If the private practice primary care physician is a dying breed, then the next endangered species may very well be the independent cancer specialist and the community oncology clinic.
Just as hospitals have begun to employ an ever-growing number of physicians over the past 15 years, a similar phenomenon is changing the nature of cancer treatment.
Hospitals have shown an insatiable appetite for oncology practices during the past half decade. In fact, hospital acquisitions have led the “unabated consolidation of the nation’s cancer care delivery system,” the Community Oncology Alliance reported last year.
The number of private oncology practices acquired by hospitals has increased 143 percent between 2008 and 2014, according to the alliance. It found that a total of 544 practices, typically comprised of multiple clinic sites, had been acquired by a hospital or entered into a contractual professional services agreement binding them to a hospital.
An additional 313 individual clinic treatment sites closed during the same six-year period, an increase of 82 percent, the alliance reported in its annual Practice Impact Report last year. Another 149 practices merged or were acquired by a corporate entity other than a hospital.
“This is basically the death of small business medicine,” said Dr. William “Bud” Pierce, a Salem oncologist and former president of the Oregon Medical Association who’s also considering a run for governor in the Republican primary. “There’s potential good to it, but the flip side is, I worry in America when you have very large organizations that hold all the power and decision making. How do you control that?”
A separate study by the Moran Group using Medicare data found that the share of chemotherapy administration by physician-owned community oncology clinics dropped from 87 percent in 2005 to 67 percent by the end of 2011. Outpatient hospital settings accounted for the remaining 33 percent.
Why is this happening? Hospitals are given higher reimbursements and drug margins than their competition. Cancer care simply costs more in hospital outpatient centers. Medicare pays $6,500 more per patient (annualized) for chemotherapy administered in a hospital compared to a doctor-owned facility, and cancer patients on Medicare have co-pays that are $650 higher.
“According to internal UnitedHealthcare data, private community oncology clinics are reimbursed 22 percent more than Medicare to administer chemotherapy, whereas outpatient hospital facilities are reimbursed 146 percent more than Medicare rates,” the Community Oncology Alliance reported.
Thanks to a federal program originally passed in 1992, known as 340B, which grants discounts of up to 50 percent on some cancer drugs, treating cancer can yield hefty profits for some hospitals. The alliance found that hospitals with 340B drug discounts accounted for 75 percent of the acquisitions of community oncology clinics in 2013 and 2014.
Theoretically, a hospital in the 340B program could buy a cancer drug at the discounted rate and then instead of using it for an indigent patient as the program intends, administer it to another patient altogether but still bill the insurance at the standard rate, netting a profit of tens of thousands of dollars, Pierce explained.
“If they qualify for this program, they can buy that drug for $60K and sell for the full amount, $100,000. It makes you want to give the most expensive drugs. This is huge to oncology,” he said.
To describe the discrepancy between Medicare reimbursement rates for hospitals and private practice oncologists, Pierce drew an analogy to the business of selling books. Imagine if Internet behemoth Amazon.com got $15 for every book sold, while locally owned Powell’s got just $10. Then, a few years later, Amazon gets a raise, to $20 and then $25, with Powell’s still at $10.
“Eventually Powell’s is going to quit. They’re going to join up with Amazon,” Pierce said. “That’s really what’s happening with private practice medicine.”
Pierce wonders what all this means for the patients and the quality of care they receive.
“The greatest challenge in private practice oncology is the patient can never be a tool for revenue. You can’t do that. For the employed physician, there’s pressure.”
Chris can be reached at [email protected], and Pam can be reached at [email protected].
