The Lynx Group

Recent Surveys Highlight Ongoing Challenges for Oncology Practices

November 2013, Vol 4, No 9

Hollywood, FL—Many current forces are colliding to challenge community oncology, according to David Eagle, MD, Immediate Past President of Community Oncology Alliance (COA), Lake Norman Oncology, Mooresville/Huntersville, NC. At the 3rd Annual Conference of the Association for Value-Based Cancer Care, Dr Eagle described the seriousness of the plight faced by community oncology practices.

Figure 1
Figure 1: Where Are We? Community Oncology Practice Impact Report.
View larger version

Approximately 1250 oncology practices have been affected by changes in cancer care over the past 5 years, either closing, struggling financially, sending patients elsewhere for chemotherapy, or merging with other entities. “This picture’s worth a thousand words and it recaps where we are today,” Dr Eagle said (Figure 1).

With the Medicare Modernization Act (MMA) of 2003, reimbursement shifted to the average sales price (ASP) + 6%. The problem is that this was never tested through demonstration or pilot projects, but purely through financial modeling “on the fly,” Dr Eagle said.

The MMA did create payment for infusion services, but the payment amounts for these infusion codes have been cut significantly since then.

These cuts are becoming more obvious from surveys conducted by COA and others. Based on data from 499 physicians in 2008, COA, in partnership with Avalere Health, documented that Medicare covered only 57% of the cost of drug administration.1 “If we are paid for what we do, but it does not match up with the expense component, this creates a problem,” Dr Eagle said.

Current Impact

Over the past few years, private payers have gradually migrated to the ASP payment system, and the cross subsidy for underpayments has been disappearing. “I think that explains why the MMA of 2003 has taken several years to fully surface,” Dr Eagle suggested.

Oncology practices are doing all they can to adjust to these changes, including seeing more new patients—an estimated 345 annually now, up from 235 approximately 10 years ago. “We’re adjusting as much as we possibly can,” Dr Eagle said.

Cuts related to the sequester have aggravated the situation. The Centers for Medicare & Medicaid Services applied a 2% cut to the entire 106% of chemotherapy payments, which reduced ASP + 6% to ASP + 4.3%. Consequently, a recent COA survey showed that 72% of practices plan to send Medicare patients to the hospital, or to not see Medicare patients at all.2

“This has become a prominent national and even international story, and we welcome that,” Dr Eagle commented.

In Dr Eagle’s state of North Carolina, Congresswoman Renee Ellmers introduced H.R. 1416, the Cancer Patient Protection Act of 2013, which now has 102 cosponsors. The bill aims to terminate the application of sequestration to payments for physician-administered chemotherapy drugs under Part B of the Medicare program. Currently, the sequestration cut is applied to these drugs, forcing many physicians to refer patients to hospitals for treatment, because Medicare payments are less than their costs. The bill is currently in the House Subcommittee on Health.

The referral of patients receiving chemotherapy to hospitals impacts all stakeholders. The 2011 Milliman Client Report from US Oncology used a limited Medicare data set for the years 2006 to 2009, and calculated the per-member per-month cost of chemotherapy. They figured this at $4361 for chemotherapy delivered in the physician’s office versus $4981 for that delivered in the hospital outpatient setting. The annual costs were $47,500 versus $54,000, and the annual patient out-of-pocket expense differential was $650.3

In another study, COA and Avalere examined data from private payers from 2008 to 2010 for patients receiving 12 or fewer months of chemotherapy, measuring all costs of medical and pharmacy services in 30-day increments at the start of each episode.4 The average cost of an episode was $28,200 in the physician’s office versus $35,000 in the hospital outpatient department.4 This amounted to a 24% difference, adjusted for age, previous cancer history, and sex, and even greater in the absence of these adjustments, Dr Eagle reported.

Of note, the rate of hospitalizations per 100 patients was 14 among hospital-managed patients versus 11 for office-managed patients.

Figure 2
Figure 2: Medicare Payment Reform for Oncology.
View larger version

Draft Model for Medicare Payment Reform

COA has drafted a model for Medicare payment reform (Figure 2). The first phase ties additional payments to patient satisfaction. “If you do that successfully, you get cost of living increases, medical economic index adjustments in your payments,” Dr Eagle said.

“The second phase is similar, but you can get a decrease or an increase, depending on how you perform,” he said. “In the third phase, you move to a shared savings model that is benchmarked against regional or national comparison groups. The final phase bases most of the payments around the episodic care payment model.”

Actionable Programs

Although there are “top-down” strategies for improving value in oncology, such as accountable care organizations, Dr Eagle is interested in “bottom-up” strategies, such as clinical pathways, episode-of-care models, and so forth, whose foundation is the oncologist.

“Our organization is spending a lot of time on the oncology medical home model,” he said. “The strength of this model is that it doesn’t just focus on one thing, but puts together multiple opportunities for coordination of care, open access, and so forth.”

Such a model incorporates concepts such as same-day evaluation and treatment to help patients avoid the emergency department, standardized processes for patient evaluation, measurement of performance and compliance to pathways, and monitoring of costs.

Finally, Dr Eagle stressed the importance of oncologists working as part of a multistakeholder team, bringing together providers, patients, industry, payers, and nursing and pharmacy representatives “to have the conver­sation about what oncology should look like.”


  1. Community Oncology Alliance, Avalere Health. Providing high quality care in community oncology practices: an assessment of infusion services and their associated costs. February 2010.
  2. Community Oncology Alliance. Sequestration started; countdown to cancer care cuts. March 4, 2013.
  3. Fitch K, Pyenson B. Site of service cost differences for Medicare patients receiving chemotherapy. Milliman Client Report. October 19, 2011.
  4. Community Oncology Alliance. Studies document efficiency of community oncology, but threats from consolidation. July 31, 2012.

Related Articles

Subscribe to
Value-Based Cancer Care

Stay up to date with personalized medicine by subscribing to recieve the free VBCC print publication or weekly e‑Newsletter.

I'd like to recieve: