As oncologists struggle to see where the health care business is headed, some are choosing to let other people worry about it.
Cancer care is still considered to be one of medicine's most entrepreneurial specialties, but a growing number of oncologists are finding the once-unthinkable idea of being employed by a hospital is rather attractive.
Nearly every week, Teri Guidi, President and CEO of Oncology Management Consulting Group, hears from an oncology group or a hospital executive seeking to align financial interests through employment or some other affiliation.
“There's definitely more interest than any time in the past 25 years,” she said.
The principals at Pacific Oncology, a 30-year-old practice in the Portland, Oregon, area, understand why. The nine oncologists in the group recently were hired by the Oregon Health & Science University Knight Cancer Institute.
“It wasn't a difficult decision,” said Bill Mooney, MD, Pacific Oncology's President and Chief Executive Officer. “We were the last entrepreneurial private-practice group in the city and with the economic pressures of decreasing drug reimbursements, we felt that we needed to be part of a bigger program.”
Brian Druker, MD, Director of the OHSU Knight Cancer Institute, said he found the decision to buy Pacific Oncology equally easy. The deal helps further his vision for OHSU's leadership in cancer care in the Portland region. And, because of Medicare's quirky reimbursement rules, a disadvantageous situation for Pacific Oncology is a financial winner for OHSU.
“It will help our financial bottom line, but what really drove this for me was providing high quality care in the community, increasing accruals for our clinical trials, and beginning to set the stage for a region-wide community oncology network,” he said.
The OHSU-Pacific Oncology deal was announced in June. In the fall, Providence Health & Services, one of the largest health systems in Oregon, announced it had hired seven oncologists, giving Providence Cancer Center a total of 16 medical oncologists in three hospital locations.
In another example, Akron General McDowell Cancer Center in Ohio has hired four oncologists in the past year and hopes to add more. Connie T. Bollin, MBA, RN, the center's director, said she plans to integrate outpatient infusion centers at Akron General's two health and wellness centers to grow new revenue streams and provide easier access for patients closer to their homes.
“Hospitals have taken the philosophy ‘let's partner with our docs' so that both of us don't lose our shirts,” Ms. Bollin said. “We are revitalizing our program and integrating processes with physicians to streamline services for our patients.”
Different from 1990s' Wave of Consolidation
The oncology moves come as hospitals across the country are hiring physicians at an increasing pace. Unlike the 1990s' wave of consolidation, in which hospitals paid handsomely to acquire primary care practices and found them to be money-losing deals, today's trend is for specialists to seek financial stability under the umbrella of a larger health system.
“The big trend right now is specialists going to hospitals saying ‘employ me, please,’” said William Jessee, MD, President and CEO of the Medical Group Management Association, a trade group representing more than 13,500 physician practices. “I think this is the beginning of a fundamental restructuring of how physicians function in the health care system.”
Researchers at the Center for Studying Health System Change conduct extensive interviews with physicians and other health care leaders in 12 metropolitan areas every two years. In the most recent round of interviews, they found that hospitals' employment of specialists had accelerated in seven of the 12 markets since 2005.
Writing in Health Affairs last fall (Sept.-Oct issue), the research team reported that more than two-thirds of the 46 hospitals in the study employed a sizable number of specialists. Of these, 84% had increased the number of employed specialists in the past two years.
Christian Downs, JD, MHA, Executive Director of the Association of Community Cancer Centers, said he sees the consolidation trend in oncology to be limited to specific markets or situations in which a compelling trigger prompts a hospital and physician group to formally combine. While many oncology practices worry about reimbursement trends, that alone will not drive most oncologists into the arms of a hospital administrator, he said.
“Reimbursement may be part of the equation, but it's not the driving part of the equation.”
Dr. Mooney, the Pacific Oncology CEO, would likely agree. He had built the practice to include 13 clinicians, including four nurse practitioners, and about 160 additional staff serving about 8,000 patients annually. By 2007, when it opened a 53,000-square-foot cancer center in the Portland suburb of Beaverton, the practice had seven locations and was planning on more.
But the downward pressure on reimbursement rates and increasing competition from the newly opened Providence Cancer Center made further expansion begin to look difficult. Dr. Druker had visited the Pacific Oncology practice in 2007 to discuss his interest in building relationships with community practices in the future, and that conversation began to reverberate in Dr. Mooney's mind last year.
Formally joining with OHSU, he could see, had several benefits, he said: better pricing on drugs, help with business management, more information technology resources, extra clout in negotiations with insurers, and a path into the future.
“I was concerned about succession planning for me as the CEO,” Dr. Mooney said, because none of his partners were interested in taking the helm of the practice after he retired.
Some of the practice's physicians were interested in teaching, however, so the fact that all received OHSU faculty appointments was an added bonus.
From OHSU's perspective, the acquisition of Pacific Oncology helps advance Dr. Druker's goal of bringing researchers and clinicians together to bring new discoveries out of the laboratory and into the clinic as quickly as possible.
“This means setting up an infrastructure that matches patients with the right therapy and that helps us learn why patients are responding or why they're not responding,” Dr. Druker said. “My view is that we can't just do this at our own cancer institute. We have to do this throughout our region, and we have to create a network of oncology care that reaches into every community in our region to provide the same level of care that we provide at our own institute.”
OHSU paid approximately $7 million to acquire the assets of the practice, and the cancer institute hired all Pacific Oncology staff members. Dr. Mooney, now a section chief for OHSU Knight Cancer Institute, said both parties agreed that Pacific Oncology physicians would not change their practice patterns.
“If I get a referral at one of the suburban office sites where I practice, and the patient needs imaging studies or admission to the hospital or radiation therapy or surgical referrals, I'm not going to be siphoning those up to the university,” he said. “We want to maintain our relationship with our referring physicians in the communities that we practice in.”
CMS Rules & Regulations
At Akron General McDowell Cancer Center, Ms. Bollin has been trying to hire oncologists for more than four years. Some of the oncologists in that market had long ago stopped buying and administering chemotherapy drugs, preferring to send their patients to the cancer center for treatment. While the revenues coming to the cancer center were nice, the risk was considerable.
“The physicians did not worry about the cost [of a particular drug] because they weren't the ones providing it,” she said. “They would write the order and we might get stuck with a $40,000 or $50,000 denial. There are all kinds of rules and regulations imposed by CMS for hospital outpatient departments that they were not aware of.”
Hiring oncologists allows the hospital and physicians to align financial incentives in a way that should benefit both, she said. From the cancer center's perspective, she believes offering treatment to patients in the community setting without the duplication of information between a private office and hospital will help increase market share and customer satisfaction.
“Anything that decreases the amount of wait time for our patients is a good change,” Ms. Bollin says.
Meanwhile, in Portland, Dr. Mooney also wants to expand the reach of his practice. But he seems relieved to have a partner that will finance future growth.
“Being an entrepreneur in the good old days when the reimbursement was so much better, you had more opportunities to grow the business,” he said. “In a way, this takes a lot of weight off my shoulders.”