Shifting Reform Landscape Is Perilous for Small Practices

Oncology Business News, August 2015, Volume 4, Issue 7

Partner | Oncology Network Providers | <b>The US Oncology Network</b>

Many healthcare reforms are dramatically changing the payment landscape for oncologists.

Debra Patt, MD

Many healthcare reforms are dramatically changing the payment landscape for oncologists, policy expert Debra Patt, MD, said in an address at the 14th Annual International Congress on the Future of Breast Cancer, held in July at Huntington Beach, California.

Patt, a medical oncologist with Texas Oncology and a researcher in Healthcare Informatics for McKesson Specialty Health and The US Oncology Network, discussed the implications of reforms on payment structures and gave advice on which programs and developments to watch carefully.

Her talk covered the Delivery System Reform Incentive Payment (DSRIP), the Affordable Care Act, the Medicare Access and CHIP Reauthorization Act (MACRA), Right to Try laws, the “Cadillac” tax, the 21st Century Cures Act, and similar programs.

Oncologists can expect governmental policies on payment to remain in flux for years, she said, as the aging baby boomer population combined with a shift toward chronic care treatment will contribute to an anticipated doubling of the cancer care population in 20 years. “The cost of cancer care is going to be much more important, and the policies that we use at the state and federal level will try to influence how we try to control costs and still provide care for our population,” she said.

The Affordable Care Act was designed to increase insurance coverage, and prior to its advent there were about 46 million uninsured adults and children in the United States, but owing to out-of-pocket costs, coverage remains very expensive for this cohort, Patt said. The rise of expensive oral oncolytics has made it more challenging for patients to pay for their prescription drugs, though the closing of the Medicare coverage gap—the “doughnut hole”—is expected to increase access to care for individuals with Medicare Part D prescription coverage, Patt said.

The Cadillac Tax Will Cause a Reduction in High-end Plans

In addition, oncologists need to be aware of what the so-called Cadillac tax on high-end insurance coverage will do, Patt said. “The natural consequence of this 40% excise tax is many employers will eliminate their high cost plans and have lower cost plans,” she said. She noted that many unionized workers enjoy coverage from these high-end plans and will be affected, too. The tax goes into effect in 2018.

Medicaid expansion has extended care to many oncology patients, but the poorest states with the largest populations of uninsured have held back on participating, Patt said. “If Texas were to expand Medicaid, think of what the natural consequence would be if the federal government stopped paying for so much of it,” she said. “Either education costs would be decreased or the budget would have to be decreased or tax would have to increase.”

At the time of this writing, 31 states had adopted Medicaid expansion, allowing people under age 65 at 133% or lower of the federal poverty threshold to receive coverage. States that have not adopted include Patt’s home state of Texas, Maine, Georgia, Louisiana, Florida, and Mississippi. “It’s a huge burden to the Southern states,” she said, noting that Texas has a population of 27 million and about 14 percent of the uninsured in the US.

The failure of poor states to implement Medicaid expansion under ACA accounts for what Patt called a disappointing dent in the uninsured population in the US. In 2008 it dipped as low as 14.4% of the population, then gradually climbed to 18% by late 2013, aided by recessionary forces. It now stands at 11.4%, lower than in 2008, but not as much as was anticipated, considering the downward boost the rate should have gotten from ACA, Patt said.

“I saw 4 patients without insurance with local advanced or metastatic breast cancer in the last 2 weeks in Austin. It’s such a challenge. It’s really such a hardship,” Patt said.

DYSRIP programs under the Section 1115 Waiver extend care to uninsured populations, but their mechanisms are “elusive,” and it’s essential for physicians to understand these better, Patt said. “I think our patients will be better served if we can be effective advocates to help them get what they need.” DYSRIP funds took her by surprise when she suddenly saw more patient navigators in her local hospital, wondered why, and then found out they were paid for with DYSRIP money.

Smaller Players Will Lose Negotiating Strength

Smaller players in the oncology sphere will have more difficulty negotiating for favorable prices, as the ACA has also spurred a consolidation push among payers, affording them tremendous leverage, Patt noted. UnitedHealthcare now measures about $125 billion in annual revenue; Anthem has about $70 billion, but has just announced a merger with Cigna, which would create a $105 billion colossus. “If they have to alleviate high cost plans and administer low cost plans and seek to control costs, that will give them market power for negotiation,” Patt said. Hospital systems are doing the same thing, she noted. Hospital mergers have soared since 2010, and amounted to roughly100 in 2014. In the five years before 2010, the yearly average was 60 or below. “The natural consequence of all of those mergers and acquisitions is that if you are a smaller shop, it’s harder than ever to have bargaining power,” Patt said. “Your contracts are likely to be lower and it’s hard to maintain financial health.”

Rather than predicting a trend of rising healthcare costs from these consolidations, Patt said a vicious cycle was more realistic: “Once government subsidizes health insurance, consumers become less sensitive to healthcare costs. Hospitals expand to reflect the increase in demand; the government spends more than it expected, cuts payments to providers; hospitals merge to reduce fixed costs and gain market power; private insurers increase their premiums; health insurance becomes less affordable to consumers; and back up again.”

Alternative payment models in healthcare—value as opposed to volume—are getting a bigger boost from MACRA than ACA, she said. Figuring out how to manage under the Oncology Care Model and other incentives is going to be a bigger challenge for smaller practices, she said. A heavy concentration of poorly reimbursed treatments will be tough to ride out for the “2 doc practice,” she said. “You have to be a bigger group so you’re able to average everything out. I think that would be a major stress on smaller practices.”

She mentioned the proposed 21st Century Cures Act, which was passed by the House in July and is designed to broaden drug access; a New England Journal of Medicine article described the legislation as potentially weakening standards for drug approval.1 Patt said biosimilars, despite very active lobbying to control the introduction of these products, are not liable to be held back. “For example, in Texas, physicians have to be notified within 5 days, but it’s not like (drug distributors) need to ask permission; so, I think we’ll be seeing a lot more of biosimilars.”

Patt also predicted that oral drug parity laws—laws that equalize terms for payment for oral drugs as well as infused—will likely increase patient access. Conversely, Right to Try laws have been passed in many states, but, even so, the money has to be available to pay for the drug. “What we have in many states now is that a doctor in combination with their patient can elect to treat them with a drug that they think is in their best interest if there is some clinical trial evidence that it would be helpful. But the insurer is not obligated to pay for it, and the pharma company in many states does not have to provide it, but the doctor will not be held liable for administering it to the patient if there is some data, and they do believe that it’s in their best interest,” Patt said, concluding, “I don’t know how impactful that will be.”

Another thing adding to the competitive difficulties faced by oncology practices is the encroachment of drugstores in the oncology space. “At Walgreens in Arizona now, you can get your labs done,” Patt said. “Some CVS stores are infusing specialty pharmaceuticals in their offices.”

“There’s a lot of state variance in scope of practice about how much individuals can do; how much autonomy advanced practice providers can have has a lot of state variation. It’s just interesting that that happens at a time when we’re going to be asked to do so much,” she said.

Asked if she thinks physician-owned practices will survive, Patt responded that the coming years will be an extreme challenge. Larger practices will be better prepared with information technology support, and understanding of the costs of care, and the ability to grow and meet needs. “But small practices, I think, are at great risk.”

Avorn J, Kesselheim A. The 21st Century Cures Act—will it take us back in time? N Engl J Med. 2015;372:2473-2475.