Download PDF of the article

Hospitals are seeing an increase in the number of oncology specialists interested in moving from independent practice to employment or in some type of hybrid practice arrangement in order to better manage their economic future. This rapid change is at times overwhelming. The American Hospital Association states that the number of employed physicians has increased 34 percent between 2000 and 2010, with just over 25 percent of physicians currently employed by hospitals or health systems.1 Other relationships, such as group contracts, account for an additional 20 percent of physician employment.

In a recent survey, Accenture reported that in the more than 200 practices queried, the percentage of independent physicians dropped from 57 in 2000 to 39 in 2012.2 This trend is taking place for PCPs and specialists, including oncology specialists. The American Society of Clinical Oncology conducted a preliminary national census of oncology practices and found that slightly more than half (55.9 percent) of respondents reported that they were private community practices, 12.4 percent reported they were employed in nonacademic institutions, academic practices made up 11.3 percent of responding practices and private, integrated group practices that were part of a large health system were 9.8 percent of respondents. Larger practices said that they were likely to purchase smaller practices in the next 12 months, while smaller practices responded that they were likely to sell or close their practices in the next 12 months.3

The rapid changes in physician practice structure are due to a variety of reasons. Physicians are working harder to maintain their income; there is increasing competition; uninsured or underinsured patients volumes are surging (although there is hope the Affordable Care Act will decrease this); reimbursement for medical and radiation oncology is under attack by CMS and other payors; and there is increased scrutiny by CMS and OIG related to intended or non-intended overpayments. A trend many physician recruiters see is younger physicians often preferring an employment arrangement versus operating an independent practice.

In the article entitled "Physician/Hospital Medical Oncology Alignment Must Focus on Operational Efficiency before the Deal Is Finalized," written by Joseph Spallina and sent out by The Oncology Group in April, the focus was on operational issues, which are critical. Prior to any physician/hospital alignment, necessary steps must be taken to ensure success.

Alignment discussions typically take up to one year to complete if due diligence is conducted correctly. Not only are the two parties involved in discussions, but legal counsel for each party is critical for compliance with anti-kickback statutes, Stark statutes, tax exemptions issues related to compensation, provider based status rules, fair market value rules and other requirements.

Prior to a hospital and physician practice deciding to integrate, it’s critical that each party is moving into a closer alignment for the same (or similar) reasons and that they both share the same motives. Both parties to any agreement must focus on accomplishing the same goals and have similar cultures. They must have an honest discussion about expectations. Without congruence, they won’t achieve success.

In the past, oncology programs and physicians were able to stay competitive through relationships with referring physicians, subspecialty expertise, technology and facilities. In the future, the value proposition must compete on outcomes, quality and cost. Physicians and hospitals each must choose partners who can compete in these three areas successfully.