HealthLeaders Magazine. By E. Thomas Wood, for HealthLeaders News, February 14, 2005
Oncologists run a business where nobody ever wants to be a customer. Yet the universal experience of cancer has touched virtually everyone in and outside of healthcare with a heart-wrenching experience. But it may not always be so. Much talked-about clinical advances on the horizon will revolutionize the prevention, diagnosis and treatment of cancer. At the same time, those same advances will bring about far-reaching changes in how the hospitals, physician practices and health plans involved in treating cancer will operate in the future.
There will be winners and losers, and they may not be the ones you would expect. For instance, today, medical oncologists are viewed as the relative underdogs. They command a high salary, but Medicare payment trends in the pipeline may substantially damage their business. Conversely, large academic medical centers wield a tremendous amount of power when it comes to the business of cancer. Not only can these institutions afford both the hardware costs and the labor expense of fully embracing new radiation technology, they also are backed by health plans that are steering their most challenging cases to these centers.
Long-term gain
A generation ago, a cancer diagnosis often meant a certain death sentence. A generation hence, cancer will be just one more chronic illness that people live with and overcome. The National Cancer Institute has made it an institutional goal to "eliminate suffering and death due to cancer by the year 2015." NCI Director Andrew C. von Eschenbach, M.D., speaking at the American Society of Clinical Oncology's annual meeting last June, insisted this goal is realistic: "Is 2015 bold? Absolutely. We not only can do it, we must do it."
No matter how much progress researchers make, oncologists will never lack for work. Nationwide, the total direct medical cost of cancer care leapt 23 percent between 2001 and 2004, according to estimates by the American Cancer Society Inc. and the National Institutes of Health. Among people under 85, cancer is America's No. 1 killer.
Much of von Eschenbach's vision to make cancer a more manageable disease is based on breakthroughs in emerging sciences such as genomics and proteomics. Ultimately, cancer experts predict that the end-stage treatments will not make the huge differences in quality of life and cost. Instead, the massive impact will come from screening, early detection and "theranostics" (pairing a diagnosis with instant therapy for a cancerous condition).
The technologies that will bring about this revolution range from multimillion-dollar pieces of equipment that enable heroic treatment of tumors to humble-looking devices and substances capable of detecting and destroying incipient cancers.
Says Ellen V. Sigal, Ph.D., founder and chairperson of Friends of Cancer Research in Washington, D.C., and a member of NCI's Board of Scientific Advisors: "The consensus among the science community is that for the first time, we understand the genetic underpinnings of this disease."
Short-term pain
This is all great news for patients. But the strategic outlook for healthcare organizations over the next couple of years is causing deep concern on many fronts.
"In the short term, we have the potential to see convulsions in the business of oncology," says William N. Hait, M.D., Ph.D., director of The Cancer Institute of New Jersey and a professor at UMDNJ-Robert Wood Johnson Medical School in New Brunswick, N.J. The main reason is a provision of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 that changes how medical oncologists are reimbursed in the outpatient setting. The changes are meant to fix a situation in which reimbursements for the drugs were often much higher than the physicians' costs, while payments for administering the medication did not cover costs.
In 2004, the Centers for Medicare & Medicaid Services introduced stopgap initiatives to temper the legislation's effects for the moment. Settling on a final system of reimbursement formulas will be a multiyear process, but it is clear that the CMS numbers as they now stand will reduce drug reimbursements to outpatient practices that administer chemo. A recent Government Accountability Office study estimated that total Medicare drug payments to oncologists will come in at $202 million above cost in 2005, down from $790 million in 2004. The report found that payments for administering chemotherapy increased substantially from 2003 to 2004, covering more expenses for oncologists than what Medicare covers, on average, for other specialties. 2005 rates, however, will dip slightly below 2004 levels.
Meanwhile, it is still unclear how hospital reimbursements will be affected by the MMA. "As we remove any profit margin from chemotherapy, it will have the unintended consequence of shifting care into the hospital," Hait predicts.
While hospitals worry about a flood of chemo patients coming their way, physician practices are scrambling to cope with the loss in pay due to Medicare changes. Many medical oncology practices are exploring mergers with radiation oncologists, albeit from a position of weakness because of the uncertainties over the future of chemo administration.
When health plan leaders talk about cancer, their mantra is "evidence-based medicine." With costs spiking and untested medical innovations proliferating, payors have reason to fear the loss of whatever tenuous grip they now have on the application of new cancer treatments. They lost their footing most spectacularly in the 1990s, when the popularity of autologous bone marrow transplantation, as a last-ditch therapy for breast cancer, leapt ahead of scientific investigations. By the time the procedure was proved to be largely a failure, insurers had been forced to pay many millions to cover it.
Insurers know that focusing on clinical evidence is a sure way to maintain logic in coverage decisions. But can they convince docs and patients to accept the "evidence?"
Forward thinkers in the oncology industry are receiving an ambiguous diagnosis of the future of their business. The few available certainties involve trends they must watch, and prepare to encounter, rather than concrete steps they must take. Cancer caregivers must keep close tabs on Medicare reimbursement for chemotherapy. Radiation technology is rapidly advancing, and healthcare organizations must be ready to embrace technologies that have popped up in only the last few years. Those who want to be ahead of the curve must start to think about evidence-based cancer medicine. There can never be many sure things about the future in oncology-except the knowledge that those involved in its practice will proceed, as ever, with determination.
How Cancer Is Changing Business Strategies at MEDICAL GROUPS
Almost anyone running an oncology physician practice today must contend with two issues that are mirror images of one another: Medical oncology may soon become a commodity, and radiation oncology is becoming so specialized in its technological demands that finding and affording qualified staff is now a major challenge.
Practice anxieties
The Medicare Modernization Act, with its downward adjustments of drug reimbursement and slighter upward push to administrative payments, has made strategic planning in medical oncology all but impossible for group practices. "Everybody thought the sky was falling from 2003 to 2004, and then 2004 has been anxiety-provoking," says Thomas A. Marsland, M.D., a member of Florida Oncology Associates, an 18-physician, nine-office network of cancer practices in and around Jacksonville. "It's only in the last six weeks of 2004 that they came around and started putting some money back in. It's going to take us some additional administrative expense to figure out how exactly to use these codes correctly." But it isn't enough, he adds; there still is a net deficit.
Marsland's group has tried to cope in a variety of ways. It is negotiating a merger with a large radiation group in the area that will bring in top-flight imaging capabilities, including a positron emission tomography/computed tomography (PET/CT) scanner. An electronic medical record system is under consideration, with some hope that the practice can recoup its cost of more than $1 million through improved efficiency as well as the sale of outcomes data to companies conducting clinical research. Marsland has even given some thought to creating a specialty pharmacy within the practice as a way to diversify revenues. "You gotta be creative," he says.
Because of the Medicare Modernization Act, Marsland anticipates a sea change in how oncologists like himself do their daily work. Today, he can make his own decision about how to administer certain drug cocktails. He gives the commonly used combination of 5-FU (5-Fluorouracil) and Leucovorin as an example: "Some people give it five days in a row every 28 days; some people give it once a week for six weeks in a row." Marsland sees that discretion being eroded in the near future. Physicians typically bristle at administrative efforts to standardize therapies, but he expects the more business-savvy of his fellow practitioners to realize that doing things their own way may not be a luxury they can afford in the future. "As the margins become less and less, we have to look at the economics of how the drugs are given."
That step may be only the beginning of a broader trend of reduced autonomy for medical oncologists. "Just using my crystal ball, I think all of these changes are eventually going to force some standardization, for better or worse," Marsland says. "And that drives folks into bigger and bigger practices. It's going to be very hard for the smaller groups of two or three, or even seven or eight physicians, to survive."
Radiating hope (and fear)
Radiation oncology appears to be a more fortunate species within the cancer industry. A stroll around the exhibit floor at last October's annual meeting of the American Society for Therapeutic Radiology and Oncology (ASTRO) revealed the vast array of new devices offering ever more precise weaponry against tumors-and conversations with physicians made it clear that many willing and able buyers exist for this gear. In the parallel universe of diagnostic imaging, the market is even larger and more bullish. Yet medical oncologist Marsland cautions that all is not so rosy for his radiation brethren. "The radiation folks have their own
Headache No. 1 is the fact that advances in radiation oncology and diagnostic imaging arrive at the practice with huge amounts of labor-cost baggage. Intensity modulated radiation therapy (IMRT), for example, is truly a lifesaver, delivering a more precise dose of radiation to tumor sites and thus making possible higher doses than traditional radiation methods, while doing less damage to surrounding tissue. But it's not a plug-and-play procedure. Whereas a prostate treatment with an old-fashioned linear accelerator might require an hour of planning time on the part of a highly paid physicist, doing a prostate with IMRT can take eight to 10 hours. For the moment, Medicare reimbursement reductions on IMRT are negatively impacting hospitals more than freestanding medical radiation practices, but industry observers don't expect that difference to persist. "I believe at some point CMS will start to correct this," says Andre A. Konski, M.D., MBA, who serves as the director of clinical research for radiation oncology at Fox Chase Cancer Center in Philadelphia. "As with anything else in medicine, reimbursement starts to fall as time goes on and more people adapt the technology."
Meanwhile there is also a severe shortage of radiation therapists, with the nationwide workforce some 18 percent or 1,800 short of demand as estimated by ASTRO. For now, says Joseph Spallina of Arvina Group LLC in Ann Arbor, Mich., radiation oncology "is still a moderate-margin business," but it may not be so indefinitely: "We are beginning to see signs of erosion."
How Cancer Is Changing Business Strategies at HOSPITALS
Despite all the advances affecting the clinical practice of cancer care, most hospitals are not showing parallel improvement in how they run their cancer business. Healthcare consultant Joseph Spallina, of Arvina Group LLC in Ann Arbor, Mich., reports that in at least nine out of 10 hospitals he visits, the cancer program is "looked at as a department, not a business unit." As a litmus test, Spallina always asks for a profit-and-loss statement on the program. Only rarely can executives deliver one. If they can't quantify what the business is worth, then it's not hard to imagine their chances of thriving in a rapidly evolving environment.
A grim future?
Hospitals face some of the same issues in their cancer business that they deal with in other specialties: payor reimbursement policies that squeeze margins, boutique competitors skimming off some of the most profitable cases in their mix, and costly treatment of uninsured patients. But they also are confronted with problems specific to oncology. Among these are the threat of a disruptive increase in chemotherapy patients shunted away from outpatient facilities because of Medicare policies, as well as the consequences of a greater payor emphasis on clinical quality benchmarking in oncology.
The possible influx of medical oncology patients, in the wake of the MMA's changes in how physicians are paid to deliver chemotherapy infusions under Medicare's outpatient Part B, is an issue clients regularly bring up with consultant Heather Pfeiffer of Washington D.C.-based The Advisory Board Co. "Probably the biggest concern is that they don't have the capacity and they don't have the staff," she says. "Honestly, the education of smaller nonspecialized hospitals is probably not at the level of the medical oncology practices, either. They're not dealing with the brand new regimens and the really complicated patients taking these new drugs."
Publicly, hospitals put on a brave face: "We're absolutely prepared," says Jennifer Daley, M.D., senior vice president for clinical quality and chief medical officer of Dallas-based Tenet Healthcare Corp., which has deployed a clinical program development group to peer "over the hill" at future cancer issues and to help roll out preparations for change across the company's multihospital network. "We have the capacity," she emphasizes.
William N. Hait, M.D., Ph.D., director of The Cancer Institute of New Jersey and a professor at UMDNJ-Robert Wood Johnson Medical School in New Brunswick, N.J., likewise plays down the logistical difficulties, but he nonetheless dreads the prospect of a mass migration into inpatient care: "For the healthcare system, this will be exceedingly more expensive-and for the patient, a complete disaster." More to the point, Hait believes that if CMS can find savings by cutting outpatient reimbursement for chemo, it will move promptly to do likewise with its inpatient Part A payments to hospitals.
The P4P push
While hospital cancer units face the potential burden of a rising number of patients, they also will be challenged with quantifying quality in the near future, with pay for performance in oncology not far behind. Pfeiffer sees the nation's major academic cancer institutions driving the trend, spurred on by the government's move toward P4P. "I think CMS opened Pandora's box," Pfeiffer says. She notes that clients of hers at the leading edge of research and treatment want to be rewarded for their excellence and are asking for more information about quality indicators and benchmarks so they can negotiate pay for performance with payors.
With P4P becoming more common in cardiac care and other areas of practice, the desire to bring it to oncology is no surprise. But the task is infinitely more complicated in oncology than in cardiology, given the tremendous diversity of cancerous conditions, diagnostic techniques and treatment options. Obviously, this means that the largest providers are the best equipped-based on volume-to furnish evidence of successful outcomes. Health plans already have policies in place that tend to shift the more complicated cases toward the major tertiary centers. For example, Hartford, Conn.-based Aetna Inc. now pays to fly patients and family members to major treatment centers. "We design our products and benefits so that it is significantly to the patient's advantage to go to an institute of excellence," says James D. Cross, M.D., Aetna's national medical director for medical policy administration.
Edmund Pezalla, M.D., M.P.H., of Costa Mesa, Calif.-based pharmacy benefit manager Prescription Solutions, says "health plans are concerned about areas where there are fewer large centers and more care is being delivered in smaller offices, because they have less opportunity to look into those. They are moving toward adopting guidelines from the large cancer centers for the diagnosis and treatment of the more common cancers." Smaller and less specialized hospitals may therefore have good reason to view the notions of quality measurement and P4P in cancer care with a jaundiced eye, seeing more burden than benefit.
Yet some community hospitals are taking concerted steps to meet the quality challenge. Roger S. Hunt, president and CEO of BroMenn Healthcare System in Normal, Ill., which has about 225 staffed beds, has recently joined with the staff of the Community Cancer Center (a five-year-old facility that is a joint venture of BroMenn and cross-town competitor OSF St. Joseph Medical Center in Bloomington, Ill.) in an effort to establish standards for benchmarking against other cancer centers. The process is meant to turn the medical advisory board of the Community Cancer Center into "the cancer quality committee of the two hospitals," Hunt explains. "Large health plans, but also large employers, are far more sophisticated in looking to find providers that are using broader-based protocols, are using disease management, and are able to demonstrate their results," he adds. "We recognize we've got to develop our own structure to be in that position."
How Cancer Is Changing Business Strategies at HEALTH PLANS
Strategic thinkers in America's health plans have seen one possible version of the future of cancer care, and it's not one they want to experience again. If they are to avoid quagmires like the autologous bone marrow transplant controversy of the 1990s, they must evangelize successfully with the gospel of evidence-based medicine.
The ABMT controversy inflicted both financial and reputational scars on insurers before the scientific verdict largely vindicated their reluctance to pay for the treatment. The notion was that extremely high-dose chemotherapy, followed by a bone marrow transplant to alleviate the effects of the chemo, held the hope of beating back late-stage breast cancer. The first limited clinical trials in the late 1980s confirmed only that further study was warranted, but they gave rise to newspaper headlines suggesting a miraculous cure was at hand. By 1990, the first lawsuit had been filed challenging a health plan's denial of coverage on the roughly $100,000 procedure.
Patients won a series of these cases (with survivors of one patient taking home an $89 million settlement), while insurers took a beating in the press and public opinion. Under pressure from members of Congress, the Office of Personnel Management mandated coverage of the treatment in federal workers' health plans. A 1995 clinical study from South Africa appeared to confirm that ABMT worked, and although other studies continued to question its efficacy, the public debate was all but over. In 2000, a team of independent oncologists conducted an on-site review of the South African research and found it to be entirely fraudulent.
"There's always going to be pressure in life-threatening illness to do things before all the science is there," says James D. Cross, M.D., national medical director for medical policy administration at Hartford, Conn.-based Aetna Inc. He emphasizes that the health plan is not the only party that suffers when patients, physicians, the courts and the press pile on to condemn a refusal of coverage. When the pressure succeeds, as it did with ABMT, a new technology floods into the marketplace before trials are conducted-thereby making it very difficult to get subjects to take part in trials. Science itself is the loser.
As a matter of fact
No wonder, then, that the evidence fetish is all the rage in the health plan world. Yes, "evidence-based medicine" has inherent merit for many reasons, but its greatest virtue is that it inoculates against corporate disasters like the ABMT fiasco. Cross at Aetna states the case bluntly, as he pleads for doctors to "follow evidence-based medicine and not be the old prima donna physician who knows best because he knows best."
Health plan leaders are nervous these days as they see Medicare straying from the path of evidentiary righteousness. Politically influenced coverage mandates by CMS tend to ricochet back to health plans as evidence of clinical validity. Case in point: intensity modulated radiation therapy for breast cancer. "IMRT has not been proven for breast cancer as it has been for other cancers, but as a political matter and a national directive, they have said IMRT is approved for all kinds of cancer," Cross argues. "They're not following the science. They're following the political persuasion." The impact on Aetna's own coverage decisions follows a familiar pattern. If a CMS coverage decision is more liberal, "the providers want us to follow CMS," Cross says. "If it's more restrictive, they don't want us to follow CMS quite so aggressively."
Manage this
Coordinating the entire continuum of oncology, from prevention to detection to treatment, clearly will become a daunting challenge as science offers a multitude of new options for intervention. That's why healthcare economist Alain Enthoven, Ph.D., looks at the financial future of cancer care and shudders. "You can be assured that all people who are diagnosed with cancer are going to exceed their deductibles," he says. "At that point, in an open-ended, fee-for-service system, the costs will be uncontained and unconstrained." For Enthoven, who was a member of the Jackson Hole Group, which birthed the concept of "managed competition," the cancer conundrum is one more argument for policy change.
Aetna's Cross disagrees. "It is true that with current plan designs, and even with some of the newer consumer-based plan designs, there is a component of patient responsibility in the early dollars of care," he concedes. "But we still do a tremendous amount of case management, disease management and all kinds of interventions to help manage that dollar once it goes beyond what the patient is responsible for."
Denver-based Great-West Healthcare, with around 1.9 million members nationwide, has implemented a customized oncology disease management program with some success despite the fact that, according to Michael Norris, manager of medical outreach programs, "cancer docs are not used to managed care." The initiative includes specialty pharmacy services and makes available a nurse on a 24-hour/7-day basis to handle calls from patients. "There is some pushback," Norris concedes. "We do have some oncologists around the country who do not want to work with this program. We have found ways to deal with that, so we still bring educational benefits to the members without having to go into any confrontational mode with the physician."
Great-West is not alone in trying to apply disease management principles to cancer care: Premera Blue Cross, a Mountlake Terrace, Wash.-based health plan serving Washington and Alaska, has had a benchmarked disease management approach to cancer since 1998.
Great-West's Norris would philosophically like to see all cancer services under a disease management umbrella, though he does not expect to see that happen soon. "I believe in the fundamental idea that if you could pay a physician for keeping somebody well, that would improve our overall health," he says. "But our system is not set up to allow that. I don't believe it will happen until there are system-wide changes. One employer or one health plan is not going to do it."
