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| Nov 07, 2012
Community oncology practices are dependent on infusion drug margins for revenues. Thus, practices are highly sensitive to changes that threaten patient volume (e.g., long chair times), changes in reimbursement levels, increased administrative demands that detract from revenue-generating activities (e.g., time spent satisfying onerous coverage policies or complying with risk evaluation and mitigation strategies (REMS)), and threats to cash flow. Cash flow concerns include delayed reimbursement, fear of nonpayment, and tying up cash in a low number of high-cost drugs—all of which reduce a practice’s ability maintain, let alone grow, volume. Small practices are particularly sensitive to such changes.
Findings from Kantar Health’s 2012 Practice Manager and Oncologist surveys as published in Oncology Market Access, US, 2012
, suggest that oncology practices have learned how to deal with the drop in Medicare drug reimbursement that occurred with the passage of the Medicare Modernization Act of 2003.
Practices unable to adapt likely have already closed. The remaining practices have largely made the operational changes necessary to accommodate thinner margins. However, oncology practices are looking to new and better ways to manage an anticipated growth in patient affordability issues and new challenges to patient volume in the form of tighter payer networks and novel integrated provider-payer models (e.g., accountable care organizations (ACOs)). Practice Operations
Most practices have weathered the storm of declining reimbursement. Patient volumes remain strong, and reimbursement appears to be stable or positive. Practices generally report slow growth toward expansion and ongoing efficiency improvements. Overall, minor modifications to practice operations continue as practices actively explore new ways to improve and remain competitive.
For example, oncology network providers and practices affiliated with group practice organizations (GPOs) are more likely to have access to sophisticated inventory management solutions that feature just-in-time shipments for expensive, low-volume drugs than smaller, independent practices. In addition, large practices may have high patient volume for tumor days, or scheduling all infusions for one cancer type on the same day, allowing them to limit product waste related to patient no-shows by using the pre-mixed drug for another patient.
The ability to protect or even improve profitability through increased practice efficiency and new services is unlikely to ensure that a practice remains competitive in the evolving marketplace. Thus, more and more practices are looking to develop stronger relationships with each other, hospitals and even payers in an effort to improve drug margins and protect market share. Landscape Restructuring
Site-of-care shifts may be driven by increasing numbers of patients being referred by community practices to hospitals due to affordability issues or more practices aligning or affiliating with hospitals for reasons such as access to the 340B drug pricing program or ACO participation. Despite the fact that inadequate reimbursement and patient affordability remain the leading reasons for patient referrals, these referrals appear to no longer be accelerating except among hospital-affiliated practices according to practice managers surveyed by Kantar Health for Oncology Market Access, US, 2012
. In the end, the majority of patients continue to be treated in the community practice setting.
Novel Reimbursement Arrangements
The possibility for higher reimbursement, lower administrative hassle, and access to revenue from shared savings is proving to be tempting for more and more oncology practices. Although oncology-specific ACOs are rare, they are starting to emerge where regional characteristics support the attractiveness of the coordinated care model in oncology. Twenty-nine percent of community oncologists and 39% of practice managers indicated that they were planning on participating in an ACO in the next six to 18 months with approximately 15% participating in 2012. Oncology medical homes are also starting to emerge, which may prove to be a more readily accessible option than ACOs as they involve fewer stakeholders and potentially less administrative hassle.
Hospital affiliation, pathways participation and bundled payment models are other options available to community practices, given the right set of circumstances. Forty-six percent of practice managers report their practices are involved in bundled payments for episodes of care representing 15-20% of patients. Pathways participation in particular appears to be growing with 34% of practice managers reporting participation, largely due to associated financial benefits. Overall impact of patient lives remains fairly low (5-10% of patients), restricted to the most prevalent cancers or those with the highest drug expenditure.
Hospital affiliation or participation in pathways may also centralize clinical decision making. Depending on the structure of the agreement, some hospital affiliations may have significant impacts on oncologist prescribing if the hospital maintains and enforces a strict drug formulary, while externally developed pathways may determine “preferred” drug choices.
Increasingly very high drug costs reinforce the importance of managing affordability issues and payer reimbursement risk. The practice may bear significant financial losses if the practice procures and then does not administer – or does administer with either the payer or the patient not paying their cost share – a high-cost drug. Manufacturer implications
Manufacturers have varied levels of influence on practices as they adopt these tactics and may have no influence on whether the practice hires non-physician clinical staff (NP/PAs) or what role they play within the practice. However, the manufacturer can engineer an effective call strategy based on their knowledge of the changing practice structure.
Manufacturers also need to support practices in navigating affordability and reimbursement issues, noting that some practices are already more sophisticated and savvy than others. Some changes, especially those related to ACO participation, hospital alignment and participation in externally developed pathways should be carefully monitored on a regional level to enable the manufacturer to identify shifts in regional and institutional utilization levels. Summary
Most practices have weathered the storm of declining drug reimbursement. Patient volumes remain strong and reimbursement appears to be stable or positive. Practices generally report slow growth toward expansion and ongoing efficiency improvements. However, options for service diversification appear to be narrowing, with large practices likely to have added services requiring capital investment already. Overall, minor modifications to practice operations continue as practices actively explore new ways to remain competitive.