The Lynx Group

Community Oncology Clinics under Increasing Financial Pressure

July 2011, Vol 2, No 4

Philadelphia, PA—Changes in oncology reimbursement have driven the consolidation of community oncology practices, as more of these practices are being squeezed financially, according to Ted Okon, BS, MBA, Executive Director, Community Oncology Alliance. Consoli dation decreases alternatives, and that means reduced competition, as many oncologists lose their practices.

The transformation of cancer care from the inpatient setting to the outpatient community setting over the past 3 decades resulted in an improvement in the quality of care and overall costsavings, even as the treatment cost per case has increased substantially.

The total cost of inpatient cancer care has fallen from 64.5% in 1987 to 27.5% this decade, for an overall costsavings of $5.5 billion. At the same time, Americans live longer with a cancer diagnosis than patients with cancer in Europe, he said.

Today, 4 of every 5 patients with cancer are treated in community oncology clinics. “Many of these are fairly integrated clinics, with comprehensive facilities that provide a broad scope of patient care,” said Mr Okon, referring to clinics that perform computed tomography and positron emission tomography imaging in addition to laboratory work and chemotherapy and radiation administration.

Reimbursement Pressure
However, community oncology practices have been under increasing pressure since the Centers for Medicare & Medicaid Services (CMS) changed its oncology reimbursement in 2004/2005 and have made subsequent payment cuts. Since 2004, Medicare reimbursement has fallen by 35%.

A study by Avalere Health showed that Medicare covered only 57% of the cost of drug administration in 2008, and it covers even less now. As a result, community oncology clinics are closing at an accelerating pace, and more private practices are being sold or absorbed by hospitals (Figure).

The Medicare payment system that is based on the flawed sustainable growth rate (SGR) has created additional pressures on cash flow (when claims are held) and business planning.

The healthcare reform law will mean more Americans aged <65 years covered by insurance, but 50% will come under Medicaid, at a time when more states are under pressure to cut Medicaid coverage and provider reimbursement.

Eliminating cost-sharing for certain diagnostic tests is expected to increase the number of cancer cases detected. Patients with cancer who have private health insurance may have greater out-of-pocket responsibilities over time, warned Mr Okon. “The problem with cancer care is not going to be ‘no insurance’; it’s going to be ‘underinsurance,’” he said.

Affordable Care Act: Pros, Cons
The Patient Protection and Affordable Care Act of 2010 contains some positive changes for oncology—breaking down barriers to cancer care, such as the elimination of annual and lifetime caps, removing preexisting conditions as a reason for coverage exclusion, and the prohibition of rescinding insurance policies retroactively, said Mr Okon.

In addition, the Medicare doughnut hole will be closed fully by 2020. Elimination of individual cost-sharing will lower the barrier to certain preventive care services. New safeguards in the use of comparative effectiveness research are provided through the creation of the Patient-Centered Outcomes Research Institute, to offer objective data to providers.

The healthcare reform bill, however, has also created uncertainties for oncology. It includes no fix for the Medicare/SGR payment system. If the system is not fixed, oncology practices may not be able to survive, Mr Okon warned. Under reform, Medicare will transition physicians to a value-based purchasing reimbursement system using quality and cost measures. Reimbursement will be tied to CMS reporting on physicians’ relative patterns of use, but it is unclear how this will be implemented for oncology.

The creation of the Independent Payment Advisory Board “is a disaster to me, like SGR on steroids,” said Mr Okon. Any recommendations from the board will be fast-tracked into law, as they will be difficult for Congress to override.

The Physician Quality Reporting Initiative changes from an incentive to a penalty program for nonparticipants. “The oncology measures are weak at best,” said Mr Okon.

A Physician Compare database will be implemented, similar to the Hospital Compare database, but how oncologists are going to be compared has not been elucidated.

Grim Outlook for Oncology
Healthcare reform “will likely pressure a cancer care delivery system already under pressure,” as reimbursement is decreased in numerous ways, said Mr Okon. Costs for payers are likely going to increase as competition is reduced through the consolidation of community clinics. In addition, demand for cancer care may outstrip the supply of oncologists. It has been estimated that by 2020, the equivalent of “1 in every 4 patients with cancer will be short an oncologist,” he said.

Payer-Provider Collaboration
Oncology payers and providers need to come together to preserve and enhance the delivery system. “If we don’t come together, there’s going to be less quality, higher cost, and inefficiencies all over the map,” Mr Okon noted.

Working together to use evidencebased clinical pathways can enhance treatment quality and efficiencies, he said, but just as important is the inclusion of a feedback loop to gauge how clinical pathways are working and how they can be improved. In addition, appropriate payment should be considered for key cognitive services, such as treatment planning and follow-up care planning. “Treatment planning is the key thing you want your oncologists to do when you have cancer,” he concluded.

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