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.