Second Partnership Was the Charm for Seattle Oncology Practice

Tony Hagen @oncobiz
Published: Sunday, Feb 14, 2016
Jeffrey Ward, MD

Jeffrey Ward, MD

Choosing the right partner in a merger or an affiliation is not a process that is guaranteed to work out the first time. For one group of physicians in Seattle, hooking up with US Oncology seemed like a good idea at first, until circumstances changed and the deal no longer was a benefit for any of the partners. Jeffrey Ward, MD, a specialist in hematology/ oncology and a member of ASCO’s government relations committee, said that going back to complete independence in the Seattle market would not have been a good move, as rising costs would have overtaken the physicians’ ability to pay themselves.

A much more satisfying solution was found in a merger with what is now the Swedish Cancer Institute. Ward and his partners severed their ties with US Oncology, and after a period of fine-tuning and special arrangements to make the partnership a success, the deal began to mature into the more fruitful large-institution practice that Ward had hoped for, providing opportunities for career development along new lines, and a chance to practice higher level oncology with more sophisticated resources.

What follows is a question and answer interview with Ward about the transition from life as an independent practitioner and the trial and error process of finding a new business arrangement, leading to the eventual absorption by Swedish.

OBM: Describe the early years that led up to the merger.

Ward: I entered private practice in 1993 and was in a small group with two other physicians for a few years, at which time we merged with another private practice group down the road, becoming a group of seven and then quickly eight physicians; at the same time, we became a US Oncology national practice. We were with US Oncology for 15 years. We still owned and ran the practice and they were a consultant, so from our vantage point, it felt very much like private practice except we shared part of our income with our consultant.

It reached a point where two things became clear to us. One was that our practice and US Oncology no longer shared the same incentives. We were a medical oncology-only practice. We had not grown into the prototypical US Oncology model of one-stop shopping cancer care with imaging, radiation oncology, gynecologic and maybe surgical oncology. That’s what works for them: a midsize metropolitan community in which you can have a large enough presence that you cannot be ignored by insurers. The Seattle market, for a variety of reasons, including cost of property as well as the fact that the hospitals were well entrenched, was never going to work with that kind of model. I think the other thing is we probably didn’t have the right personalities in place to create the cohesion among the medical oncology community that would have allowed for that either.

What were some of the payment issues?

First off, there was the Medicare Modernization Act, which certainly changed the way chemotherapy was paid for by Medicare. Initially commercial insurers kind of looked and watched that. But over time, they slowly all changed to Average Sales Price (ASP) -based reimbursement for chemotherapy. And then in tight times and in trying to lower cost, they just kept ratcheting down little by little what they were going to pay for reimbursement and became much tighter in preauthorization and things that increased your overhead, until we reached a point where we could see the trajectory and said if we continue in our current model, we won’t be in practice in five more years.

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