As Community Oncology Falls, Cancer Costs Rise

Community oncology practices provide efficient cancer care, but fewer exist today.

Al Soltan, president of the Georgia Cancer Specialists, and his fellow doctors found themselves in an increasingly risky business. Private insurers and government payers like Medicare and Medicaid were squeezing their reimbursement rates for services and treatments. So in 2013, they decided to get some leverage by being acquired by Northside Hospital.

I could see a day where there is only a handful of large community oncology practices and over 80 percent of cancer patients are treated in hospital outpatient clinics.

“It was time to leave that business model behind,” Soltan said. “We have been in a much better position to provide for our patients. Hospitals have more resources than what we could afford as a private practice.”

For some, though, those resources come with a cost. Following the acquisition, one cancer patient’s monthly copays jumped from $20 to $212. And the amount that his insurer had to pay more than doubled from $2,735 to $5,661.

It’s not just Northside Hospital. The decline of the community practices is increasing cancer care costs.  According to one analysis, Medicare pays hospitals up to 47 percent more for cancer treatment than they do community practices.

“It’s part of the dilemma,” said Soltan. “Because of regulatory requirements, hospitals have to spend more on overhead and on staffing.” Perhaps as a result, or perhaps simply because they can, some hospitals in the U.S. are charging out-of-network patients and the uninsured more than 10 times the costs allowed by Medicare, according to a recent study.

Cancer Care Becomes More Expensive When a Community Oncology Practice Is Acquired by a Hospital

Over 540 community oncology practices have been acquired by hospitals since 2008, according to a report released by the Community Oncology Alliance (COA). The rate of acquisitions by hospitals has increased 143 percent since 2010.  As a result, only 67 percent of cancer patients in the U.S. were treated in oncology clinics in 2011, compared with 87 percent in 2005.

If the current trend continues, community oncology practices could disappear completely from U.S. cancer care.

“That’s exactly my fear,” Bruce J. Gould, medical director of Northwest Georgia Oncology Centers and COA president, said. “I could see a day where there is only a handful of large community oncology practices and over 80 percent of cancer patients are treated in hospital outpatient clinics.”

Where Cancer Patients Are Treated Has Changed Dramatically Between 2005 and 2011

Because hospitals are larger than community practices, they have more leverage in negotiating the payment for services and treatments from insurers and Medicare. Hospitals also charge additional facility fees for services, adding to the costs. These higher payments and additional fees often mean higher copays or coinsurance for cancer patients.

Some argue that consolidation provides more efficient cancer care and will eventually mean lower costs for payers. “Yes, in the short-term, prices are rising,” Rena Conti, a health economist at the University of Chicago, said. “But there is hope, although not much evidence, that this consolidation will lower treatment costs and improve quality.”

But some remain understandably skeptical.  “I hear that a lot, that the payers are eventually going to get tough with the hospitals,” Gould said. “I just don’t see it happening; they just don’t have the leverage that they need to do so.“

Although some consolidation is natural in any industry, the process in cancer care has been accelerated by several health policies, including 340B. Congress needs to take action to ensure the 340B program continues to serve the poor and vulnerable without unintentionally driving up the cost of cancer care for patients, insurers and government health care programs.

It’s also up to Medicare and private insurers to recognize the cost benefits of community oncology practices and reevaluate their negotiation strategies to ensure these private practices continue to thrive.