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Study: Practices Must Improve Administrative Skills to Survive

Butcher, Lola

doi: 10.1097/01.COT.0000411537.65102.d7


A study funded by the Association of Northern California Oncologists (ANCO) suggests that much of the financial pain experienced by oncology practices could be alleviated by better administrative practices.

The study, based on an assessment of 14 practices, found that many do a poor job of using payer coverage guidelines to their advantage, collecting money from patients, managing cash flow, coding appropriately and taking advantage of pay-for-performance opportunities.

The findings, published in the Journal of Oncology Practice (2011;7:295-301), are important because they suggest that small oncology practices can survive with current Medicare payment rates (assuming the huge fee cut called for by the Sustainable Growth Rate formula is held at bay).

Two consultants—Roberta Buell, MBA, of OnPoint Oncology and Patricia Falconer, MBA, of Health Options—conducted the practice assessments and recommended specific actions that the struggling practices should take.

“No one can help practices if they do not help themselves.”

“If we have relatively stable economic Medicare pay, which then also percolates into the private payer reimbursement system, implementing these prescriptions will increase the probability of your practice surviving,” said ANCO's Executive Director, Jose Gonzalez.

The Association commissioned the economic assessment in 2009 after one of its member practices went out of business. Worried that it might be a “canary in a coalmine moment,” as Gonzalez puts it, the ANCO board offered to subsidize practice-management consulting services to member practices that would submit to an assessment of their business practices and financial viability.

Of the 14 practices that agreed to participate, the vast majority had three or fewer oncologists. The largest practice to participate had nine physicians.

The consultants found specific shortcomings that can be addressed by the following better management practices:

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1. Plan How to Get Paid

Oncology practices receive revenues from government payers, private insurance companies, and patients, but practice managers must have protocols in place to get that money in the door. For starters, they need to know whether patients have insurance and what their insurance companies will pay for.

“Almost all the practices we visited seemed vague about payer coverage guidelines,” Falconer said in a JOP podcast interview with Robert S. Miller, MD, who practices at Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins. The podcast is online at

Insurers post their coverage rules online, and administrators must use that information if the practice expects to get paid. Coverage guidelines change, Falconer said, so administrators must review the rules at least once each quarter.

Some practices did not screen patients for the appropriate use of erythropoietin-stimulating agents (ESA) according to Medicare's local coverage determination rules, meaning they used ESAs that the practice could not be paid for.

Finally, practices must understand each patient's out-of-pocket financial responsibility—and they must collect it.

“It used to be such a small component that you could not do it and not suffer financially,” Falconer said. “But those days are gone.”

The percentage of privately insured individuals who have high-deductible insurance rose to 27% in 2010, and the individual's average deductible is now more than $2,000 a year. Additionally, the number of patients who participate in Medicare HMOs is increasing, and those patients generally must pay a 20% copayment on any drug they receive.

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For More Information

ANCO responded to the economic assessment by developing a Business of Oncology 2011 and Beyond webinar series, which is available at

The series includes “how-to” information on:

  • Patient financial counseling
  • Reducing financial and reimbursement risk for chemotherapy and administration services
  • Oncology coding
  • The federal government's incentive to encourage “meaningful use” of electronic health record technology
  • Oncology management trends
  • Choices for payer-provider partnerships

“Bottom-line, practices need to establish stringent patient collection policies and help patients who cannot pay at the time of service to access patient-assistance programs,” she said.

The findings are important because they suggest that small oncology practices can survive with current Medicare payment rates (assuming the huge fee cut called for by the Sustainable Growth Rate formula is held at bay).

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2. Code Appropriately

Only one of the 14 practices had educated their physicians about the fact that, as of 2010, Medicare no longer uses consultation codes (See OT, 12/10/09 and 8/25/10).

Additionally, the practices in the assessment were “high profile,” meaning that they used certain codes more often than their peers nationally. That may send a red flag to Medicare and private insurers, putting the practices at risk of an audit.

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3. Manage Cash Flow

Because they did not collect revenue on a timely basis, many of the practices fell into arrears with their drug distributors. In fact, four of the practices had closed their infusion centers at some point because they could not pay their drug bills.

Falconer provided a statistic that explains the problem: If patients and payers do not pay money owed to the practice in the first 90 days, it is likely to become never-paid bad debt; 20% of the accounts receivable for the survey practices were older than 90 days.

“Most of the cash flow issues were avoidable because they were caused by poor management decisions and ineffective billing and collection procedures,” she said.

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4. Be Smart about Drug Purchasing

Only three of the practices regularly monitored whether their drug costs were being covered by their reimbursements. Most practices used a single distributor rather than engage in competitive purchasing strategies. And half of the practices agreed to pay drug invoices by direct debit at the time the drug was shipped; while this practice reduces the cost of the drug, it is not a good idea if payers and patients are allowed to be slow payers because it causes cash flow problems.

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5. Take Advantage of Incentive Programs

Only two of the practices participated in Medicare's e-prescribing (eRx) or Physician Quality Reporting Initiative (now known as Physician Quality Reporting System, or PQRS) programs. The result: Missing out on an estimated average per year of $14,600 per physician or $39,500 per practice.

At that, the pay-for-performance incentives would have more than offset the Medicare physician fee schedule reductions in 2010. In a slide presentation reviewing their findings, Buell and Falconer were blunt: “No one can help practices if they do not help themselves.”

© 2012 Lippincott Williams & Wilkins, Inc.
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