Reimbursement policies that favor large health care systems has accelerated the consolidation of cancer care in recent years. Unfortunately, these troubling trends have led to a significant shift in the delivery of certain services from the community-based setting to the hospital outpatient department, resulting in increased health care costs to patients, employers, Medicare and taxpayers.
Hospital outpatient departments (HOPDs) are paid significantly higher rates for the exact same services provided in an independent physician office. Payment policies that support higher reimbursement in the HOPD setting encourage the acquisition of office-based physician practices, further restricting patient access to care in the lower cost community setting. According to the Government Accountability Office (GAO), the number of vertically consolidated hospitals and physicians increased from 2007 through 2013. Specifically, the number of vertically consolidated hospitals increased from about 1,400 to 1,700, while the number of vertically consolidated physicians nearly doubled from about 96,000 to 182,000. Between 2012-2018, “the number of physician practices owned by hospitals/health systems rose 124%, with 44,000 additional physician practices acquired,” according to a study commissioned by the Physicians Advocacy Institute.
In addition to higher payment rates for outpatient services, many hospitals also participate in the 340B drug discount program which is largely aimed at stretching scarce federal resources to benefit indigent patients in critical access areas. However, the program’s recent growth may be contributing to the consolidation of community oncology practices. Based on an internal study from the Community Oncology Alliance, it is estimated that roughly 658 community cancer practices have been acquired by or affiliated with hospitals since 2008, with a significant portion of those transactions believed to be leveraged with 340B benefits. This has resulted in a shift in the site of service for chemotherapy administration from the physician‐office setting to other, more-costly outpatient settings. Over the last decade, the percentage of cancer care services delivered in the community-based setting dropped from over 80% to around 50%.
A recent Milliman study on the cost drivers of cancer care found that the portion of chemotherapy infusions delivered in hospital outpatient departments increased from 15.8% in 2004 to 45.9% 2014 in the Medicare population. This means that more Americans are receiving cancer care from oncologists whose practices have been bought by a hospital.
Driven by the disparity in reimbursement rates, vertical consolidation has caused costs to skyrocket. The cost of providing cancer care in a hospital outpatient department is significantly higher than the exact same care delivered at a community cancer clinic: charging approximately 126 percent higher costs for administering common cancer drugs and 100 percent higher costs for drug infusion services overall. Unfortunately for patients, the higher costs are also associated with higher copays. In its June 2013 report to Congress, the Medicare Payment Advisory Commission (MedPAC) determined that patient copays were approximately 3x higher at HOPDs than at independent physicians’ offices, costing Medicare beneficiaries as much as $380 million that would not have been paid had the cost of care been equal across sites.
The US Oncology Network, in conjunction with the Alliance for Site Neutral Payment Reform, advocates for payment parity across site of service to decrease Medicare and commercial spending, ensure patient access to the right care in the right setting and lower taxpayer and beneficiary costs. In order for policymakers and regulators to properly assess the scope and value of the 340B program, the Network supports increased transparency through public reporting on meaningful data that provides additional clarity on a covered entity’s patient mix, savings associated with enrollment, revenue associated with 340B-eligible outpatient drugs/services and charity care or patient services underwritten by 340B proceeds.