologists interviewed by Oncology Business News truly enjoy the practice of oncology and are optimistic about its future.

“When I first started, we did not have the means to control the vast majority of pain. The science is better, and the patients are happier and healthier. I am optimistic about the practice of medicine. We just have to build a business infrastructure that will support the rapid advancements in the science and clinical care,” Gesme said.

Whittaker calls himself a blind optimist. “The science is so much better, and we cure so many more people than we used to. This is exciting and fun because we are doing a better job than ever. I do not think we should let financing get in the way.”

Sources

• Barr TR, Towle EL. National Oncology Practice Benchmark, 2011 report on 2010 data. J Oncol Pract. 2011 Nov;7(6S):67s-82s.
• Barr TR, Towle EL. Oncology Practice Trends from the National Practice Benchmark, 2005-2010. J Oncol Pract. 2011;286-290.
• Benson LR. Reimbursing Cancer Care: medicare policies challenged. J Natl Cancer Inst. 2001;93(21):1595-1597.
• Community Oncology Alliance. Community Oncology Cancer Care Practice Impact Report, updated 3/31/2001. Available at www.communityoncology.org. Accessed January 17, 2012.
• Medco. Drug Trend Report 2011. Available at www.drugtrendreport.com. Accessed January 15, 2012.