Hawaiian Oncologists Surf Lower Pay, Fewer Resources

Oncology Business News, March 2016, Volume 5, Issue 3

Oncare Hawaii is unusual in the autonomy it affords to its doctors. Each physician sets his or her own hours, recruits most of his or her own patients, and then becomes the only Oncare physician to see those patients.

Leslie Chinen

Many oncologists have doubtless thought, just as they were about to board the plane and fly back to their snowy homes after a Hawaiian vacation, “This place is paradise. I wish I could move my practice here someday.”

Jonathan K. Cho, MD, understands the temptation, but he urges such people to be careful what they wish for.

“Hawaii is a very difficult place to be a doctor,” explained Cho, who practices with Oncare Hawaii. “Blue Cross Blue Shield dominates the private insurance market so completely that it can virtually set its own reimbursement rates, and the reimbursements paid by Medicare are also low because the government lumps Hawaii in with all Pacific Islands and claims it’s a low-cost market. As a result, doctors make considerably less here than they do on the mainland, and that disparity is increased by what is actually a very high cost of living.”

The practice that’s currently known as Oncare Hawaii opened its doors in the 1980s. It operated from a single office in Honolulu until, in 1997, it was bought out by a Georgia-based firm called Oncare that essentially cornered the market for both medical and radiation oncology in Hawaii. The parent company went out of business, but the business it left behind is still the largest player in Oahu’s community-based medical oncology market. It is also the only one with the economies of scale to provide infusion chemotherapy treatments.

The main competition comes from hospitals, such as Queen’s Medical Center, Kuakini Medical Center, and the Straub Clinic & Hospital. Kaiser Permanente also controls about 20% of the market, but it doesn’t really compete with other providers because its members must use its facilities. The same could be said of the US Department of Veterans Affairs facilities that care for the state’s many active and retired military families.

Oahu measures only 597 square miles, less than twice the size of New York City, but Oncare Hawaii operates seven separate offices to minimize the time patients spend traversing the island’s mountains and crawling through its often congested streets.

Relationship Building Is Critical to Survival

The practice has made a point of locating its satellite offices in medical office buildings attached to different hospitals. Oncare physicians maintain privileges at those hospitals — some of them even have a contract to provide services for Queen’s — and they all maintain relationships with the doctors who work in and around each facility.“Hawaii is a small market. Everyone knows everyone here, at least through a friend of a friend. Long-term business success hinges upon the ability to build relationships and, for us, the key relationships are those we build with referring doctors,” said Leslie Chinen, Oncare’s chief financial officer since 2011, who noted that all of the group’s doctors had been born and raised on the island. “The insularity here virtually eliminates our need to market ourselves. We don’t advertise. All of our patient referrals are from other physicians.”

The size of the market also places some limits on the services that Oncare Hawaii can provide. Less than a million people live on Oahu, and the total population of Hawaii is just over 1.4 million. Those figures are far too small to allow oncologists to specialize in anything but the most common tumor types. They’re also too small to give surgeons much practice with rare procedures or to let the hospitals justify the purchase of specialty equipment stocked by mainland cancer centers. As a result, some Hawaiian cancer patients need to seek treatment on the mainland.

In addition to being relatively small, Hawaii’s population differs dramatically from that of any other state in the union. Nearly 40% of the people there are Asian (mostly Japanese). Europeans are the next most common group (24.7%), followed by people of two or more races (23.6%, more than triple the percentage in any other American state) and Pacific Islanders (10.0%, including people of Native Hawaiian ancestry).

This mix has little effect on the incidence of major cancers, such as breast cancer and lung cancer, which all reflect national norms, but Hawaii’s large Asian population suffers from significantly elevated rates of liver cancer, thyroid cancer and biliary cancers — mostly because it also suffers from unusually high rates of hepatitis B and C. (Hawaii’s climate is also unique among American states, but it does not boost the number of patients at Oncare Hawaii: melanoma incidence rates are actually below the national average.)

At present, Oncare Hawaii does not have the equipment or the personnel to provide radiation regimens, but Cho and his partners are exploring ways to add radiation as a means of attracting more patients and providing more complete service to current patients. The practice has already added in-house facilities for performing common tests and dispensing pharmaceuticals. According to Chinen, both additions have produced financial benefits, while the pharmacy service has produced medical benefits in the form of helpful patient information.

Trial Participation Makes for More Robust Offerings

“The financial benefits are pretty straightforward. We can perform both services efficiently, so they have been valuable new revenue streams for us at a time when reimbursement rates have either stayed flat or gone down,” Chinen said. “The medical benefits of the pharmacy stem from the extra information we get about patient behavior. When patients fill prescriptions elsewhere, we have no way to know if they’re filling them as frequently as they should. When they fill them with us, the dates give us a pretty good idea about which patients are taking their medications correctly, and they give us a chance to improve adherence among patients who use our pharmacy.”Another relatively recent initiative that has succeeded for Oncare Hawaii has been participation in more clinical trials, which allows the practice to offer patients more (and often better) treatment options. Many of those trials originate at the University of Hawaii, which has a cancer center at its medical school that performs research but avoids most clinical practice. The other trials mostly originate with drug companies that want to test experimental medications. Oncare Hawaii now assigns a staff member to track new trial proposals and sign up for trials that might benefit the practice’s patients.

Oncare’s efforts to participate in more clinical trials echo similar moves by other successful independents around the country. The similarities do not end there. Oncare Hawaii has embraced a number of basic strategies that have helped many oncology groups remain independent. For example, the practice works continuously to increase productivity, reduce waste and use its size to secure the best rates from suppliers.

Chinen believes, however, that Oncare Hawaii is unusual in the autonomy it affords to its doctors. Each physician sets his or her own hours, recruits most of his or her own patients, and then becomes the only Oncare physician to see those patients.

“The idea is to combine the best of both worlds,” Chinen said. “On a day-to-day basis, our physicians practice almost as though they were totally independent, but their participation in the group obviously gives them access to more facilities and resources and support staff than any solo practitioner could ever have. The only time they really act collectively is at the meetings they hold at least once a month, when they discuss things that affect the practice as a whole, review each other’s clinical performance, and otherwise support each other.”

The strategy has worked so far, but Cho believes that he and his partners must keep evolving if they want to keep pace with changes that threaten to make a tough market even tougher.

“We expect all the other hospitals to follow the lead from Queen’s and develop their own chemotherapy and radiation departments. Queen’s has done pretty well, so they all think they can make cancer care into a profit center. We also expect Blue Cross Blue Shield and the federal government to keep putting downward pressure on reimbursements, even as the cost of living continues to rise,” said Cho, who noted that a large hidden cost of living in Hawaii is the need that most professionals feel to school their children privately rather than rely on much-maligned public schools.

“If we’re to survive as an independent practice over the long term, we cannot get complacent. We need to consider every option for improving our position, and we’re considering many options right now. Should we bring in an accelerator? What are mainland practices doing that might make sense for us? Should we partner with a primary care group and other types of specialists to create a much bigger organization with more bargaining power? These are things we have to talk about.”