Oncology Practices Have Lost $78 Million, Many Closing

Roxanne Nelson, BSN, RN

September 04, 2018

As a result of the ongoing Medicare sequester cut to reimbursement for Part B drugs, community oncology practices in the United States have lost $78 million in just over 2 years. This amount extrapolates to an average loss of more than $847,000 for each practice, which in turn has led to an alarming rate of practice closures, forcing patients with cancer to receive more expensive care in hospital outpatient facilities.

The new findings were published online August 29 and will appear in the October issue of Evidence-Based Oncology.

The study found that sequestration had a significantly impact on all community oncology practices.

During a period of 27 months, from January 2016 to March 2018, each practice averaged an approximate 28% to 31% loss due to sequestration at the beginning of 2016. This amount remained steady for large practices, but small and medium practices began to experience a greater impact (38.4% loss in small practices, 34.7% loss in large practices). Overall, the average loss was 32% by the first quarter of 2018.

"This research quantifies what we have known for a long time — that the sequester cut has decimated the community oncology system, causing millions of Americans to lose access to high-quality, affordable cancer care close to where they live and work," said lead author, Lucio Gordan, MD, a practicing medical oncologist/hematologist and director of quality and medical informatics at Florida Cancer Specialists & Research Institute, Gainesville.

 "Practices simply cannot afford to keep the lights on for patients as long as they have to absorb the hundreds of thousands of dollars in cuts imposed by the sequester," Gordan said in a statement.

Practices Struggling and Closing

According to the latest impact report from the Community Oncology Alliance (COA), 653 community oncology clinics or practices have closed, been acquired by hospitals, or undergone corporate mergers or are struggling financially, as previously reported by Medscape Medical News.

During the past 2 years, an average of 3.5 community oncology practices have closed per month, and each month since 2008, an average of 13.8 practices have been affected by closings, hospital acquisitions, or corporate mergers, according to the COA

Since 2008, 658 practices have been acquired by hospitals, which the COA says is a "dramatic shift" of community cancer care into the more expensive hospital setting.

Since the 2016 COA report, the number of community cancer clinics that have closed has increased 11.3% and the number of consolidations into the hospital setting has increased 8%.

 "The sequester has added insult to injury in the world of community oncology," Gordan told Medscape Medical News. "This type of cut has been very deleterious and nefarious to oncology."

One of the most detrimental consequences of clinic closures is that it limits access to care. The COA report had noted that consolidation and hospital acquisition place an additional burden on the nearly 20% of Americans living in rural areas, where oncology clinics are limited.

Hospital acquisition is also far more expensive, Gordan noted. Medicare policies currently incentivize higher-cost settings, and patients may pay anywhere from 40% to 55% more for outpatient hospital care compared with the same care they would receive in a physician office setting. "There is no improvement in quality, just cost," said Gordan.

"If a small practice gets absorbed by a bigger practice, at least they stay in the community, but with hospital acquisition, costs go up," he added.

The Medicare Modernization Act of 2003, which sought to modernize reimbursement for cancer drugs and essential cancer-care services by reforming the payment systems, might actually have worsened the situation. It established that the rate for payment of Medicare Part B drugs is the average sales price (ASP) of the drug plus 6%. In 2013, a 2% cut was implemented to Part B drug reimbursement, but because the sequester is taken off the top of the 80% paid by Medicare, this actually decreases ASP from 6% to 4.3% and results in a 28.4% drop in reimbursement for cancer medications (chemotherapy, immunotherapy, and supportive intravenous drugs) under Part B reimbursement.

Heavy Financial Impact

In this study, Gordan and colleagues looked at the actual financial impact on community oncology practices of the sequester cuts to Medicare Part B drug reimbursement.

To conduct the analysis, they used an aggregated database of medical claims from practice management systems used by community-based oncology practices. The analysis included any services provided to any Medicare patient from January 2016 to March 2018.

Oncology practices were defined as small if they had 1 to 5 physicians, medium with 6 to 10 physicians, and large if there were more than 10 physicians. The authors analyzed reimbursement and costs for each quarter beginning with the first quarter of 2016 and ending March 2018. The full ASP reimbursement and the corresponding sequestration amount were also calculated for each service line, and the differences were assessed in order to reflect the losses experienced by each service line and the differences among them.

A total of 396,848 Medicare recipients with an active cancer diagnosis who were treated at 92 community oncology practices located in 33 states were included in the analysis (54 small, 19 medium, and 19 large practices).

Throughout the 27-month study period, the percentage of Medicare patients remained consistent for the small and medium-sized practices, ranging from 52% to 54%, but increased by 10% for large practices, from the first quarter of 2016 (45%) to the first quarter of 2018 (55%).

Part B drugs accounted for 68% of the total Medicare allowable expenditures, but this amount was slightly higher in smaller practices, at 76% for total Medicare allowable associated with buy-and-bill drugs vs medium (62%) and large (67%) practices. The overall growth in quarterly Part B drug reimbursement was 91% during the study period, and reimbursement for large practices tripled, but  they only increased by 16% for small practices and by 9% for medium-sized practices, respectively.

The total quarterly drug costs also increased by 9% and 10% for small and medium-sized practices and nearly tripled in the large practices, Gordan and colleagues note. The average quarterly drug costs grew to approximately $1.9 million, $3.6 million, and $17.1 million per quarter for small, medium, and large practices, respectively.

As a result of sequestration, the average quarterly loss per practice increased from $67,243 to $124,902 from the first quarter of 2016 to the end of 2017, or an 86% increase in lost revenue.

This information is not terribly new, Gordan told Medscape Medical News, as far as the impact on oncology practice and the greater expense generated by forcing patients to receive care at hospital outpatient facilities.   

"If we keep showing more and more data, hopefully common sense will prevail," he said. "We have to properly analyze the cost of care and put an emphasis on preventive care. For example, if patients have to go to the emergency room, it is much more expensive than giving them the care they need to stay out of the hospital."

Evidence Based Oncol. Published online August 29, 2018. Full text

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