In Negotiations, Oncologists Find That Size Does Matter

Joseph Burns
Published: Tuesday, May 13, 2014
Jeffrey F. Patton, MD

Jeffrey F. Patton, MD

For oncology practices today, the keys to negotiating successful contracts are size and a willingness to contain costs while improving quality.

Having a large presence in a market helps an oncology practice demonstrate that it has the scale to serve a large number of patients. A secondary but related factor that drives success in negotiations with health plans is a willingness to move away from fragmented feefor- service contracting and to follow protocols. By following protocols, oncologists can demonstrate that they are controlling costs and improving quality.

Practice Size Matters

The problem in many markets is that health plans tend to dictate contract terms, as oncologists and other physicians have seen in Tennessee recently. The Tennessee Medical Association has documented how health plans have been changing payment terms in mid contract, thus forcing many practices to accept these terms, says Yarnell Beatty, vice president of advocacy for the Tennessee Medical Association (TMA). For oncologists in Tennessee, drastic changes in contract terms have resulted in a big drop in payment just since the start of this year, he added.

“Health plans are so big and powerful that they have what amount to take-it-or-leave-it clauses in their contracts. These clauses allow them to amend contracts and the fee schedule at any time,” he says. As of last year, Blue Cross Blue Shield of Tennessee said it would cut what it pays to practices that have in-office pathology laboratories by 52 percent, and most large oncology practices have in-office labs.

Jeffrey F. Patton, MD, the CEO of Tennessee Oncology in Nashville, said his practice has been adversely affected by this change. “We couldn’t accept a cut of that size,” Patton says. “We have 80 oncologists working in 40 sites in Tennessee, and our size means we can refuse such unilateral changes.”

At each site where it delivers care, Tennessee Oncology needs an in-office laboratory. In addition, it has a central lab, Patton says.

“We need an analyzer at every site to check the blood counts before you deliver care, and we have a central lab to do chemistry analysis as well,” he says. “A cut of 50 percent would have been significant, and we were fortunate to have the size to reject that cut.”

Tennessee Oncology said it would not accept the cut, and because of its size and geographic coverage in the Volunteer State, it retained the contract, Patton says.

Small practices, however, do not have the market clout to say no to payers, Beatty says. The TMA supports legislation to prevent health plans from making unilateral changes in mid contract.

As of mid-March, that legislation was under consideration. “We just want some predictability for medical practices so that they will know what they will be paid during the year,” Beatty says. “We need this legislation to level the playing field, particularly for smaller independent practices.

“There needs to be predictability on the provider side so that they can be more efficient and know how much staff to hire and which services to deliver,” he adds.

Developing New Payment Arrangements

Another important element when negotiating contracts with payers today is a willingness to move away from fragmented fee-for-service payment. Oncologists are just starting to get involved in negotiating shared savings and other payment arrangements with health plans. Just as size is important to controlling costs, these new payment methods are designed to provide a financial reward for keeping costs low and for improving the quality of care oncologists deliver.

To control costs and coordinate care more effectively, health plans are asking oncologists to participate in accountable care organizations and patient-centered medical homes. But progress in developing these arrangements for oncology has been slow, hampered by the complexity of cancer care.

While they recognize that fee-for-service arrangements need to be replaced and are interested in new forms of payment, oncologists remain wary of negotiations over new reimbursement models.

“Everyone understands that we need to develop a more value-based system that includes some risk sharing,” says Patton. “There are lots of discussions about new forms of payment, and new programs are being developed, but the vast majority of reimbursement remains as fee for service. Oncology is complicated and understanding where all the costs are is a challenge.

Practices are blind to hospital costs, and that’s the biggest part of the cost equation. For us to do a bundled payment or go at risk would be difficult until we fully understand hospital pricing,” he explains.

“To do that would require a lot of collaboration with payers because health care is fairly well behind other industries in terms of information technology. Without the right data and the proper tools to measure costs in real time, it’s difficult to do risk contracting,” he adds.

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