The Lynx Group

The New Face of the Community Oncology Practice

July/August 2010, Vol 1, No 3

Community oncologists are facing big changes to the way they have traditionally practiced, and they would be wise to accept, adapt, and move on, speakers said at a session at the 2010 ASCO annual meeting titled “The Challenge of Financial Survival.”

Economic pressures are essentially killing many community practices, according to Elaine L. Towle, CMPE, director of oncology services at Oncology Metrics, a division of Altos Solutions, Los Altos, CA, who drew on data from the National Practice Benchmark, an annual survey of nearly 200 US practices that her company conducts.

“Total collected revenue in these practices increased 6% from 2007 to 2008, and at first glance this is good news. However, total practice expense increased 16% over the same period, resulting in fewer dollars available to support practice operations,” Ms Towle said. “When oncology practice expenses rise more rapidly than revenue, the result is lower physician incomes.”

In the most recent (2009) survey of 190 oncologists, 73% of respondents were still independent physician-owned practices but changes were occurring. Eleven percent practiced oncology within a multispecialty group, 6% were hospital-affiliated physicians or hospital employees, 5% were physician-owned but had a hospital or corporate affiliation, 2% were affiliated with US Oncology, 1% were academic-affiliated, and 2% described their practice setting as “other.”

Perhaps more telling were their predictions: only 20% envisioned their practices and business structure remaining “unchanged and viable” for at least 5 years, 20% said they are “changing now,” and 60% predicted they will be stable for only “the foreseeable future.”

What is pressuring oncologists to think about different business models? Declining physician compensation was the main reason (54%), according to the survey. Also cited were loss of referrals as a result of local competition (19%) and the need to reduce practice overhead expenses (15%). Interestingly, only 4% cited reduced reimbursements as a reason, and just 3% listed lower drug-cost margins.

But oncologists have seen drug margin as a percentage of total revenue increasingly fall, from 45% in 2002 to just 9% today, according to Ms Towle. She noted that the lost revenue contributes to the “dramatic decline in the funds available to run a medical oncology practice.”

Still, profit related to drugs is more important than ever, she added, telling the physicians, “If drug management is not a core competency in your practice, you are losing revenue...Practices that are still in the buy-and-bill model are greatly impacted.” The “new normal,” with regard to drug revenue, she said, is now “low margin, high volume.”

More Problems and Pressures

Oncologists face other problems as well: greater regulatory exposure, information overload, scarcity of resources, increased practice size, and changes in patient profiles, Ms Towle said.

The patient base, for example, now includes more Medicare patients lacking secondary insurance. More than half the survey respondents said at least 10% of their Medicare patients have no secondary insurance, leading more physicians to refer patients for chemotherapy visits outside of their practices. Although about half the respondents refer patients for 40 chemotherapy visits at most per year, 33% refer for up to 400 visits and 9% refer for more than 1000 visits.

An additional drain on resources comes from handling insurance and payer issues, with the average practice employing 1.2 billing staff for every physician and 0.4 patient financial advocates.

How Practices Are Coping

One increasingly common means of coping with the changing environment is to consolidate: to sell one’s practice to a hospital or otherwise join a hospital physician network, to merge to form a larger organization, or to join a university system or insurance “preferred” network of physicians. In addition, more practices are moving away from the “buy and bill” model and are incorporating new entities such as specialty pharmacy and centralized infusion services.

Ms Towle advised physicians to do “strategic planning,” and become involved in aspects of healthcare reform that would serve their practices, such as demonstration projects and clinical process measurements. “Pay-for-service is going away; new systems will pay for quality and outcomes,” she said.

Oncologists can also partner with others in the community to increase efficiency, especially in areas that require capital or specialized, highly paid staff, such as radiation, imaging, and infusion therapy. Most importantly, practices must be able to adapt, she emphasized. “The good old days are gone,” Ms Towle said. “New practice models are developing. Investigate and embrace them.”

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