Perhaps you or a loved one has been diagnosed with cancer. Or perhaps your IDN has acquired a medical oncology practice, or opened up a cancer care facility. In either case, you might have noticed the large volume of cancer care being delivered in community outpatient settings.
More than 80 percent of all cancer care is delivered in such settings, as opposed to academic centers, points out Steve Paulson, MD, president and chairman of the board of Texas Oncology in Dallas. Even high-dose chemotherapy and preparative regimens for bone marrow transplants – not to mention high-tech radiation diagnostics and therapy – are being delivered in outpatient settings.
Texas Oncology itself reflects this trend. The practice comprises more than 340 physicians in 116 points of service. Thirty-five of those centers are full-service cancer centers, six are radiation facilities, and the rest are medical oncology centers. (“Full service” to Texas Oncology means radiation oncology, medical oncology and diagnostic imaging in one facility, with cooperation between each area. This may also include gynecological oncology, urology, and breast surgery. “Medical oncology” refers to medical oncology services and chemotherapy infusion. )
The practice is an affiliate of US Oncology, a The Woodlands, Texas-based practice management company which in January 2011 was acquired by McKesson Corp. US Oncology provides billing, personnel, capital acquisition and other services to 1,400 physicians in 500 sites of care, including 100 radiation facilities.
Migration to the outpatient setting
Several factors have driven cancer care to the outpatient setting, says Paulson. They include the availability of infusion pumps for chemotherapy, the effectiveness of antiemetics (anti-nausea medications), and the development of other targeted cancer therapies. With that migration has come changes in the makeup of oncology practices, some clinically driven, some economically driven.
Texas Oncology’s approach is one of collaboration. “Almost all of our centers take care of all kinds of cancer, though we do have some centers of excellence, which specialize,” says Paulson. What’s more, the practice emphasizes coordination of care. For example, working together, breast surgeons, medical oncologists and radiation oncologists address all issues affecting their patients with breast cancer. “Together in one practice, they are able to look at things from the perspective of, ‘What’s the best thing for the patient?’” he says. The same trend holds true for other cancer specialties, such as prostate cancer.
Economic factors are driving cancer care to the outpatient setting as well. The Medicare Prescription Drug Improvement and Modernization Act of 2003, which created Medicare Part D, changed how medical oncologists are reimbursed for infusion therapy, points out Owen Dahl, MBA, FACHE, CHBC, LSSMBB, a consultant with the Medical Group Management Association. Prior to the act, practices were reimbursed for infusion drugs based on the “average wholesale price,” or AWP, which is the price of pharmaceuticals published in the Red Book, an industry-recognized source of drug pricing, published by Thomson Reuters. In a move to control costs, Medicare phased out the AWP formula and replaced it with one based on average sales price plus 6 percent, or ASP plus 6.
The change reduced reimbursement, but failed to address medical oncology practices’ expenses for infusion therapy. “And they’re not cheap,” says Dahl. For example, in addition to the drugs themselves, practices must ensure that registered nurses are on hand to monitor infusion therapy.
As a result, practices have become more sophisticated about managing their margins, says Dahl. They have become better at comparing the clinical efficacy of Drug A vs. Drug B, and, all clinical things being equal, selecting the less expensive one. “Their level of understanding on the drug side has grown significantly,” he says. At the same time, they have gotten better at understanding the impact of the cost of ancillary supplies – including needles, syringes, tubing and everything else associated with infusion therapy – on their margins. “There’s a growing awareness of costs,” says Dahl.
Some practices are exploring ancillary revenue streams, says Dahl. They may offer increased lab work, or invest in radiology equipment for diagnosis and therapy. But solo oncologists typically lack the money to take some of these steps, particularly investment in the sophisticated radiological equipment used for today’s cancer care. Consequently, they face several choices: They can join forces with other practices, get acquired by a hospital or hospital system, or close shop. Age, interest level and willingness to take on risk all factor into their decision, he says.
“The reduction in drug margins and a variety of other things have had a huge impact on the financial viability of oncology practices, especially smaller ones,” says Paulson. “It’s a very expensive and time-intensive specialty. A number of practices have either closed or sought relief by consolidating with others. One of the deep pocket opportunities in their neighborhood are hospitals.” Hospitals have several reasons to pursue such acquisitions. Those with radiation facilities want oncology practices on campus, says Paulson. Further, they see such practices as a means of attracting surgical cancer patients.
Adds Dahl, “They can capture some infusion revenue, radiation volume and inpatient days.” What’s more, so-called “safety net” providers, including disproportionate-share hospitals, can save from 20 percent to 50 percent on the cost of pharmaceuticals, as part of the federal 340B Drug Pricing Program.
Some hospitals and hospital systems are urging oncology practices to join the hospital’s accountable care organization, says Paulson.
Accountable care organizations hit prime time when the Patient Protection and Affordable Care Act (the healthcare reform law) was signed into law by President Obama in March 2010. They are intended to bring together inpatient and outpatient providers to provide high-quality, efficient care to a specific patient population. Organizations that provide such care at a cost that is less than a target established by the government will get a percentage of the savings – though exactly how much has yet to be specified. The government will begin paying them in January 2012.
There’s no reason large oncology practices can’t form their own accountable care organizations, then contract with hospitals to provide inpatient care as needed, says Paulson. But it’s a little early to set these plans in stone, he says. “The problem is, people are trying to manage to accountable care organizations, which have only been set up as a concept; there aren’t any rules yet. It’s like the proverbial blind man trying to figure out the elephant.”
A chronic disease?
Clinical advances are rapidly changing the nature of cancer care. “Because of all the options and therapeutic variability of treatments available, especially given the large number of oral medications available today, you’re seeing the short survival rates characterized by cancer 10 or 15 years ago – a six-to-12-month life expectancy – being converted to three to five years, and even longer in some circumstances,” says Paulson. “What was an immediate death sentence is being converted to a controlled and modified evolution of the disease. You’re seeing a lot more chronic-type situations.”
New methods of radiology – including intensity-modulated radiation therapy, or IMRT, and now, image-guided radiation therapy, or IGRT – are much more accurate in attacking tumors without damaging surrounding tissue. “Oncologists can treat multiple tumors [with these technologies],” says Paulson. “That’s part of what converts some of these situations from acute, life-threatening events to long-term, more chronic illnesses.”
Advances in chemotherapy are just as dramatic. “Once upon a time, with chemotherapy, if all you had was a hammer, everything looked like a nail,” says Paulson. “Now, you have more lock-and-key-type treatments, where you specifically target the treatment to a specific abnormality or genetic mutation in a tumor.” These so-called targeted therapies will have a dramatic effect on cancer care in the near future. They already are, for the treatment of such diseases as Chronic Myelogenous Leukemia.
What’s more, many of these so-called targeted therapies can be delivered by injection or via oral medication, meaning the patient can self-administer them at home. “Will they replace infusion? Absolutely not,” says Dahl. But some medical oncology practices have already opened pharmacies to sell oral and injectable chemotherapy drugs to their patients.
More consolidation ahead
Looking ahead, Dahl sees continuing consolidation among medical oncology practices. “With the declining reimbursement threat, there’s no way a small one- or two-doc medical oncology practice can compete, unless you’re in rural America where there are no other choices,” he says. Although it’s unlikely that oncology practices will affiliate with primary care or multispecialty clinics, it is likely that such practices will form closer ties with their referral sources.
As cancer survival rates grow, providers will evolve, adds Dahl. “They will be speaking in terms of quality-adjusted life-years. So five years from now, we will need to be very sophisticated in managing patients post-treatment to see how well they’re doing. For that reason, the whole IT arena will be critical.”
As cancer treatment improves, providers should expect to see more complicated cancer patients, that is, patients who present with comorbidities, such as diabetes, congestive heart failure or chronic obstructive pulmonary disease, says Dahl. “We’ll be looking at a very different kind of patient. The level of sophistication will have to be there, which again means that the onesy-twosy physician practices will have a more difficult time making it.”