More than 40 oncology clinics have closed so far this year, and the pace of clinic closings is increasing, according to new data released by the Community Oncology Alliance.
COA, a nonprofit organization that supports the provision of cancer services in the community setting, has been tracking the well-being of oncology practices for the past three years. During that time:
* 172 clinic sites have closed.
* 323 practices, which may include multiple clinic sites, report that they are struggling to pay their bills and/or remain in business.
* 44 practices are referring all of their patients elsewhere for chemotherapy.
* 224 practices have been acquired by a hospital.
* 102 practices have merged or been acquired by another corporate entity.
Ted Okon, COA's Executive Director, attributes the trends to the Medicare Modernization Act of 2003, which changed the way the federal government pays for chemotherapy drugs and administration.
Because of those changes, many oncology practices—particularly small practices that have little bargaining power with pharmaceutical companies—receive Medicare reimbursement for some chemotherapy drugs that is less than their cost to buy the agents. On top of that, Medicare has cut payments for chemotherapy administration by 35% since 2004.
“We've reached a tipping point, and you can see the impact of these changes,” he said.
Although the American Society of Clinical Oncology does not track the number of oncologists or practices operating at any one time, the trends that COA reports support the anecdotal reports its staff members are hearing.
“It's very clear to us that the one- and two-person practices just cannot survive in this environment,” said Deborah Kamin, PhD, ASCO's Senior Director of Cancer Policy and Clinical Affairs. “And the six- to eight- physician practice is probably going to have a major challenge.”
To gain a better understanding of the situation, ASCO is commissioning a research study about the state of oncology care across the country—a contract for the study will be signed this fall, she said.
Changing Definition of ‘Small’
Dawn Holcombe, a Connecticut-based consultant to oncology practices around the country, said she believes the definition of a “small” oncology practice is rapidly changing.
Right now, about half of US oncology practices have five or fewer physicians, she estimates.
“In the near future, I think a small practice is going to be five doctors. It will be very hard for a practice of fewer than five doctors to maintain its independence.”
Bruce H. Zeitz, MD, a hematologist and general internist who works locum tenens in southern California, agrees.
“Small practices will need to consolidate in order to remain viable, and the window for this is over the next two to five years,” he said.
Gene V. Sherman, MD, an oncologist who closed his solo practice in Torrance, Calif., two years ago, would probably nod in agreement. He stopped working at age 60, although he enjoyed good health and a busy practice.
“I stopped for financial reasons,” he said. “As much as I wanted to go on—I had a wonderful practice, great patients—I just couldn't tolerate the financial strain anymore.”
At the time he closed his practice, Dr. Sherman's weekly overhead was $38,000 and weekly average revenue was $41,000. Collections were sometimes difficult, and he often had to use a bank credit line to pay bills.
“Medicare was threatening to cut our reimbursement even further and the private insurers to follow, my overhead was constantly rising, and every week I would get an email that the cost of a chemotherapy drug was going up,” he said. “I met with my accountant and we figured that within a year or two, I would be paying for the privilege of practicing oncology. I would have a negative salary.”
Follows Period of Expansion
The current wave of oncology practices closing and consolidating with other entities follows a period of expansion, in which oncologists sought to deliver care close to their patients' homes. That was financially possible in the era of high chemotherapy markups that preceded the passage of the MMA in 2003.
“Public policy is a pendulum that rarely finds the middle ground,” Mr. Okon said. “It swings to the extreme.”
The effect of CMS's new payment strategy for cancer services was blunted in 2004, when the Medicare program had money to support a transition from the old pay system to the new one, and in 2005 and 2006, when a Medicare demonstration project temporarily bolstered oncologists' revenues.
Pay cuts have occurred every year since 2007, and cuts are already in place through 2013.
Ms. Holcombe, President of DGH Consulting, said she believes that, while some consolidation of oncology practices may be appropriate, most cancer clinic closings mean that patients have to travel further from home for their treatment. And while being treated at a hospital facility might be an option, the oncologists in that setting may also be struggling to stay in business.
“Many hospital facilities in smaller communities closed their outpatient chemotherapy suites years ago, leaving that care to be more appropriately delivered in the very physician offices which are now struggling,” she said. “Many hospital ‘cancer centers’ and programs touted in the community are actually a collaborative program between the hospital and a private oncology practice that rents space from the hospital, and those private practices are subject to the same financial pressures as any private practices.”
Because Medicare pays for about 50% of all cancer care, private payers often base their own rates on what Medicare pays. Considering that Medicare is covering only 57% of physicians' cost of administering chemotherapy, according to a COA-funded 2009 study by Avalere Health, the financial situation for some oncologists has become intolerable.
“I should still be seeing patients,” Dr. Sherman said. “And I'm not.”© 2010 Lippincott Williams & Wilkins, Inc.
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