Prognosis Profits

Oncologists struggle to stay independent

This story was originally published in the Observer on 9/22/12.

For the last half of his 30-year career, Dr. Thomas Hauch provided chemotherapy in his own Charlotte offices, resisting the financial pressure that other oncologists felt to merge with a hospital.

When Hauch died in 2009, his wife and business manager, Karon, wanted to make sure his patients continued to receive good medical care.

In 2010, she sold the practice, Carolinas Cancer Care, to Carolinas HealthCare System. She said hospital officials promised to care for patients regardless of whether they had insurance, just as her husband had.

But there was a downside.

The cost of care went up – substantially.

According to data obtained by the Observer, the charge for a dose of Neulasta, a drug used to reduce the chance of infection for chemotherapy patients, rose from $2,365 to $9,750. Charges for other chemotherapy drugs rose as well.

Also, the clinic used to charge $252 for one hour of infusing a cancer drug. After Carolinas HealthCare took over, that charge rose to $800.

Pressure to sell out

What happened with Carolinas Cancer Care isn’t unusual.

Across the country, nearly 400 oncology practices have been bought by hospitals or formed financial arrangements with hospital systems since 2007, according to Community Oncology Alliance, a group that represents independent oncologists.

And when hospitals buy the practices, prices go up. Patients are billed based on the hospital fee schedule.

Nationally, chemotherapy costs 24 percent more in a hospital-based outpatient setting than in a doctor’s office, according to a study by the consulting firm Avalere Health.

“The suggestion that when a (physician) group comes to us ... we raise their prices, that’s not true,” said Carolinas HealthCare President Joe Piemont. “When the group comes to us, they charge our prices. These are our negotiated rates with (private insurance companies).”

Large hospital systems have greater leverage in contract negotiations with private insurers than do smaller doctors’ offices.

But hospital officials say it’s unfair to compare their systems to independent oncology offices because private doctors can refuse to treat uninsured or underinsured patients. Hospitals cannot.

“We take everybody,” Piemont said.

Hospital officials say their chemotherapy charges are justifiably higher because they must cover the cost of those non-paying patients, of providing services that are not covered by insurance and of sustaining an infrastructure that provides around-the-clock emergency care.

How the trend began

Health care experts say the trend toward private oncologists becoming employees of hospitals had its genesis in the Medicare Modernization Act of 2003. With that law, Congress reduced Medicare reimbursement to private doctors for cancer drugs. As a result, private insurers also cut their reimbursement.

Before that, oncologists were “making huge profits” on drugs, said Bob Berenson, a past member of the Medicare Payment Advisory Commission, which advises Congress on changes to Medicare.

When reimbursement decreased, private oncologists warned they would stop giving chemotherapy in their offices and predicted that Medicare would end up paying more for patients to get treated in hospital-owned clinics, Berenson said.

And that’s what happened.

Hospital-based outpatient clinics get paid more for providing chemotherapy – even if it’s delivered by the same people in the same place that was once doctor-owned.

“You take the same oncologist and suddenly you’re paying more when nothing has changed except they have a new plaque on the wall,” Berenson said.

One doctor’s quest

As reimbursement for cancer drugs declined for private oncologists, doctors found it harder to stay independent.

Five of Hauch’s partners became hospital employees when the practice sold. One left Charlotte, but the other, Dr. Bill Mitchell, struck out on his own in Huntersville.

Mitchell jokingly refers to his current practice as “Little House on the Prairie Oncology” because he took a loan to open two years ago in a small office with minimal equipment. Since then, he’s added a doctor and a second location, but he struggles to remain competitive.

“It would be easier to go with the hospital,” he said. “My trade-off is I have my autonomy.”

Mitchell is one of about 30 oncologists in the Charlotte region who remain independent.

Carolinas HealthCare employs 53 medical oncologists in Mecklenburg and surrounding counties. In addition to buying Hauch’s practice, the system purchased NorthEast Oncology Associates in 2007, Carolina Cancer Specialists in Rock Hill in 2008 and Rutherford Internal Medicine Associates in 2009. The hospital has also recruited eight medical oncologists to staff its new Levine Cancer Institute.

That means Carolinas HealthCare dominates one of the most lucrative markets in the Carolinas.

Presbyterian Healthcare, Charlotte’s other major hospital system, doesn’t own any oncology groups and employs only six cancer specialists – four in pediatrics and two in gynecologic oncology. But several private oncologists work solely with Presbyterian when their patients need hospital care.

Referring to hospitals

Independent oncologists acknowledge they often refer uninsured and underinsured patients to hospitals for chemotherapy.

This transfer of patients is one of the reasons hospital officials say their prices must be higher than those in a private doctor’s office.

But doctors in private practice, who pay more for cancer drugs and don’t get reimbursed as much as hospitals do, say they can’t afford to buy the drugs if there’s a chance they won’t get paid.

“Most practices can’t carry that kind of debt for a long period of time,” said Marge Beazley, practice administrator for Cancer Care of Western North Carolina.

Not bankrupt, but

Dr. John Powderly, who owns Carolina BioOncology Institute in Huntersville, says it’s harder than ever to remain independent.

He and his wife sold their house on Lake Norman in 2005 so he could open his Huntersville office. He has cut his staff from 19 to 11 and worries every month whether he can pay his bills.

“No, I’m not bankrupt,” Powderly said, “but I’m at or near a point where I have to consider joining a hospital simply for the sake of being able to practice my trade.”

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