Cost of Cancer Rises as Private Oncologists Affiliate with Hospitals

What if your doctor’s office changed the sign on the door, and nothing else about it, except the price of care suddenly doubled? You’d be in the strange new world of cancer treatment.

Insurance companies are reducing reimbursements to oncologists, and the drugs they use for treatment are increasingly expensive. The only way many of these doctors can continue to treat their cancer patients is to sell their practices to a hospital system. But that doesn’t mean cancer treatment is business as usual – it means the same treatment is more expensive.

A story last week in the New York Times told the stories of oncologists who said they were forced into selling their practices because they couldn’t maintain a viable business receiving lower fees while the drugs they buy and sell to patients cost more.

The paper cites figures provided by the Community Oncology Alliance Practices, an advocacy outfit. Since 2008, of the nation’s 1,447 independent oncology practices, 544 were purchased by or entered contractual relationships with hospitals, 313 closed and 395 reported being in financial distress.

When cancer patients move from private to hospital care, “Because of quirks in the payment system,” The Times said, “patients and their insurers pay hospitals and their doctors about twice what they pay independent oncologists for administering cancer treatments.”

Dr. Barry Brooks, one source for The Times story who practices privately in Dallas, explained what’s happening in oncology like this: “Say there was a Costco that had very good things at reasonable prices. Then a Neiman Marcus comes in and changes the sign on the door and starts billing twice as much for the same things.”

The Times said cancer treatment is different from that of other diseases because of unique systems of reimbursement that include what drugs patients may get, and where they’re treated. As we wrote in our, “Calling Out the Corruption in Medical Care,” such systems invite conflicts of interest and put doctors in the position of making treatment decisions based not on what’s best for an individual patient, but on whether and how much he or she will be reimbursed.

Some observers say the Affordable Care Act (ACA) has accelerated private practice sales to hospitals because many people bought relatively spare Obamacare insurance plans that don’t cover the expensive cancer care they need. So doctors, who buy cancer drugs in advance, face budget problems when their patients can’t pay, and the overhead is crushing.

Doctors in private practice often send uninsured and Medicare patients to hospitals for their chemotherapy, and keep them as patients for office visits. As one such practitioner said to The Times, “The disgrace is that we have to treat people differently depending on how much money they’ve got. That we do diminishes me.”

Unlike other doctors, oncologists maintain a wide stock of drugs in their offices, and if the patient requiring one dies or can’t pay, the doctor takes the loss. “That used to be acceptable because insurers paid doctors at least twice the wholesale price of drugs,” The Times explained. “Now doctors are reimbursed for the average cost of the drug plus 4.3%, there are more and more drugs to stock, and drugs cost more.”

For private practitioners, the sale of chemotherapy drugs no longer generates impressive income, but it does for hospitals. They get higher reimbursement for administering drugs, deeper discounts for buying large quantities and many take advantage of the federal program that compensates research hospitals and hospitals serving poor people.

The ACA also requires documentation of efficiencies in medical care that some private practice doctors find onerous and time consuming. If they consolidate with a hospital, the drug purchases and paperwork are someone else’s problem.

Medical centers, of course, tout the advantages of this changing business model. An executive with the American Hospital Association told The Times that patients get tests such as CT scans and MRIs, lab work and pharmacy services all in one place. The convenience, and the facilities’ 24-hour care for everybody, including uninsured and underinsured people, justify the higher fees, he said.

Hospitals really want cancer patients, of course, because they use lots of hospital services. They generate a lot of revenue. But as these patients move from private suite to large medical center, the treatment is less personal and often less efficient. As The Times stated bleakly, “The private practice oncologist is becoming a vanishing breed, driven away by the changing economics of cancer medicine.”

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