To cancer patients, “metastasis” is a very bad word. To cancer businesses, metastasis is essential to survival. Mounting costs of practice and uneven insurance reimbursement rates mean that small cancer practices have had to grow and spread with the aggressiveness of the errant cells they treat—or, conversely, risk obliteration. Oncology and radiation therapy providers are buying each other out, gobbling up other specialty groups and partnering with the really big guys—the hospitals—to increase their buying power and protect their bottom lines.
Meanwhile, the hospitals are enjoying government-sanctioned discounts and reimbursement policies that enhance their clout in the cancer industry.
The result: The rise of the cancer center. In Southwest Florida, you won’t see small oncology or radiation groups; you will see hospital-owned cancer centers or oncology units and powerful physician-run organizations. Treating cancer is a very, very big business—in ways both evident and hidden from public view, and in ways both positive and detrimental to patients.
“The underlying mission of how to treat a patient hasn’t changed, but the mechanism has evolved due to the complexity of treatment and what can be done,” says NCH Health care System CEO Dr. Allen Weiss. “The cost of entry into radiation therapy is millions of dollars. To get an oncology infusion center started, to get all the drugs, equipment and laboratory support, is huge.” Southwest Florida is home to two of the nation’s biggest practices, 21st Century Oncology and Florida Cancer Specialists & Research Institute, both of which make no apologies for their quests to grow from community practices to national—and in 21st Century’s case, international—players.
“Given the changing health care landscape, increased focus on lower-cost, higher-quality care and potential for value-based reimbursement, we built a more complete and integrated cancer care platform to better meet the needs of patients, physicians and payers. As a result, we proactively broadened our provision of care to include a full spectrum of cancer care services by employing and affiliating with physicians in the related specialties of medical oncology, breast, gynecological and general surgery, urology and primary care,” wrote 21st Century Oncology officials in their 2014 annual SEC filings. The practice is 3.3 percent larger than its next-biggest competitor.
The story at Florida Cancer Specialists is largely the same: That group of doctors saw a looming threat in hospital acquisitions and responded by merging with related providers, including OHC-Sarasota, Gulf Coast Oncology and Florida Cancer Institute. Today, the practice has 120 physicians and is the largest physician-owned medical oncology practice in the United States. Founding doctors say the growth and ensuing financial stability allows the physicians to retain decision- and policy-making power.
Southwest Florida’s newest player, Florida Cancer Affiliates, moved into the market with a Naples office in June 2014 and a Fort Myers office in September. The company belongs to a national group of more than 1,000 physicians, the US Oncology Network, which is owned by the Fortune 15 McKesson health care corporation.
At present, one doctor recruited from out of the area works both Southwest Florida offices, says U.S. Oncology spokesman Marc Panarisi, and another is being recruited. All company offices are physician-led. “But they’re getting the benefit of greater buying power for oncology drugs, and the IT support possible with a large network. And back to that network advantage, we’re able to negotiate insurance contracts on a statewide or even national level.”
Panarisi expects Florida Cancer Affiliates to follow the trend of emerging cancer centers. Radiation likely will be added at some point to the hematology and oncology treatment offered in the Fort Myers and Naples offices now. So, what are the stakes in Big Cancer? Here’s what Gulfshore Business has learned about the big business of cancer, how companies are changing the ways they compete for the dollars and how that dynamic is affecting the patient.
A boon for patients
Walk into the Lee Memorial Health System-owned Regional Cancer Center in Fort Myers, and there’s little reason to have to go anywhere else; the center’s services range from chemotherapy to diagnostic testing to counseling to nutritional advice to rehabilitation programs.
“The goal from the beginning was how do we provide a level of [cancer] care that’s easily accessible for a patient, so the patient would not have to go so many places for what they need,” says Sharon MacDonald, Lee Memorial’s vice president for strategy and business development. “The cancer center became the beacon of how you could take privately owned physicians’ groups and put the patient in the middle at one seamless location.”
Unlike other markets where hospital systems have driven out physician groups, Lee Memorial partners with Florida Cancer Specialists and 21st Century Oncology and its affiliated Florida Gynecological Oncology and Regional Breast Care.
Jane Thorrington of Punta Gorda learned she had breast cancer in August 2013. After surgical biopsies and a lumpectomy, her surgeon, Dr. Lea Blackwell, set up an appointment at the Regional Cancer Center for followup with several medical professionals, including a radiation oncologist and a medical oncologist. “I sat in a room and my team of doctors came to see me,” says Thorrington. “It was much better than having to make an appointment with each doctor.”
The next step was for her to receive radiation at the 21st Century Oncology office in Charlotte County near her home. But when a scheduling glitch occurred, Fort Myers-based 21st Century—which owns 145 cancer treatment centers in the United States and 35 in Latin America—simply sent her to its Cape Coral location, where she had treatments five days a week from Nov. 7 to Dec. 31, 2013. She is now cancer-free.
Such is the biggest benefit of the large cancer center: Patients can get state-of-the-art treatment in their own backyards and get prescriptions filled, too. They often can go to the same place for lab tests, radiation and infusion. They need not sit in multiple waiting rooms and drive to multiple locations to see multiple doctors. Often, they can see all of their doctors in one place.
Patient convenience isn’t the only perk: By merging and expanding their financial bases, these practices can purchase advanced technology—radiotherapy machines can cost as much as $7 million with $200,000 in annual maintenance costs—and enter into clinical research, putting front-line drugs into the hands of local patients.
“We offer comparable services to any large institution,” says Bradley Prechtl, CEO of Florida Cancer Specialists & Research Institute, a network of 90 locations with its own central laboratory and specialty pharmacy. Patients’ electronic medical records have shared access that allows, for instance, an in-house pharmacist to read a physician’s notes for coordination of care such as available in hospitals. “We also have more clinical trial options than any other group in the state,” Prechtl says.
Sometimes the hospital itself is that central spot.
NCH Health care System has an inpatient unit devoted to oncology at its downtown Naples location. NCH Downtown also has an outpatient infusion center.
“Florida Cancer Specialists and 21st Century Oncology have rented space downtown for eight years,” Weiss says. “We’re landlords; they’re lessees. Informally, it’s a collaboration.”Such blurred business distinctions were inconsequential to Kristi Murphy, a 36-year-old nurse who was diagnosed with leukemia late last year and spent 44 days at NCH Downtown, having intermittent chemotherapy and bonemarrow biopsies. Her medical oncologists are Dr. Douglas Heldreth and Dr. Michele Ramirez, who work for Florida Cancer Specialists in NCH’s Lutgert West Building. Ramirez visited her hospital room, as did a hospitalist, an infectious disease specialist and her in-house pharmacist oncologist, Jeff Weiss.
What mattered to Murphy was that members of hercare team were near one another and communication was easy. Above all, her treatment took place close to home.The day that 30 of her friends and neighbors gathered outside her hospital window with balloons and signs of encouragement reminded her how important that was.
A more expensive model of care?
Seen through a different lens, Big Cancer is no different from any other industry: Less competition creates the potential for higher costs. Last year, a study by the American Society for Clinical Oncology cautioned that two-thirds of small community- based practices would likely merge, sell or close within the next year alone, potentially affecting access to care and the cost of care.
For instance, say all the medical oncologists in a 25-mile radius belong to the same practice. Those oncologists begin insisting on higher reimbursement amounts from a private insurer. The choice for the insurer is then to either pay the higher amounts or have no medical oncologist on its plan—and likely then, plenty of customers shopping for new insurance plans.
Government policies are also grabbing the attention of some watchdog groups who worry that a provision originally designed to protect low-income patients and the hospitals that treat them is being exploited—and driving up the cost of care.
The federal 340B program was established in 1992 to enable safety-net hospitals to treat indigent patients. Because LMHS treats a disproportionate share (compared with other hospitals) of un- or underinsured patients, it qualifies for the 340B program, allowing it to purchase drugs at discounts ranging from 25 to 50 percent. The savings can be particularly significant with chemotherapy drugs, which can cost $10,000 a month or more.
But when a provision of the Affordable Care Act allowed more facilities to qualify for the 340B program, hospitals began purchasing private practices and setting up freestanding cancer centers, according to an investigation by the Berkley Research Group for the Community Oncology Alliance.
The ACA also began allowing eligible facilities to contract with more than one pharmacy provider, increasing competition and driving down the provider’s costs—although not necessarily the patient’s.
In fact, studies show that patients (or their insurers) typically pay the list price— not the discounted rate. Prescribing physicians or medical centers keep the profits, according to a report in the May 2013 issue of The Journal of the American Medical Association. Its authors cited research suggesting that a single oncologist can generate $1 million in profits for a hospital by obtaining drugs at 340B-discounted prices and then using them to treat well-insured patients.
The implications of that reverberate in multiple ways— from prescribing habits to an expected jump in list prices as manufacturers seek to offset revenue losses (between 2009 and 2012, the number of hospitals eligible for 340B doubled; today, about one-third of U.S. hospitals use the program). Lee Memorial’s Regional Cancer Center began participating in 340B in 2009. Lee Memorial says 340B has been a plus for patients, though it’s hard to quantify how much it benefits them because overall drug costs have been spiraling. Medications such as chemotherapy infusions are supplied by the hospital system; services provided by or prescriptions ordered by 21st Century Oncology or Florida Cancer Specialists are not eligible for 340B.
The Big Pharma Effect
On top of that, hospital-based cancer care already enjoys a higher reimbursement rate than that of a private physician practice—one of the drivers of small practices merging with each other or selling out to the hospitals.
Testifying before Congress in June 2013, Dr. Barry Brooks of US Oncology pointed out that the 2013 Medicare Physician Fee Schedule for a one-hour intravenous infusion of chemotherapy was $143.24. If performed in a hospital outpatient center, the payment was $230.50, a 61 percent difference. The reason for the difference is generally attributed to the higher overhead and other costs hospitals face.
But patients in hospital-based centers aren’t realizing any savings in the portions they pay. In fact, their costs appear to be rising, according to a study published last year by the IMS Institute for Health Care Informatics.
When Medicare reimbursement rates are significantly higher, the 20 percent left as the responsibility of the patient or the secondary insurance provider is also significantly higher.
“These higher [drug] costs are also associated with higher patient out-of-pocket costs depending on insurance plans and benefit designs, and can trigger reduced levels of therapeutic persistence by patients and higher overall cost of care,” according to the report.
It’s hard to say how much patient share-of-costs are affected, Lee Memorial spokeswoman Mary Briggs says.
“Patients may or may not pay more for services depending on the insurance plan chosen by the individual. Every policy is different in its mix of benefits offered, premiums charged and out-of-pocket costs,” she says. “RCC [Regional Cancer Center] is almost like a ‘hospital without beds.’ Your treatment there requires some of the same resource-intensive services found in an inpatient setting, which generally will cost more than outpatient care.”
And no matter where the drugs are administered, Medicare is paying more and more for them. A report by the Moran Company, cited by MedPage Today, found that between 2005 and 2011 reimbursements to hospitals for chemotherapy drugs went from $904.5 million to $2.03 billion. Reimbursements to physician offices also climbed, from $2.63 billion to $3.47 billion.
“Big Pharma is clearly responsible for a lot of this,” says Weiss of NCH Health care System. “The defense [they use] is that it’s very expensive to bring these drugs to market. Long-term trials are very expensive. It’s true. I wish we had a better way of doing this because we’re not going to survive.”
The casualties now occurring among smaller physician practices may be a symptom of the growing financial toll cancer will take. Treatment now costs $127 billion each year in the United States, according to a June 2014 report by Kaiser Health News.
Understanding and regulating hidden cancer costs is critical: Already, medical bills drive patients to abandon their care—even when they have insurance. A study in the Journal of Oncology Practice and the American Journal of Managed Care found that 16 percent of Medicare patients and 9 percent of commercially insured patients who were prescribed oral chemotherapy drugs between 2007 and 2009 abandoned treatment due to cost. And that should be a sobering trend no matter how much innovation is taking place in Southwest Florida.