John D. Sprandio, MD
In 2002, when fee-for-service payment structures were already arousing concern because of how they encouraged unneeded care, Pennsylvania oncologist John D. Sprandio, MD, separated his Philadelphia-area group, Consultants in Medical Oncology and Hematology (CMOH), from a large oncology practice chain so that he could create a patient-centered medical home with standardized treatment, greater efficiencies, lower overall costs, happier patients, and more advantageous agreements with payers.
Sprandio’s practice appeared to thrive as he embraced software designed to overhaul phone triage and symptom management. He shrunk his workforce and dramatically lowered emergency department (ED) visits and hospital admissions among his patients, demonstrating better management of disease. Meanwhile, his pioneering work transformed him into a national figure in the oncology business world. “Dr Sprandio has certainly been an innovator and modernized his practice in a way that has been almost unparalleled in oncology,” said Jeffrey C. Ward, MD, of Swedish Cancer Institute in Edmonds, Washington.
Now Sprandio has changed direction. Since striding off as an independent to develop a successful value-based care system, he has joined another large organization, saying it is time to combine his innovations in care and apply them through a network of practices that can offer technology and data access that were beyond the scope of CMOH.
Sprandio joined forces with The US Oncology Network (The Network), a physician practice management company. “The Network model of standardized business practices, its role in aggregating practices in a market, and its ability to serve as a capital partner were very compelling,” he said. The deal afforded him a measure of independence and created advantages that might enable his innovations to be adopted on a much broader scale.
Even before the partnership, Sprandio’s innovations had influenced oncology care beyond the boundaries of the 5 practices in CMOH. For example, the Centers for Medicare & Medicaid Services (CMS) based some of the architecture of the Oncology Care Model (OCM) on CMOH’s efficiency models. CMOH is an OCM participant. In addition, Sprandio’s business ties with The Network were already formed. The Network had licensed proprietary software for patient-centric care that was developed by Sprandio’s consulting company, Oncology Management Services in Conshohocken, Pennsylvania.
Behind the Decision
In an interview, Sprandio expanded on his practice’s decision to join the practice management company that works with about 20% of oncology practices in the United States. One reason for the move, he said, was to help facilitate growth in the southeastern Pennsylvania market. To succeed with payers and their increasingly rigorous prior-authorization policies for approvals of costly oncology drugs, adherence to high standards of care must be demonstrated, Sprandio said: “Payers in our market, as well as expanding primary-care independent practice associations and affordable care organizations, are clearly in search of specialists who are committed to deliver a new and continuously improving value proposition for complex oncology care.”
The partnership also supplies capital for expansion. “Our practice’s superior clinical results, our National Committee for Quality Assurance recognition, and the potential of having The Network as a capital partner will allow us to collaborate with payers, health systems, and hospitals in order to build out and improve existing patient services,” Sprandio said.
In 2015, CMOH reported robust numbers on practice efficiencies that would have sounded appealing to potential partners struggling to align with the value-based direction espoused by CMS and now being imposed through the OCM and the Medicare Access and CHIP Reauthorization Act of 2015.
CMOH reported that its chemotherapy patients were averaging 0.541 ED visits per year, down from 2.6 visits 10 years earlier and well below the national average of 2 per year. Sprandio estimated he was saving payers $1 million per physician per year. He also estimated that, adopted nationwide, his model could cut $8 billion to $16 billion from annual cancer spending. “To be able to reproduce that model across the country is something I find extremely, extremely, extremely exciting,” Sprandio told OncologyLive® at that time. RETAINING A COMMITMENT TO VALUE-BASED CARE
Retaining a Commitment to Value-Based Care
Although Sprandio sought to expand his practice’s horizons through the deal with The Network, he wanted to preserve the achievements in value-based care that are his trademark. “We developed and introduced the concept of the oncology patient–centered medical home in 2009, broadly known as the oncology medical home,” he said.
“Our non-risk-adjusted ED utilization and all-cause admission rates have consistently been below the median for all OCM practices since April 2016,” Sprandio said. “Our OCM data for the period [of] January 1 to March 31, 2018, show further reduction in all-cause admissions per 100 beneficiaries—trending at 19% below median for OCM practices. For the same period ending March 31, 2018, our ED visits not leading to an admission or observation stay per 100 beneficiaries were running approximately 41% below the median for all OCM practices. Our physician visits per beneficiary continue to trend lower than the median for OCM practices.” That all was accomplished even though CMOH’s patient risk categories have been in the high- to medium-high patient risk quartile since the OCM started, he said.
Although these statistics are strong, Sprandio said, maintaining them requires a tremendous amount of number crunching. That’s where The Network comes in. “We needed greater data capabilities regarding utilization and performance metrics that drive value-based cancer care,” he said. “As new drug development continues to accelerate, we will need to have information at our fingertips at the point of care to match patients to the appropriate, newest drug in a way that allows physicians to factor in comorbid conditions, current medications, and past medical history, as well as individual patient goals and wishes. Independent practices of 5, 10, or 30 physicians are less likely to have those data capabilities.”
Mergers Offer Standardization
Working with The Network offers another benefit, Sprandio said: smoothing the process of forging partnerships. “When you have groups of practices aggregating in a market, there’s typically variability of delivery of care and often wider variability in terms of how the practices run their business,” he said, and The Network can help standardize business practices.
For example, The Network performs accrual accounting. Although it’s more complex than cash accounting, this form of bookkeeping allows businesses to understand their current financial status at a glance. Combined with other business methods, it leads to “timely, accurate, and highly actionable” business- related data, Sprandio said. According to a 2008 report, small oncology practices tend to use cash-based accounting, whereas larger healthcare organizations use accrual-based accounting.1 The Network offers all its practices accrual accounting services.
Sprandio pointed to other benefits, such as the ability to purchase drugs and supplies as a group of hundreds of physicians. The Network serves 1400 independent physicians—oncologists, oncologic surgeons, hematologists, thoracic surgeons, pathologists, and others— at more than 60 practices with more than 450 sites of care. According to The Network, the number of physicians it serves has grown by about 40% since 2014. “There are also benefits in terms of centralizing of billing, human resource activities, and 401(k) programs, to name a few,” Sprandio said. “Physicians who join US Oncology continue to own their practice corporation and continue to have complete control over the clinical delivery of care.”
Networks are Not Right for All
Many oncology practices have not partnered with The Network. Ward, the Swedish Cancer Institute oncologist, said his practice ended its partnership with The Network about 9 years ago. “When we joined it around 1996, it was in the days before the Medicare Modernization Act. US Oncology brought us a number of things that were nice and helpful. The biggest one was buying power in a time when drug companies could easily give large purchasers deals on drug purchasing,” he said. “What really drew us was the fact that they could buy chemotherapy drugs for 10% less than we could. They also made a huge difference in financial stability and provided capital to modernize and grow a practice.”
The Medicare Modernization Act changed the system and created a new model. “As drug revenue became tenuous, the goal was to diversify your income stream by adding services,” Ward said. “We simplified things for patients by adding access to radiation oncology, positron- emission tomography, pharmacy, hematopathology, and in-house flow cytometry, etc, all under 1 roof.”
Success with this model required scale, however, and that wasn’t going to happen under the arrangement with The Network at that time, Ward said.
“The model required capital and infrastructure that we would have had to build. Seattle-area real estate and building costs made it difficult to pencil out. Further, the hospitals were well established in these services and would have resisted our efforts vigorously. We weren’t convinced we could win the battle that would have resulted. Finally, we were a relatively small practice in a large market. Had we had leadership in place that could sell a vision of private practices consolidating into a power broker, there might have been a window of opportunity to grow into the model described. But in my opinion, the personalities of key players, divisions created by geography and hospital affiliations, and the economic risks didn’t let it happen.”
Ward’s practice needed a way out, but The Network contract stood in the way. “We needed to have someone to buy us out of the contract,” he said. That’s where a local hospital system came in. “We joined our hospital in large part because we saw them as a partner that had the same ideals we have,” he said. “They had a vision of growth that we fit into.” If his practice hadn’t made the move, Ward said, it would have had to shut down.
Since then, The Network has changed, taking actions such as developing an oncology- specific electronic medical record system. “They walk the walk in a way they didn’t then,” Ward said. “They’ve built a strong value-based pathway program and done studies that have shown they can bring savings to the healthcare system by doing so.” Even so, Ward is happy to stick with Swedish Cancer Institute, which provides social workers, registered dietitians, palliative care physicians, and other benefits. “The hospital can provide these services because it gets paid adequately for oncology care,” he said. “They either don’t get paid or get underpaid for these ancillary services, but they can subsidize them from their core business.”
Which Way Forward?
Should other oncology practices consider a move toward a contract with a physician practice management company such as The Network? Although the landscape has changed over the past couple of decades, “the reasons to affiliate are as strong as they ever were,” said John E. Hennessy, an oncology practice management veteran and chief business development officer at WellRithms in Portland, Oregon, which offers cost-containment services for the healthcare industry. Valid options are still available, such as selling to a hospital or continuing to go solo, he said: “Understand those options, explore them, and don’t just default to what seems easy.”
Hennessy was executive director of the Kansas City Cancer Center for 11 years when it was part of The Network and for a year when it partnered with the University of Kansas. Times have changed, and so have motivations for choices regarding partnerships with a company like The Network, according to Hennessy.
“It’s still a value proposition, but it’s different,” he said. “It’s not the same as in the 1990s, when a reason to join The Network was to be able to buy drugs at such a great price that it will make a significant difference.”
Now, he said, the reasons for joining include the creation of clinical and technology partnerships: “It’s a bit more 3-dimensional than the hospital proposition, which often becomes an employee agreement.” Other oncology groups include OneOncology, which works with practices in Tennessee and Long Island, New York, and American Oncology Network, with practices in Arkansas and Louisiana. However, Hennessy cautioned oncologists to be careful about extended affiliation deals that may last as long as 30 years. “I don’t think healthcare [in 3 decades] is going to be anything like it is now,” he said.
Ward urges his peers to take a hard look at themselves and their practices as they consider the way forward. Those thinking about joining a hospital system should ask themselves if they can work for “the man,” he said. “For some doctors, private practice is like the family farm,” he explained. “It is a way of life, and joining a hospital practice is selling your soul.…They need to try to build a big practice in [The Network] model and hold on.”
Putting things in reverse is also an option. “The next best thing is to have flexibility. Sometimes the best way forward [requires] putting it in reverse and trying a different path,” Ward said.
Understanding the finances of oncology practice, part 1. J Oncol Pract. 2008;4(3):146-149. doi: 10.1200/JOP.0836501.