The healthcare market has been consolidating in recent years with practice mergers, hospital partnerships, and acquisitions or affiliations with primary care and specialist practices.
The healthcare market has been consolidating in recent years with practice mergers, hospital partnerships, and acquisitions or affiliations with primary care and specialist practices. Large health systems have diversified services and revenues and begun managing risk as accountable care organizations (ACOs)—sometimes even offering their own health plans.
The formation of an integrated delivery network (IDN) can be vertical (usually involving hospitals acquiring or affiliating with a large physician group or forming an HMO) or horizontal (mergers, partnerships and affiliations between multiple providers). Much of this consolidation and IDN formation is happening quietly and steadily, but the increasing corporatization of the US market and the trend from community to hospital outpatient care delivery is on the radar of payers and pharmaceutical manufacturers alike.
These trends raise a few key concerns. Payers are concerned that acquisition of practices (especially oncology practices) by hospitals inflates costs of services because the hospital “outpatient setting” is associated with higher reimbursement rates and facility fees than the community setting,1 without necessarily offering improvements in quality or efficiencies. Manufacturers note that this dynamic contributes to the increasing number of entities and sites eligible to receive 340B discounted drugs,2 which in turn takes a toll on manufacturer revenues. Another concern is that IDNs are influencing physician behavior and drug selection.
These concerns are not without merit: a similar wave of consolidation in the 1980s and 1990s resulted in the formation of some particularly sophisticated systems such as Geisinger and Kaiser Permanente that are often associated with highly centralized decision making, lack of representative access and limitations on drug selection. With the availability of better healthcare information technology to link providers, computerized physician order entry, and clinical pathways in oncology, implementation of draconian limitations on prescribing based on costs and contracting is easier than ever. The consolidation of oncology practices through affiliation or acquisition3 raises the question of whether this will significantly change the way decisions are made about oncology care.
Kantar Health explored the dynamics of the impact of IDN care delivery on physician autonomy and drug decision making in a 2014 survey with 80 IDN oncologists. We found that many IDNs have the ability to influence drug selection through outpatient formularies, electronic medical records, and physician order sets that restrict the treatments that can be prescribed (Figure 1).
Source: Kantar Health.
Kantar Health data also show that some IDNs may incentivize physicians based on oncology performance, and treatment pathways--which reorganize care around evidence-based medicine and coordinated treatment--are significantly more common in oncology practices and centers that are part of IDNs than in the community setting.4 In addition, since IDNs often participate in ACOs, this reimbursement structure may further prompt more cost-conscious physician behavior, even in oncology. About one-third of IDN oncologists participating in an ACO in Kantar Health’s 2014 survey stated this reimbursement arrangement had caused them to be more careful in selecting cost-effective treatments.4
Although many IDNs have the capability to heavily influence oncology decision making, it would be a mistake to conclude that oncology care delivery is universally more regimented and proscriptive in any IDN setting. IDNs often hesitate to take a heavy hand with oncologists, and caveats help oncologists to maintain autonomy over their drug choices (Figure 2).
Source: Kantar Health.
Although most IDNs may refrain from denying oncologists flexibility in decision making, it is possible that the minority may become the majority in the future. For now, variation in cancer care delivery and decision making within IDNs makes it difficult to generalize about these increasingly important stakeholders. Still, Kantar Health has found that meaningful characterizations can be made based on analyses of the IDN delivery structure (eg, payer ownership, degree of integration, site of care), which can help manufacturers support a meaningful, strategic approach to allocating resources and engaging with IDNs.
More time will be needed to see if the tone of the health system and cancer center relationship changes significantly as the consolidation process continues. It is likely that health system executives may opportunistically explore ways to nudge physicians to meet new goals; after all, oncology practices are likely to have been acquired for profitability and to better manage patients across the care continuum, including their associated costs and risk. At least until health executives start changing priorities, what my doctor told me about his practice is likely to hold true in oncology: “Nothing is going to change.”