Vertical Integration - the future of private practice Rad Onc?

[Gfunk6]

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For those of you who don't know:

1. Horizontal integration = merger of PP Rad Onc group with other oncology groups (Med Onc, Rad Onc or combined) for the purposes of market stability, better coordination of care, practice survival, etc.

2. Vertical integration = merger of PP Rad Onc group with either specialists (mainly surgeons such as Gen Surg, Neurosurg, Urology, ENT) and/or with primary care physicians. This is being done due to the likely introduction of bundled payments by CMS, which will presumably dispense with fee-for-service and simply give a lump sum for oncology care. This will allow an alliance of PP groups to compete with hospitals. Furthermore, such "mega groups" will be better able to meet provisions of the ACA which call for more efficient, cost-effective patient care.

We are certainly looking into vertical integration and I know a couple of practices who have already merged. I'd be curious to hear thought/perceptions from other Rad Oncs around the country.

 

[deleted4401]

Interesting. My esteemed colleague works for a "vertically integrated" center and it seems to be a fantastic set up. I'd like to work for a system like that - captive referral base, everyone is in building, and everyone's incentives are in line for the practice to succeed.

This change in reimbursements to push people to work for the hospital does not bode well for the private practitioner and free-standing centers. The margins are going to get very slim and places are going to shut down. I don't think it's good for community cancer care. None of the hospitals in Southern Maryland have enough patients to warrant a linac, so we provide services for them. If (in the long term, 15-20 years down the road) we end up failing, these folks will have to start driving to DC and Annapolis for their radiation - 1.5-2 hour one way trips. And this is the DC area. I wonder about community practices in the Mountain West, Deep South, and other rural areas. They are creating some perverse incentives ...

 

[medgator]

This change in reimbursements to push people to work for the hospital does not bode well for the private practitioner and free-standing centers. The margins are going to get very slim and places are going to shut down. I don't think it's good for community cancer care. None of the hospitals in Southern Maryland have enough patients to warrant a linac, so we provide services for them. If (in the long term, 15-20 years down the road) we end up failing, these folks will have to start driving to DC and Annapolis for their radiation - 1.5-2 hour one way trips. And this is the DC area. I wonder about community practices in the Mountain West, Deep South, and other rural areas. They are creating some perverse incentives ...

This is true for several areas I am sure and I agree with you that it's not a good trend. Often hospitals will charge more for the exact same services/procedures and this ends up driving up healthcare costs for everyone while reducing choice. I know that in very large cities, some patients find the freestanding/PP clinics easier to access (no parking garages, often parking right in front of the office, better accessibility for times etc.)

 

[RadSki]

Sounds like Kaiser Permanente

 

[deleted4401]

Well, Kaiser has its own insurance plan and only takes it own insurance, so it's a pure HMO. In terms of reimbursements, they usually salary their employees and pay capitation to their contracted services (Kaiser doesn't have radiation oncology in our area, so they contract out to us, at a pittance). A vertically integrated model is more or less like a smaller version of the Mayo Clinic, but with varying degrees of ownership of the capital. They take a variety of insurances, pay their employees in all sorts of ways (salaries, RVU-based) and they get a cut of all the capital gains (technical fees, rent from the building, etc.). So, I don't think Kaiser is a fair comparison.

 

[Old rad onc]

This is only my 2nd reply in 3years. Gfunk is to be congratulated for such an incredible idea and resource. I knew people in rad onc were smart but the compassion and intelligence shown on this site gives me hope for our future.

I have been in private practice for about 20 years. Trained when there was no 3d planning or srs or imrt. In fact when I was a med student, they used tomograms and some breast ca patients were treated with estrogen. Back when we treated hodgkin's with mantles and spade fields. Sigh. But I digress....

I have seen many rad oncs over the years used and abused by senior partners looking to take advantage of employees. While I agree some freestanding centers have abused the system I believe most are honest and put patients first over profits. I take exception with the notion that hospital based practices are more ethical and that freestanding centers are abusing the system. There are bad apples in both.....

I started my own freestanding center not because I wanted to , but rather worked for a scheister for 6 years who promised partnership after 3 and never delivered on numerous promises. I have competed with him and the hospital I used to work for.....successfully.....built my own center as a solo rad onc. But that's another story.

I have been thinking about the future of our field and integration will probably happen but there are some issues. Autonomy is the biggest one. Alot will depend on the success of ACOs. If they succeed then small practices will have no choice but to merge.

In the future I think hospital foundations may be the only ones who will be able to afford to build new centers and get new equipment. But I also believe we will have a shortage of rad oncs in the next 5 years or so. Because of the shortage, freestandings and practices will be more valuable once we survive these cuts....I think the shortage of med oncs and physicists will be even worse. I believe we will have fewer dollars but more work. That will likely equal bigger fractions and selective IMRT.

My advice is only merge or sell if you think it will be beneficial. Don't panic merge or sell. Build as healthy a practice as you can. If you take good care of your patients and referring docs, there will always be work.

The problem with integration is that no one really understands our work. Vertical integration is tough because of the differential in primary care salaries. Kaiser has integrated but rad onc has its own salaries and department. A good solution. Merging in order to negotiate better with payors is also potentially beneficial. The last problem I have with integration is like George Orwell's Animal Farm......
All pigs are equal, but some are more equal than others.......

 

[TarHeelRadOnc]

This is only my 2nd reply in 3years. Gfunk is to be congratulated for such an incredible idea and resource. I knew people in rad onc were smart but the compassion and intelligence shown on this site gives me hope for our future.

I have been in private practice for about 20 years. Trained when there was no 3d planning or srs or imrt. In fact when I was a med student, they used tomograms and some breast ca patients were treated with estrogen. Back when we treated hodgkin's with mantles and spade fields. Sigh. But I digress....

I have seen many rad oncs over the years used and abused by senior partners looking to take advantage of employees. While I agree some freestanding centers have abused the system I believe most are honest and put patients first over profits. I take exception with the notion that hospital based practices are more ethical and that freestanding centers are abusing the system. There are bad apples in both.....

I started my own freestanding center not because I wanted to , but rather worked for a scheister for 6 years who promised partnership after 3 and never delivered on numerous promises. I have competed with him and the hospital I used to work for.....successfully.....built my own center as a solo rad onc. But that's another story.

I have been thinking about the future of our field and integration will probably happen but there are some issues. Autonomy is the biggest one. Alot will depend on the success of ACOs. If they succeed then small practices will have no choice but to merge.

In the future I think hospital foundations may be the only ones who will be able to afford to build new centers and get new equipment. But I also believe we will have a shortage of rad oncs in the next 5 years or so. Because of the shortage, freestandings and practices will be more valuable once we survive these cuts....I think the shortage of med oncs and physicists will be even worse. I believe we will have fewer dollars but more work. That will likely equal bigger fractions and selective IMRT.

My advice is only merge or sell if you think it will be beneficial. Don't panic merge or sell. Build as healthy a practice as you can. If you take good care of your patients and referring docs, there will always be work.

The problem with integration is that no one really understands our work. Vertical integration is tough because of the differential in primary care salaries. Kaiser has integrated but rad onc has its own salaries and department. A good solution. Merging in order to negotiate better with payors is also potentially beneficial. The last problem I have with integration is like George Orwell's Animal Farm......
All pigs are equal, but some are more equal than others.......

To echo Wagy, I think this is an excellent post. Appreciate the insight that comes with your experience.

Agree that the pendulum will swing back. The problem is that many practices, even those with technical ownership and an excellent community presence, will struggle in the interim and some will be forced to sell/merge/etc with hospitals. Those practices that survive will likely be in a strong position, albeit 10 years down the road.

Also agree that ACOs may not be successful and, at the very least, are unlikely to work the way they are currently envisioned.