Cancer Care Northwest (CCNW) is an approximately 20-physician multispecialty oncology group in Spokane, Washington, that has undergone several consolidations over the past 15 years. In this article I would like to outline these efforts, hoping to share the experiences and assist others who may be facing such events.
CCNW’s experience with consolidations and integrations began in 1995. At that time the practice, consisting of 7 medical oncologists, became part of Physicians Reliance Network, a precursor to US Oncology. This consolidation is best described as horizontal integration. The practice affiliated with other oncology groups around the country to gain advantages associated with such specialty integration.
The next phase, in 1999, involved adding radiation oncology and imaging, with the practice moving into free-standing outpatient cancer centers. Surgical and gynecologic oncologists were added in 2002, and breast surgeons a short time after.
These details are less important than the leadership, analysis, and decision-making that underlain the organizational change. A full exploration of these issues is beyond the scope of this article; however, I encourage leaders and organizations to delve more deeply into these topics. These decisions offer the opportunity to shape, for better or worse, the course and welfare of your organization for years to come.
Consolidation should be a solution, a means to an end and not an end itself, and be designed to address a specific problem or set of problems. More broadly, it should be used as a strategy meant to realize a vision and organizational goals. Two good questions to ask yourselves continuously are: “What are we doing?” and “Why are we doing it?”
The (idealized) process by which CCNW decided to undertake its consolidations and integrations is instructive. We spent significant time understanding what we wanted the organization to look like in the future and assessing where we were currently. We looked within as well as without, assessing our strengths and weaknesses as well as opportunities and threats, and trying to understand the external environment (including the local and national market and trends) and where oncology was headed. From this process, decisions were made; for example, we would need a partner to help us to “get to where we wanted to go.” A subsequent analysis looked at the various partners available and, ultimately, a formal decision was made. Whether the issue was horizontal integration or the addition of other oncologic specialties, we had to make sure these strategic moves were consistent with our vision, that they supported both our clinical and business goals, and that we undertook a careful and thorough analysis of the environment, our competitive position, and our capabilities before making a final decision. An additional important part of the analysis relates to legal and regulatory issues. In the case of CCNW, we planned to bring the other specialty physicians into a single legal and operational entity, with a single tax ID number. This was relatively straightforward, although there were legal regulations that we had to follow regarding Stark and antikickback statutes. Expert legal assistance is strongly advised.
Consolidations and integrations such as described are difficult and time-consuming. There are many challenges to overcome including issues of trust, compensation, governance, and especially the merging of different cultures; the need for skilled physician leadership is great. Despite these issues, given the state of the industry, consolidations among various entities are sure to increase. The likelihood of such an effort succeeding can be improved by assuring a rigorous and well-done evaluation and analytic process, making sure that you have quality decision-making, and making very clear you understand exactly what it is you are doing and why you are doing it.