Community oncologists are devising ways to stay afloat as they brace for the "perfect economic storm" making landfall on their practices. At a 2010 ASCO Annual Meeting session called "The Challenge of Financial Survival," speakers described their view of these uncharted waters.

Indeed, many practices are feeling the pinch of a difficult economy and are being forced to evolve, said Elaine L. Towle, CMPE, Director of Oncology Services at Oncology Metrics, a division of Altos Solutions, Los Altos, California. This is clear from the National Practice Benchmark, an annual survey of some 200 U.S. practices that her company conducts.

"Total collected revenue in these practices increased 6% from 2007 to 2008, and at first glance this is good news. However, total practice expense increased 16% over the same period, resulting in fewer dollars available to support practice operations," she said. "When practice expenses rise more rapidly than revenue, the result is lower physician incomes."

The most recent survey (2009) revealed a shifting practice landscape. Some 73% of respondents were still independent physician-owned practices but many were consolidating: 11% were practicing oncology within a multispecialty group, 6% were hospital-owned physicians or hospital employees, 5% were physician-owned but had a hospital or corporate affiliation, 2% were affiliated with US Oncology, 1% were academic-affiliated and 2% reported "other" practice settings.

Perhaps more telling were their predictions: only 15% envisioned their practices/business structure remaining "unchanged and viable" for at least 5 years, while 19% said they are "changing now" and 53% predicted they will be stable only for "the foreseeable future."

Eye of the Storm

Oncologists considering a new business model are mainly concerned about declining physician compensation, the survey suggested. This was cited as a reason for change by 54% of the survey respondents, while others cited loss of referrals due to competition (19%) and the need to reduce practice overhead (15%). Interestingly, only 4% said reduced reimbursements were a reason for change and just 3% listed lower drug cost margins.

But oncologists have seen drug margin as a percentage of total revenue increasingly fall, from 45% in 2002 to just 9% today, according to Ms. Towle, who said this contributes to the "dramatic decline" in the funds available to run one's practice. Revenue related to drugs is more important than ever, she maintained (see Fig. 1), adding, "If drug management is not a core competency in your practice, you are losing revenue. The 'new normal' is low-margin, high-volume."

More Problems and Pressures

The "perfect storm" is also fueled by greater regulatory exposure, information overload, scarcity of resources, increased practice size, and an emerging patient profile in which more and more Medicare patients lack secondary insurance. As a result, oncologists are increasing their referral of patients for chemotherapy visits outside of their offices. In the survey, 33% of oncologists referred up to 400 visits in 2009, and 9% referred more than 1,000.

More drain on resources comes from the handling of insurance and payer issues, with the average practice employing 1.2 billing staff for every physician and 0.4 patient financial advocates.

Time to Start Adapting

"Pay-for-service is going away; new systems will pay for quality and outcomes," Ms. Towle emphasized. Many practices have started adapting, and good first steps are to become involved in a demonstration project, initiate clinical process measurements, and perhaps partner with others to increase efficiency. Partnering is especially beneficial in areas that require capital or specialized, highly paid staff for procedures such as radiotherapy, imaging, and infusion therapy.

The main point, she concluded, is, "The good ol' days are gone. New practice models are developing. Investigate and embrace them." ■