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The Nuts and Bolts of Physician and Hospital Practice Arrangements from the Oncology Front Line

November 2012, Vol 2, No 6

Dallas, TX—Many hospitals and physician groups are courting now, exploring the possible option of physicians going hospital-based. There are many drivers leading to the dance: financial pressures, an excess of administrative burden on doctors who just want to practice medicine, an aging physician population, an aging patient population that will need more care, and changing policy and reimbursement models that appear daunting to the community oncologist.

At the 2012 Cancer Center Business Summit, 3 oncology practice executives presented some of the daily details that can be forgotten during the hospital–physician integration.

Issues to Consider Before the Contract Is Signed
Teri U. Guidi, MBA, FAAMA, President and Chief Executive Officer of the Oncology Management Consulting Group, Pipersville, PA, opened with a discussion of the day-to-day issues listed below that may not be considered in the heat of contract negotiations with a hospital that may become unwelcome surprises once the deal is done.

Control. The shift in control is often a surprise, both to the physicians and to the staff. Who is making the daily operations decisions now, and how much input do the physicians have compared with what they were used to having in private practice? Who will be making the hiring and the firing decisions? Other pressure points to watch include laboratory and pharmacy turnaround times, check-in and registration processes and timing, scheduling of visit lengths, and distribution of new and established visits.

Performance and compensation. There may be unmatched expectations between the hospital and the physicians that come to light after the deal is done, or that may even surface 2 to 3 years later when the original contract comes up for renewal. Is there agreement on productivity targets, management duties, expectations for corporate citizenship duties, and other expectations? Has physician compensation been clearly defined with regard to the base and basis, the timing of revisions, the amounts for ceilings and floors, and any additional incentives?

Compensation issues may arise for staff as well, regarding pay scales, bonus policies, and seniority status for transferred staff. Will there be additional nononcology duties ex­pected of staff and physicians, and what impact will these have on the process and flow of normal patient care in the acquired practice?

Billing and collecting. Practices are often much more efficient at billing oncology claims than hospital staff, but the transition may not be easy. The oncology practice staff understands physician practice claim forms and rules, but hospital billing forms and billing constructs are different.

Ms Guidi warns that “payer contracts [for the practice and the hospital] are not likely to be parallel…it may be a challenge to get clean claims out the door and to collect on them.” That can affect the cash flow for the new entity.

Technology. There may be challenges related to a different type of technology used by either institution, such as when a practice bills electronically and the hospital is still paper-based. Or the hospital may have a completely new billing system that will present a learning curve for the practice staff members. Is it possible for the billing systems to be integrated or merged? Have plans been made for the “transitional eon,” as Ms Guidi calls it?

Outsourcing to Specialty Pharmacies
Burt Zweigenhaft, BS, Chief Executive Officer of OncoMed Onco360 in Great Neck, NY, spoke about some of the considerations that a hospital may encounter when deciding whether to outsource to an oncology pharmacy. With con­tinuing Medi­care and com­­mercial payer drug reimbursement reductions, some hospitals are evaluating the option of outsourcing the acquisition and the mixing of oncology drugs to specialty pharmacies.

Access to oncology drugs is no longer as simple as using a sole drug distributor. Many pharmaceutical manufacturers now choose to name specific channels for new drug dis-tribution, and drugs may have to be acquired from multiple sources, thereby requiring dedicated re­sources for inventory acquisition and for management.

The population of patients with cancer is growing exponentially as America ages, and it is likely to run right up against a concurrent reduction in the number of treating oncologists. Oncology pharmacists can be a valued asset to the oncology care team in providing drug management support to oncologists in the coming years, Mr Zweigenhaft suggests.

Mr Zweigenhaft anticipates an increase in payer imposition of prior authorization processes, formularies, and selected pathways. Part of that increased payer oversight is also very likely to include payer network contracting with pharmacy benefits managers and with specialty pharmacies. He suggests that hospitals that outsource the management of cancer drugs to specialty pharmacies would benefit from:

  • Medication treatment management interventions
  • Support of a board-certified oncology pharmacist
  • Increased focus on pathways and concordance with evidence in treatment decisions
  • Increased focus on care and min­imizing side effect management
  • Pharmacists who would follow the physician care plan and manage to quality end points
  • Increased focus on the management of patient adherence for oral formulations of cancer therapies
  • Inclusion of advanced care directives
  • Stronger reporting and measurement of data.

Pharmacy regulations in the hospital setting are different from those in the physician office setting, but they may also differ from those in the commercial pharmacy setting.

Mr Zweigenhaft suggests that recent state Board of Pharmacy changes, such as in Georgia, may set forth dispensing expectations that hospital pharmacies will find difficult to meet. He also noted that some facility accreditation expectations may be a challenge for physician-based or hospital-based pharmacies and for the new models in which hospitals now manage physician practice–based pharmacy needs.

Recommendations for Integrating Hospitals and Physician Practices
Martin Shenk, CMPE, Chief Operating Officer, The Medical Oncology Group, PA, Gulfport, MS, discussed the process of integrating his practice physicians with the local hospital. His practice began the negotiations with the hospital in January 2009 and completed the deal by December 2009 that was based on a provider services arrangement.

Mr Shenk outlined the following 7 tips for practice managers, based on his experience with this hospital–practice integration process.

  1. Beware of promises made in the courtship phase. The longest part of the process was determining the valuation of the practice. The hospital had initially offered substantial salaries, with fine print noting that the offer was subject to fair market value. One of the most difficult challenges for the practice and the physicians was coming to grips with how valuations are developed.

    The strategic value of the practice as an acquired asset for a hospital is not quantifiable; in fact, it does not enter into the valuation process at all. The postvaluation compensation was considerably lower than the original offer.

    Mr Shenk also commented that the current compensation was based on Current Procedural Terminology® code volumes, and that, so far, there is no provision for what would happen should care payment move to a bundled rate, which could happen in oncology—specifically with certain payers or on a national scale with accountable care organizations—and in payment reform.
  2. Understand where the power really lies in the hospital organization. During the negotiation process, Mr Shenk’s practice learned quickly how to distinguish between those who said they had the power to make decisions and those who actually did have the power. If someone in the room says he or she needs to check with someone else, perhaps that person is not the right person to be in the room for this negotiation.

    The Medical Oncology Group was glad that it maintained employment of its own staff as opposed to leasing the staff members back to the hospital, so that the hiring and firing process was not as difficult as it could have been had they had to work within the hospital infrastructure.

    Mr Shenk also noted a concern that current strong relationships are grounded with existing hospital leadership, and he wondered what might happen should those leaders move away from the hospital.
  3. Watch the clinic’s design and layout. Hospitals often have severe space limitations and many fragmented services (eg, registration in one area, laboratories and imaging in centralized locations) that create very different patient and staff workflow situations from those seen in private practice. Mr Shenk warned about the unanticipated impact on the historical practice workflow and on staff and patient expectations.
  4. Understand EMR complications. Many hospitals have multispecialty EMRs electronic medical records that may not have a strong oncology module and that may not integrate well with the systems you already use. Understand the challenges, and negotiate for an arrangement that works best for you, your physicians, and your staff. An oncology-specific EMR is absolutely essential.
  5. Understand the challenges of 340B pricing. Make sure you understand what 340B pricing means to hospitals. Mr Shenk warned that “340B prices are not a floor—they are a ceiling—which makes a difference when the hospital integrates inpatient and outpatient volume.” He also warned that practices need to be aware that 340B pricing may not be applied to a component of an eligible hospital until that component (ie, division) of the hospital has appeared on the hospital cost report. This can take as long as 16 months, which can be an unpleasant surprise for hospitals and practices who entered negotiations and new arrangements without fully understanding that timing delay.
  6. Understand the impact of your own referrals. Before the negotiations go too far, measure your practice’s volume of referrals to the radiation oncology, radiology, and surgical specialties that are affiliated with the hospital. In many cases, your clinic may refer more than 50% of the hospital’s positron emission tomography and computed tomography scans. It will be important for both parties to understand that in the negotiation processes.
  7. Keep your physicians focused on patient care. Both during and after the negotiations, it will be easy for physicians to get drawn into hospital and administration issues. If you work with them and support them to stay focused on patient care, it will help keep the practice on an even keel. After the negotiations are done, this will protect the physicians from being burdened down with hospital administration tasks.

Then Ms Guidi, Mr Zweigenhaft, and Mr Shenk reminded the attend­ees that there is much more involved in hospital–physician negotiations than often meets the eye. They shared these process details with the hope that these points would make it easier for oncology practices to come out on the other side of the negotiation process better equipped to handle the new reality of hospital–physician relationships in cancer care, no matter how the negotiations end.

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