Choose the Right Organizational Model for Oncology Practice Success

Ariela Katz
Published: Sunday, Jul 01, 2018
Many pressures on independent oncology practices have contributed to regionalization of services, in which practices merge or establish relationships with larger health systems. The forms that these larger systems have taken are diverse, but they do fall into several basic categories. However, the systems that succeed are the ones that best fit the geographical, cultural, and financial profiles of practices, according to experts on optimizing regional health systems interviewed by OncologyLive®.

“Reimbursement and margins for practices are going down,” said Matthew R. Sturm, MBA, associate principal at ECG Management Consultants based in Seattle, Washington. “Practices are trying to figure out how to do the same things or, in many cases, do more with [fewer] financial resources.” Ultimately, by combining resources and improving collaboration, practices can provide higher levels of comprehensive care, he said.

Over the past decade, 848 practices have merged with or been acquired by larger entities, according to the 2018 Community Oncology Alliance Practice Impact Report.1 Payment issues are a chief cause of this trend, Sturm said. More patients are using Medicare and Medicaid, he noted, and this includes patients who become eligible for coverage before they reach retirement age (Table).2 These plans tend to pay less than private health plans, and from a practice’s perspective, this results in less revenue, Sturm said. In addition, more patients are on plans with higher deductibles, which motivates them to find the most economical options for their care.

Another factor putting pressure on margins at practices is that cancer drugs and technologies are developing at a rapid pace. Providing state-of-the-art radiation, immunotherapy, imaging, diagnostics, and even chemotherapy can require heavy financial investment. The challenge for organizations is finding a way to pay for this against a backdrop of declining revenues. A regionalized cancer care collaborative often is the answer to these problems.

Picking the Right Model

A regional cancer care collaborative can clinically integrate, align, and coordinate services. It can happen within a single healthcare system, across healthcare systems, or across healthcare systems and affiliated hospitals.

Although there are many ways to structure a regional cancer care delivery system, experts recommend choosing management personnel carefully and selecting a business model that fits the practice. Each group must consider their location, whom they want to lead their group, and which structural and financial models best suit their needs and their mission.

Because greater efficiency is at the heart of any move to consolidate, it is important to avoid any unnecessary duplication of services, particularly in nonurban areas where the investment in resources could be costlier. A collaborative has multiple parties that combine assets across a spectrum of oncology services, and this can provide a more comprehensive array of oncology services to a defined geographic service area than what an independent could achieve.

Table. Medicare and Medicare and Medicaid Enrollment Has Increased

There are 3 basic organizational models that typically define regionalized care systems. The hub-and-spoke model, which features a system of geographically centralized care with satellite clinics, is most common and works best in many environments, including rural areas. The distributed model of regionalization allows for geographically dispersed facilities that specialize in different types of care. The third type, the coordinated model, features a high degree of specialization in which physicians work closely to address each element of care. The distributed and coordinated models are more appropriate for compact geographical footprints where patients don’t have to travel significant distances to reach each center.

“There’s not a single superior model; it’s not one-size-fits-all,” Sturm said. “I think that it has to be vicinity- and organization-specific in terms of what resources they have, what their culture will allow, and what geography they have.” Each organization must consider what the different stakeholders are trying to achieve and how committed they are to reaching those goals.

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