Pushes Against Consolidation Creating Uncertainty for Provider Revenues

The dramatic surge in hospital merger and acquisition activity that gobbled up oncology practices by the score is losing steam as a result of numerous policy and legislative acts, and this is creating a climate of uncertainty in terms of revenue generation, according to Michael L. Blau, JD, of Foley & Lardner. The repercussions of these changes are affecting not just the prospects for independent oncology practices but also the ability of inner-city and charity-care hospitals to continue serving low-income residents to the extent that they have in the past.

Since 2008, 423 individual cancer treatment sites have closed, often because of competitive pressures caused by policies and legislation that favored large hospital treatment centers, and another 658 community cancer centers were acquired by or became affiliated with hospitals, according to the Community Oncology Alliance. Many hospital acquisitions and alignments have been driven by shared-service agreements and co-management arrangements that allowed increased returns of up to 10% to 15%, Blau said in remarks at the 2018 Association of Community Cancer Centers 44th Annual Meeting and Cancer Center Business Summit, held in March in Washington, DC. Such margins will be much slimmer going forward, and some financial “downside” can be expected, he said.

Blau moderated a panel of experts who discussed practice alignment activities from different perspectives, including how to derive organizational synergy from patient-centered care, integrate operations to prevent disjointed care, and negotiate an alignment deal that works for both sides.

The past few years have seen a number of measures implemented that put the brakes on the rapid consolidation of practices and the upward spiral in costs of cancer care borne by the Centers for Medicare & Medicaid Services (CMS).

Medicare site neutrality rules curtailed the practice of hospitals acquiring lower-cost treatment centers to extend higher hospital outpatient department rates to those facilities. Revisions in CMS reimbursement rates for drugs purchased through the 340B Drug Pricing Program are expected to significantly lower revenues for some providers in the discount program, although the $1.6 billion in savings will be reinvested in healthcare. The Merit-based Incentive Payment System (MIPS) rewards or penalizes oncology practices based on the extent of improvements in quality and value of care (Figure), and the Tax Cuts and Jobs Act of 2017 is expected to move millions of covered individuals into situations in which they rely on free or reduced-price care, adding to the pressure on urban hospitals and other charity providers (Table).

“The net effect is less money to support physician- alignment arrangements, and this is what was really driving consolidation over the last 10 to 15 years,” Blau said. He noted that further developments are expected to compound the revenue pressure. In 2019, oncology practices will face upward or downward 4% Medicare payment adjustments based on their MIPS performance, and those adjustments will expand to plus or minus 9% by 2022. Some may have chosen to sidestep MIPS by enrolling in the Oncology Care Model experiment, but those practices are also under pressure to reduce costs.

There are still opportunities for gain, Blau noted. Despite the outpatient payment rate changes, it's still allowable for oncologists to move their practices onto hospital sites and receive the higher payment rates from CMS. In addition, although reductions are planned in 340B payments, a redistribution of the savings is expected to improve revenues for a large swath of hospital providers.

Challenges in Consolidation Tulsa Cancer Institute (TCI) was one of the largest independent practices in Oklahoma when it merged with St John Health System in 2016 and became Oklahoma Cancer Specialists and Research Institute (OSCRI). The deal occurred shortly after TCI had built a new cancer facility in an expansion of its operations. There were synergies at the outset but also challenges to making the merger a success, said Jason Ervin, MBA, of OCSRI.

The group saw a huge influx of patients who had previously been seen by the hospital providers. In a short time, 1800 hospital patients began using the outpatient facilities, and the staff had to incorporate hospital records into an electronic health record system that was not capable of managing this process without heavy manual input, Ervin said. These new patients had more comorbidities and financial challenges, which amounted to the biggest challenge of making the merger work. “We worked to enhance the infrastructure for low- or no-pay patients,” he said. The number of wheelchairs had to be tripled.

Throughout it all, they kept the focus on quality, and they have the positive patient satisfaction surveys to prove that they were successful at this, Ervin said. He added that the partnership improved relationships with hospital staff and with affiliates of the hospital with whom they may have been in competition before.

The joint venture that created OSCRI made it a provider-based organization with physicians as the majority owners and managers. The group is an Oncology Care Model participant and also participates in 3 other value-based care models with varying requirements, which presents many data integration challenges, although OSCRI “believes participating in these models is crucial,” Ervin said.

Table. Actions Expected to Reduce Hospital-Oncology Practice Mergers

Strategies for Delivering Value

Whereas Ervin described a participatory merger in which physicians were financially motivated to make the realignment of operations a success, George Daneker Jr, MD, chief medical officer of Cancer Treatment Centers of America (CTCA), said that CTCA has sought to nurture talent by discovering it within or outside the healthcare organization and then providing thorough training to instill leadership and management skills in those individuals. It’s also important to match talent with skilled leadership so that the process of mentoring and collaboration develops opportunities into success. This produces results, Daneker said: “I’ve found that physicians have great ideas, but when I say, ‘How are you actually going to do that?’ they say, ‘Uh, I don’t know. Give it to somebody else, and I’ll come back in a couple of months and see if it’s done.’”

Another issue that needs to be addressed within a merger environment is the coordination of care. Daneker said it is often the case that components of care are good but not well coordinated. Patients complain about this. “For a patient with a cancer diagnosis, minutes are like hours, and hours are like days.” CTCA has multiple locations spread across 3 time zones, so coordination problems can make it frustrating to deliver the quality of care that hospital administrators would like, he said.

Like Ervin, Daneker said the key has been to keep the focus squarely on the patient, and in doing so, the multiple parts of the cancer treatment delivery network begin to function in a coordinated manner. At CTCA, this is accomplished in part by giving patients a 27-question survey that lets them describe what they’re experiencing as a result of their disease and their treatment. The automated survey is designed to ping physicians if any trouble signs appear—problems that a patient might not report independently until conditions become more serious and costly to treat.

Another key to delivering the value that patients had asked for was the development of cross-functional teams that can deliver care that patients feel is tailored to their particular cancer. These specialists are linked and informed by tumor boards, case conferences, and other meetings. In addition, a significant effort has been made to simplify clinical pathway information on 670 different regimens so that physicians find them understandable and easy to use and the same information can be understood by patients, which facilitates doctor— patient discussions, Daneker said.

As cancer treatment becomes more targeted and consequently more complex, simplification serves a growing need among oncologists for practical guidance that cuts through the clutter. Daneker said the following comment sums up the mood among a large proportion of oncologists: “Genomics scares the hell out of me. There’s just so much stuff. I don’t know how I’m going to integrate it into my practice.”

Planning is Vital

There’s more to the success of an integration among healthcare providers than a patient focus, and whereas external factors such as regulatory strictures may play a role, there’s no substitute for good planning and execution, said Kelley D. Simpson, MBA, of Oncology Solutions, an Atlanta, Georgia—based consulting firm. Well-structured agreements include careful oversight, performance metrics, and planning. She presented a hypothetical business case of a healthcare system that contracted with a physician practice to clinically comanage the oncology service line.

“Don’t underestimate the time you need to plan and go live. That’s probably where things go awry most often and where there’s the most confusion and disappointment between the parties,” Simpson said. In a tactical timeline she presented, 3 months were set aside at the outside for the groundwork of engaging consultants, a valuation firm, and legal counsel and for defining service line components. A subsequent 3 months were set aside for discussion of quality and performance metrics and finalizing valuation and letters of intent. Six to 9 months after initiating the process, both parties should be discussing financial terms and operational arrangements. At 10 months comes the approval to go live, in accord with testing and tracking; following that, parties to the deal should monitor carefully and refine processes to ensure that the consolidation is a success.

“We recommend a working group that includes hospital leadership and the physician practice and leadership to really work on what the reporting structure is going to be—meetings, tracking and reporting performance improvement and quality improvement activities and then test that for a month or two and then go live,” Simpson added.

Payment to physicians and staff should be calibrated to avoid paying twice for the same task, such as an administrative task that is also recognized as a performance-based service. Good collaborative deals are defined by well-delineated tasks, which means that responsible parties need to be identified from the outset and boundaries should be maintained. Be careful not to let hospital-based staff and time cross over to physician-designated performance deliverables,” Simpson said.

Originally published by Onc Live as "The Looming Squeeze on Provider Revenues."