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Wellness-Based Healthcare: Economic Incentives and Benefit Design

ONCOLOGY PRACTICE MANAGEMENT ™

PROCESS IMPROVEMENTS TO ENHANCE PATIENT CARE

Special Edition

APRIL 2011

Preparing for Successful Alignment

Introducing Oncology Practice Management

Key Elements from Start to Finish By Jessica L. Turgon; Malita I. Scott

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Dawn Holcombe, MBA, FACMPE, ACHE Editor-in-Chief

President, DGH Consulting

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ncology Practice Management seeks to offer process solutions for all members of the cancer care team—medical, surgical, and radiation oncologists, as well as executives, administrators, and coders/billers. It is our hope that the information contained within these pages will assist our readers with the skills needed to master the ever-changing business of oncology in order to continue to provide the high-quality care cancer patients deserve. It is my hope that this series will instill a feeling of hope in our readers, as we highlight the positive changes oncology professionals are making to position themselves for success in the current Continued on page 3

VOLUME 1 • NUMBER 1

iven the reimbursement climate, there is growing concern that the economics of private medical oncology practices are no longer sustainable. As such, many oncologists are evaluating alignment options with hospital partners who, in turn, are seeking to strengthen their oncology service lines. Relationship options offer varying degrees of integration, benefits, and risks. Meeting objectives, responding to strategic need, improving physician integration, and mitigating financial risks are key considerations when seeking and evaluating the various alignment models (Figure, page 14). In addition to negotiating compensa-

tion for clinical services, physicians should be familiar with the following key elements that may be included in the various types of transactions.

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Fair market value (FMV) for assets. Hospitals will buy assets or arrange to assume leases at rates that are supported by market data. A third-party firm is usually consulted to evaluate a group to determine FMV for the purchase of the practice. Physician practices will be asked to provide a host of financial information including tax returns, financial statements, and other documents for the FMV analysis. Continued on page 14

Payer Strategies Forewarned Is Forearmed By Dawn Holcombe, MBA, FACMPE, ACHE

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alf or more of oncology care is paid by payers other than Medi care or Medicaid. Does your cancer center have a defined strategy for communications, contracting, and program development with these payers?

Defining Payer Strategies • Are all my contracts in one place and easily accessible? • Do I know the expiration and renegotiation deadlines for each of my payers, and do I have prompts to remind me to Continued on page 6 ©2011 Engage Healthcare Communications, LLC

INSIDE HOSPITAL-BASED CANCER CENTERS

Taking the Right Steps Toward Collaboration . . . . . . . . . . . . . . 15 PRACTICE MERGERS

The Subjective Factors for Success…or Failure . . . . . . . . . . 16 INTEGRATION CASE STUDY

Florida Cancer Specialists . . . . 18


VELCADE and Millennium are registered trademarks of Millennium Pharmaceuticals, Inc. Other trademarks are property of their respective owners. Millennium Pharmaceuticals, Inc., Cambridge, MA 02139 Copyright Š 2010, Millennium Pharmaceuticals, Inc. All rights reserved. Printed in USA

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A Letter from the Editor

Oncology Practice Management…Continued from the cover oncology healthcare marketplace. Each issue will concentrate on one area of oncology practice, showing you ways to

Collaboration requires us to work with others for mutual benefit, be it another practice, a hospital, or your payers. manage your business as efficiently as possible. With this inaugural issue, we focus on the collaborations and affiliations that

PUBLISHING STAFF

can move us forward. Collaboration requires us to work with others for mutual benefit, be it another practice, a hospital, or your payers. In each situation, you will need to understand your options and properly prepare for the negotiations. As our case study illustrates, successful collaboration can bring challenges but offers many rewards. Future issues will delve into implementing technology, such as electronic health records, and regulatory processes, such as risk evaluation and mitigation strategies. Along with the editorial board and staff, I am excited to bring you Oncology Practice Management. We look forward to your feedback. l

Publisher Nicholas Englezos nick@engagehc.com 732-992-1884 Associate Publisher Maurice Nogueira maurice@engagehc.com 732-992-1895 Directors, Client Services John Hennessy john@greenhillhc.com 732-992-1886 Phil Pawelko phil@greenhillhc.com 732-992-1887 Cristopher Pires cris@engagehc.com 732-992-1896 Editorial Director Dalia Buffery Editor Dawn Lagrosa dawn@greenhillhc.com 732-992-1891 Production Manager Marie R. S. Borelli Quality Control Director Barbara Marino

EDITORIAL BOARD

Business Manager Blanche Marchitto

Editor-in-Chief Dawn Holcombe, MBA, FACMPE, ACHE President, DGH Consulting South Windsor, Connecticut

MISSION STATEMENT

Bruce A. Cutter, MD President Cutter HealthCare Consulting Spokane, Washington

Teri U. Guidi, MBA, FAAMA President & CEO Oncology Management Consulting Group Pipersville, Pennsylvania

Patrick A. Grusenmeyer, ScD, FACHE Senior Vice President, Cancer and Imaging Services Christiana Care Health System Newark, Delaware

Cindy C. Parman, CPC, CPC-H, RCC Principal CSI Coding Strategies Inc Powder Springs, Georgia

Oncology healthcare requires providers to focus attention on financial concerns and strategic decisions that affect the bottom line. To continue to provide the highquality care cancer patients deserve, providers must master the ever-changing business of oncology. Oncology Practice Management will offer process solutions for members of the cancer care team— medical, surgical, and radiation oncologists, as well as executives, administrators, and coders/billers—to assist them in reimbursement, staffing, electronic health records, REMS, and compliance with state and federal regulations. VOPM1

Value-Based Cancer Care®, ISSN 2153-4888 (print); ISSN 2153-4896 (online), is published 7 times a year by Engage Healthcare Communications, LLC, 241 Forsgate Drive, Suite 205A, Monroe Township, NJ 08831. Copyright © 2011 by Engage Healthcare Communications, LLC. All rights reserved. Value-Based Cancer Care® is a registered trademark of Engage Healthcare Communications, LLC. No part of this publication may be reproduced or transmitted in any form or by any means now or hereafter known, electronic or mechanical, including photocopy, recording, or any informational storage and retrieval system, without written permission from the publisher. Printed in the United States of America.

The ideas and opinions expressed in Value-Based Cancer Care® do not necessarily reflect those of the editorial board, the editors, or the publisher. Publication of an advertisement or other product mentioned in ValueBased Cancer Care® should not be construed as an endorsement of the product or the manufacturer’s claims. Readers are encouraged to contact the manufacturers about any features or limitations of products mentioned. Neither the editors nor the publisher assume any responsibility for any injury and/or damage to persons or property arising out of or related to any use of the material mentioned in this publication. Postmaster: Correspondence regarding subscriptions or change of address should be directed to CIRCULATION DIRECTOR, Value-Based Cancer Care®, 241 Forsgate Drive, Suite 205A, Monroe Township, NJ 08831. Fax: 732-992-1881. Yearly subscription rates: 1 year: $99.00 USD; 2 years: $149.00 USD; 3 years: $199.00 USD.

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In This Issue

DRUG CODING & PRICING GUIDE Colorectal Cancer.................................................................................................. 7 HOSPITAL-BASED CANCER CENTERS Taking the Right Steps Toward Successful Collaboration ....................15 PRACTICE MERGERS The Subjective Factors for Success…or Failure ............................16 MANAGED CARE CONTRACTING Negotiate Your Way to Higher Reimbursements ..............17 INTEGRATION CASE STUDY Florida Cancer Specialists ......................................18

Want to Implement What You Have Learned?

Want to Read a Second Case Study?

Printable Checklists of Steps

Cancer Care Northwest: A Lesson for Consolidation and Integration

• Collaboration • Payer Contracting

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®

ARZERRA HCPCS Code J9302 Announcing a NEW J-Code for ARZERRA ARZERRA will have a permanent HCPCS code effective January 1, 2011 The new J9302 Code replaces miscellaneous HCPCS Codes J9999, J3590, J3490, and C9260 that most providers have used to bill for ARZERRA to date

HCPCS code

Description

Effective

J9302

Injection, ofatumumab, 10mg

January 1, 2011

©2010 The GlaxoSmithKline Group of Companies All rights reserved. Printed in USA. AZA228R0 January 2011

Contact your GSK representative for additional information or visit www.ARZERRA.com.


Payer Strategies

Forewarned Is Forearmed…Continued from the cover meet those deadlines with change requests and new expectations? • Do I know what my patient volume is for each payer? • Do I know my denial rates and profiles for each payer? • Do I know my patient demographics and net charges, costs, and profit/loss for each payer? • Do I know the medical directors, pharmacy directors, physician relations/contracting staff for each significant payer and their contact information? • Am I tracking my referral sources for each significant (more than 5% of your net revenue) payer, and noting any changes (which includes market organizational changes and affiliations/mergers)? • Am I aware of the oncology management policies (not just medical policy but also oversight, prior authorization, pricing patterns, and depth of utilization management and focus on oncology issues and costs) for each significant payer? • Have I talked to the medical or pharmacy director about oncology management policy (not individual patient claim issues) in the past 6 months? • Am I aware of the vendors who are calling on payers regarding oncology management solutions, and how those programs would affect my cancer center? A negative response to any of these questions would indicate that your cancer center is at risk for significant unanticipated adverse events occurring that could affect daily operations. There are a number of ways to reduce that risk—which will position your group for better negotiations and make it easier to be proactive in your payer relationships.

Contracting The terms of your payer contract

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are explicit. They govern the timing and changes generated by either you or the payer. There is a finite period of time and degree of notice that has been negotiated in these terms, and you can be sure that the payers are tracking those terms very closely. If you don’t have ready access to your contracts, and do not watch the deadlines, it is likely that you will miss activity by payers outside of those contract boundaries, or your own chance to present changes before expiration/renewal dates.

Patient Activity Profiling Payers know to the penny what their costs are for every patient you touch. Payers regularly profile your volume, costs, admission rates, readmission rates, etc. To be an effective negotiator, you also need to understand the issues and trends for the patients you treat for any individual payer, as well as how they are performing as a contracted agent of yours— their payment and service patterns. Referral and Market Trends Healthcare affiliations and mergers discussions are moving forward at a rapid rate, whether or not they actually materialize. Primary care physicians are being heavily targeted. More than one oncology practice has suddenly found its referral patterns change overnight as corporate loyalties shift with these affiliation and merger discussions. Payers and hospital disagreements can also affect your patient base. Staying aware of the market trends is a key element of your overall group strategy and directly touches on your contracting and financial situations. Payer Oncology Management Policies Every day, external vendors are calling on payers with programs designed to control the costs of

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oncology care. Some will reach out to cancer centers and physicians in the process, most will not. Payers are not immune to these vendors, because every payer is sensitive to the need for reduction in variation of care, reduction of costs, and proving that the dollars they are paying for care are being spent wisely and efficiently. Every payer has a different focus and set of top issues and concerns. Most are waiting for physicians to be proactive and bring suggestions/program options to them, but will not wait for long. Unfortunately, if they are looking at such strategies, many payers and physicians make the mistake of accepting one solution brought to them by one vendor (with its own agenda), and struggle to make that solution fit their market (which often leads to frustration and failure). True collaboration and joint oncology strategy will entail a journey together, and probably integrate several tools, projects, and vendor solutions along the way. Take the time to listen, learn, and become truly collaborative (not just with payers, but with other cancer centers in the market) on quality issues for the most productive and successful solution in the long run. Payer strategies are essential and cut to the very lifeblood and existence of a cancer center. The best care cannot be delivered for long without payment, and understanding not only the terms and limitations of payer contracts, but also the key people and directions of the payers themselves is the most effective payer strategy for any cancer center. l Dawn Holcombe is President of DGH Consulting, which provides consulting and speaking services to practices, pharma, and payers in strategy development, MD/payer negotiations and relationships, and oncology management and pathways.


Drug Coding & Pricing Guide Supplied by: RJ Health Systems

Medications Used for the Treatment of Colorectal Cancer Colon cancer forms in the tissues of the colon (the longest part of the large intestine). Most colon cancers are adenocarcinomas (cancers that begin in cells that make and release mucus and other fluids). Rectal cancer forms in the tissues of the rectum (the last several inches of the large intestine closest to the anus). The following sections will assist healthcare professionals and payers by providing appropriate coding and billing information associated with the management of colorectal cancers. The following sections include: • Associated ICD-9-CM codes used for the classification of colorectal cancer • Drugs that have been FDA-approved in the treatment of colorectal cancer • Drugs that are Compendia listed for off-label use for colorectal cancer based on clinical studies that suggest beneficial use in some cases. Please note: if a check mark appears in the FDA column it will NOT appear in the Compendia off-label use column • Corresponding HCPCS/CPT® codes and code descriptions • Most recent ASP plus 6% (Medicare allowable), if applicable • Current Code Price (AWP-based pricing) • Possible CPT® Administration Codes for each medication

Associated ICD-9-CM Codes Used for Colorectal Cancer 153 Malignant neoplasm of colon excludes: benign carcinoid tumor of colon (209.50-209.56) malignant carcinoid tumor of colon (209.10-209.16) 153.0 Hepatic flexure 153.1 Transverse colon 153.2 Descending colon Left colon 153.3 Sigmoid colon Sigmoid (flexure) excludes: rectosigmoid function (154.0) 153.4 Cecum Ileocecal valve 153.5 Appendix 153.6 Ascending colon Right colon 153.7 Splenic flexure 153.8 Other specified sites of large intestine Malignant neoplasm of contiguous or overlapping sites of colon whose point of origin cannot be determined excludes: ileocecal valve (153.4) rectosigmoid junction (154.0) 153.9 Colon, unspecified Large intestine, not otherwise specified 154 Malignant neoplasm of rectum, rectosigmoid junction, and anus excludes: benign carcinoid tumor of rectum (209.57) malignant carcinoid tumor of rectum (209.17) 154.0 Rectosigmoid junction Colon with rectum Rectosigmoid (colon) 154.1 Rectum Rectal ampulla 154.8 Other Anorectum Cloacogenic zone Malignant neoplasm of contiguous or overlapping sites of rectum, ectosigmoid junction, and anus whose point of origin cannot be determined

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Drug Coding & Pricing Guide Supplied by: RJ Health Systems

generic (Brand) name

HCPCS code: code description

bevacizumab (Avastin) capecitabine (Xeloda) capecitabine (Xeloda) carmustine (BiCNU) cetuximab (Erbitux) cisplatin (Platinol AQ)

lomustine (CeeNu)

J9035: injection, bevacizumab, 10 mg J8520: capecitabine, oral, 150 mg J8521: capecitabine, oral, 500 mg J9050: injection, carmustine, 100 mg J9055: injection, cetuximab, 10 mg J9060: injection, cisplatin, powder or solution, per 10 mg J9000: injection, doxorubicin hydrochloride, 10 mg J9200: injection, floxuridine, 500 mg J9190: injection, fluorouracil, 500 mg J9206: injection, irinotecan, 20 mg J0640: injection, leucovorin calcium, per 50 mg J0641: injection, levoleucovorin calcium, 0.5 mg J8999b: prescription drug, oral, chemotherapeutic, not otherwise specified S0178: lomustine, oral, 10 mg

methotrexate sodium

Compendia listed off-label use for colorectal cancera

Current code price (AWPbased pricing)

Medicare allowable (ASP + 6%), CPT ® effective administration 4/1/11-6/30/11 codes

$70.04

$59.84

$8.95

$6.94

N/A

$29.83

$22.92

N/A

$205.69

$175.88

96413, 96415

$58.46

$50.47

96413, 96415

$4.33

$2.07

96409, 96413, 96415

$13.20

$3.50

96409

$121.06

$37.30

$3.37

$1.54

96422, 96423, 96425 96409

$31.48

$5.00

96413, 96415

$3.60

$1.18

96372, 96374, 96409

$2.12

$1.80

96365, 96366

NDC level pricing $10.59

J9250: methotrexate sodium, 5 mg

$0.30

NDC level pricing S0178: not payable by Medicare $0.19

methotrexate sodium

J9260: methotrexate sodium, 50 mg

$2.95

$1.91

mitomycin (Mutamycin)

J9280: mitomycin, 5 mg

$67.20

$20.76

doxorubicin (Adriamycin) floxuridine (FUDR) fluorouracil (Adrucil) irinotecan (Camptosar) leucovorin calcium (Wellcovorin) levoleucovorin calcium (Fusilev) lomustine (CeeNu)

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FDAapproved for colorectal cancer

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96413, 96415

N/A

N/A

96372, 96374, 96401, 96409, 96450 96372, 96374, 96401, 96409, 96450 96409


Drug Coding & Pricing Guide Supplied by: RJ Health Systems

FDAapproved for colorectal cancer

generic (Brand) name

HCPCS code: code description

mitoxantrone (Novantrone)

J9293: injection, mitoxantrone hydrochloride, per 5 mg J9263: injection, oxaliplatin, 0.5 mg J9303: injection, panitumumab, 10 mg J9305: injection, pemetrexed, 10 mg J8705: topotecan, oral, 0.25 mg J9351: injection topotecan, 0.1 mg J9370: vincristine sulfate, 1 mg

oxaliplatin (Eloxatin) panitumumab (Vectibix) pemetrexed (Alimta) topotecan (Hycamtin) topotecan (Hycamtin) vinCRIStine (Vincasar)

Compendia listed off-label use for colorectal cancera

Current code price (AWPbased pricing)

Medicare allowable (ASP + 6%), CPT ® effective administration 4/1/11-6/30/11 codes

$106.50

$34.60

96409, 96413

$11.89

$8.52

96413, 96415

$101.85

$87.26

96413, 96415

$62.70

$52.35

96409

$89.73

$77.13

$20.41

$19.67

96413

$5.83

$4.00

96409

N/A

Compendia references available upon request. When billing a nonclassified medication using a CMS 1500 claim form you must include both the HCPCS code (ie, J8999 for CeeNu) in Column 24D and the drug name, strength, and National Drug Code (NDC) in Box 19 to ensure appropriate reimbursement.

a

b

References HCPCS Level II Expert, 2011 • Current Procedural Terminology (CPT®), 2011 (CPT® copyright © 2011 American Medical Association. All rights reserved. CPT® is a registered trademark of the American Medical Association) • ICD-9-CM for Professionals Volumes 1 & 2, 2011 • FDA-approved indication (from product’s prescribing information) • National Cancer Institute® • www.ReimbursementCodes.com powered by RJ Health Systems International, LLC, Wethersfield, Connecticut • CMS (Centers for Medicare & Medicaid Services), Medicare Allowable 2nd Quarter 2011 (effective dates: 4/1/11-6/30/11). Prices listed herein are effective as of April 1, 2011. ASP indicates average sales price; AWP, average wholesale price; CMS, Centers for Medicare & Medicaid Services; CPT, Current Procedural Terminology; FDA, US Food and Drug Administration; HCPCS, Healthcare Common Procedure Coding System; NDC, National Drug Code.

This information was supplied by:

PO BOX 290616, Wethersfield, CT 06109 T: (860) 563-1223 • F: (860) 563-1650 • www.RJHealthSystems.com

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Exit Strategies

Preparing for Successful Alignment…Continued from the cover

Jessica L. Turgon

Malita I. Scott

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Physician compensation. The appropriate compensation plan aims to strike a balance among productivity, service, and quality. Physicians should expect the hospital to rely on historical performance data and on survey data to determine an FMV compensation range. There can be variability depending on the attributes of the practice and the market the practice serves. Most compensation plans are heavily weighted toward performance and based on the number of work relative value units generated by a physician as well as performance on quality incentives.

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Transition to a hospital-based setting. Because hospitals may receive higher reimbursement for the same infusion and ancillary services provided in a physician office, it is likely that hospital management will want to either convert the practice to hospital outpatient space or relocate infusion services to the hospital. The potential in upside reimbursement makes this concept an integral com-

ponent to the discussions surrounding the deal. Both hospitals and physicians will benefit from an evaluation that understands the impact to the service line of transitioning oncology services from office-based to provider-based. In addition to better payment structures, hospital purchasing constructs may allow these services to realize lower costs related to drug acquisition. Although a provider-based setting can generate a higher combined reimbursement from Medicare and certain commercial payers, there are several operational changes that should be considered. These considerations include, but are not limited to: • Greater billing complexities and potential inefficiencies, because of integration of billing functions and services • Potentially higher out-of-pocket payments from Medicare patients • Potentially higher practice costs, related to additional staffing and facility upgrades. Because of the considerable impact to revenues and operations, evaluating the significance of a transition to a hospital-based service should be included in initial discussions.

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Exit strategy. Although the goal is to establish an affiliation that is both scalable and sustainable, any deal should be structured with the ability to unwind the arrangement. As such, some oncologists begin with a professional services agreement.

Although physicians may prefer options other than full employment, they should expect continued financial instability in an independent practice, which can be mitigated under an integrated approach. When and if the prospect of an exit strategy becomes necessary, the exit strategy should be well thought out and subject to rules, procedures, and a valuation methodology that has been mutually agreed upon by both parties. The following are recommended guidelines: • Rules—Define the parameters that allow both parties to relinquish interest in the alliance • Procedures—Outline the approach for parties interested in relinquishing their interest • Valuation—Outline the methodology to determine the values and subsequent remuneration of the exiting parties.

Conclusion A deal will be defined not only by the negotiated payment levels but the strategic and operational priorities of both partners. Oncology practices should realize the advantages of various alignment tactics with hospitals and seek to develop relationships that are sustainable and successful. l Jessica L. Turgon is Senior Manager and Malita I. Scott is Manager, ECG Management Consultants, which provides business and strategy solutions for healthcare organizations.

Figure. Level of Integration with Various Alignment Models

Medical directorship

Practice management Joint service venture organization

Comanagement arrangement

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Professional and management services agreement

Degree of hospital/physician integration

Loosely integrated

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Professional services agreement

Full employment

Tightly integrated


Hospital-Based Cancer Centers

Hospital-Based Cancer Centers Taking the Right Steps Toward Successful Collaboration By Sharron Swann, JD; Sarah Fink, JD

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reating a successful hospitalbased cancer center requires medical and radiation oncologists to collaborate with the hospital. But how to partner to create a financially viable cancer center while staying in line with myriad regulatory laws that affect such arrangements?

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Hospital employs medical and radiation oncologists. Hospital creates an on- or off-campus cancer center that may be provider-based and employs the oncologists to provide services to the center. This option presents little risk for the hospital; however, it may not be the most attractive to the oncologists.

2

Hospital-oncologists clinical joint venture. Hospital and radiation oncologists partner to create a freestanding cancer center. Medical oncologists are excluded from such a venture because of the Stark regulations. The venture could still involve medical oncologists through equipment leasing, medical directorships, and/or a management services relationship. Under the federal and state antikickback statutes, ownership may be open to scrutiny given the ability of the hospital and oncologists to generate business for and refer patients to the cancer center.

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Hospital-oncologists nonclinical joint venture. Medical and radiation oncologists form a management services organization (MSO) to provide management services and lease equipment, space, and nonprofessional staff to the hospital’s on- or off-campus cancer center. Due to constraints under the Stark law, the MSO cannot actually

“perform” the radiation therapy and other cancer-related services. The hospital must exercise professional control over the services and perform other functions to ensure that it is clear that, although the hospital may be contracting with the MSO for certain functions, it is the hospital itself operating the cancer center and providing the services. Payments to the MSO need to be structured to comply with applicable law. The management fee could be a percentage of collections, and lease

Sharron Swann, JD

A number of federal and state laws and regulations may impact any proposed arrangement discussed, including the federal antikickback statute and state antikickback laws, the Stark law and state versions of such law, state certificate of need regulations, corporate practice of medicine laws, and state licensure laws and regulations. In addition, ownership structure and governance issues will need to be carefully considered.

Medical and radiation oncologists form a management services organization to provide management services and lease equipment, space, and nonprofessional staff to the hospital’s on- or offcampus cancer center.

What You Can Do • Assess current oncology market in the community. Are there already large, established groups, or are there a few smaller groups? What makes the most sense in terms of the community—a hospital-based cancer center or a freestanding clinical or nonclinical joint venture entity? • Analyze proposed structure under applicable laws and regulations to identify potential legal hurdles. • Keep abreast of additional regulatory changes that may impact the cancer center in the development phase and thereafter. Be prepared to modify arrangements as needed. l

fees would likely need to be flat dollar amounts that are consistent with fair market value and not be based on a percentage of revenues or a peruse basis in the case of the leases.

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Hospital-branded cancer center. Hospital and oncologists remain separate in providing their respective services, but collaborate on marketing and “branding” all of their services under the auspices of a cancer center. This model works particularly well with a hospital with a well-known reputation.

April 2011

Sarah Fink, JD

Sharron Swann and Sarah Fink are attorneys at Swann & Waddill, a law firm in Austin, Texas, that focuses on healthcare-related legal matters.

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Practice Mergers

Practice Mergers The Subjective Factors for Success…or Failure By Stephen F. Schulz, CPA, CMPE

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ong gone are the uncomplicated days of private oncology practice operations. Privately practicing physicians now face major decisions about the structure within which they will pracStephen F. Schulz, tice medicine. CPA, CMPE Mergers are an opportunity to create the critical mass needed for the now larger practice to leverage operating costs properly and maintain competitive physician compensation levels for physician owners who do not see hospital employment as a viable option. Market share is a primary driver for investigating practice mergers. Physicians of all specialties need market share for a flourishing private practice. Market share provides for access to more patients, which is the foundation for growth and financial success.

The Challenge Mergers are challenging because there is no single template for ensuring the process is a success. Many

experts will tell you, “If you’ve seen one merger, then you’ve seen one merger.” The legal, accounting, tax, and financial aspects of a merger are comparatively easy to negotiate by the professionals engaged to get the deal done. The challenging aspects of a merger are subjective and rely more on physician involvement and leadership than the technical prowess of accountants, lawyers, and consultants. With the proper physician leadership in place, the advantages of merging are clear and plenty. • Control one’s destiny • Capture, retain, or build market share • Create and maintain leverage on different levels with payers and hospital systems • Build or expand service lines or new ancillary services • Subspecialize • Address and solve common private practice problems: staffing allocation, recruiting, management, and IT/electronic medical record issues • Leverage with economies of scale • In administration—ability to hire the “best of the best” in practice management, billing

Table. Subjective Factors of Success or Failure

Factors of Success Commitment to vision Commitment to process Commitment to time Manage expectations Manage communication Work around obstacles Good of the whole in favor of the few

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Factors of Failure Lack of champion Deal fatigue Not investing the time to finish the deal Unrealistic goals Poor communication Allow distractions and obstacles to dominate Good of a few overshadow the good of the whole

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and coding, and IT • In clinical services • In ancillary services • In use of space and in rent costs • Establish high quality-of-care standards and best practices • Create assets: real estate (owned office space), captive insurance company as a tax-advantaged savings- and risk-management vehicle. Physician practice mergers can maintain a private practice model while creating a true professionally run business. If done properly, it will give you all the perceived advantages of hospital employment while retaining your independence and opportunities to make more money— not to mention the ability to stay in control of your destiny.

Factors of Success A practice merger will only succeed if it involves physician members of like mind, common purpose, and aligned vision. It must have one or more champions for the cause or the deal will die an early death from fatigue or lack of direction. Mergers succeed and fail for a variety of reasons, all unrelated to the strength or weakness of professional advisors. These are mostly process-driven and subjective factors (Table). If practice merger is the road of choice, recognize it is the road less traveled. But in the end, if successfully done, it can make all the difference in providing the highest level of professional job satisfaction possible. l Stephen F. Schulz is a partner at Mountjoy Chilton Medley, where he provides broad-based practice management consulting services for physician practices.


Managed Care Contracting

Negotiate Your Way to Higher Reimbursements The Relationship between Provider and Payer By Cindy C. Parman, CPC, CPC-H, RCC

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ith preparation, you can negotiate favorable reimbursement from managed care and other contracted payers. To do so, you will need to develop a contracting strategy before each negotiation.

1

It is a negotiation; leave the adversarial relationship at the door. Negotiation is defined as a giveand-take process between parties, each with its aims and needs, seeking to discover a common ground and reach an agreement. The negotiation process should be fair to all parties.

2

Prepare for negotiation. Make a list of contracting issues and include the items you must have, the items you would like to have if possible, and the items you are willing to give up. For the contracting experience to be successful, both parties must leave satisfied with the finalized contract.

3

Be a partner. Demonstrate to the payer how your practice can help it meet its needs with the patient population. Provide information on value-added services offered by your organization, such as clinical trials, disease management, and palliative care. Emphasize relationships with other providers in the same network who ensure their patients get all necessary services in a cost-effective manner. In addition, if you have cutting-edge technology or a desirable location, emphasize those benefits.

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Compile organized data. Quantify the number of medical necessity denials or bundling rejections from this payer, and what each type of denial has cost your practice or facili-

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ty. Develop statistics on the number of repeat patients, results of patient satisfaction surveys, aggregate payment amounts, and any other statistical information that supports your case for increased reimbursement. Remember the golden rule of data: He who has the data, rules.

Maintain balance. Try not to negotiate contracts that place all or most of your patients with 1 or 2 managed care plans. You will need to protect your prac- Cindy C. Parman, COC, CPC-H, RCC tice against a major dispute or failure of one plan costing the practice most of its revenue.

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Emphasize quality. Analyze and compile utilizations and outcomes data to use for leverage during contract negotiations (eg, cost per patient by diagnosis code). Most managed care payers try to reimburse all their network providers at the same rate schedule, which may be a percentage of the Medicare Physician Fee Schedule or based on America’s Health Insurance Plans data. If you can present data showing that your practice or facility is a lower cost provider with the same or better clinical outcomes than other providers of the same medical specialty on its preferred provider panel, the managed care plan may consider a rate increase.

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Have an “out.” One of the best contracting tools is a termination clause. For example, negotiate a 90day contract termination option, so that if the practice starts losing a significant amount of money on this segment of the patient population, the contract can be terminated in a reasonable time frame.

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Be oncology-specific. Although negotiations should never focus exclusively on payments, make certain to review specific issues related to oncology services, such as the payer’s formulary, off-label drug use requirements, payments for drug waste, medical necessity, and the appeals process.

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Seek clarity. The negotiation process is the time to ensure that all terms are defined adequately, including the use of bundling software, preauthorization requirements, refunds, penalties, and other contracting issues. Eliminate any ambig uous language or confusing clauses during the negotiation process.

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It is a relationship. After negotiations, be the best contract partner possible. Monitor publications from the managed care plan, communicate with your provider relations representative, and stay abreast of any changes. l

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Little things. Look for apparently minor contractual issues that may cost your practice money over time; for example, a clause that requires the practice to pay for copying records when the insurance company requests a medical record review.

April 2011

Cindy Parman is Principal, CSI Coding Strategies, Inc, which provides auditing, education, and reference tools for outpatient coding and other consulting services for specialty coding and compliance.

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www.OncPracticeManagement.com

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Integration Case Study

Florida Cancer Specialists & Research Institute Merging in Private Practice By Dawn Lagrosa

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n October 2010, Gainesville Hematology Oncology Associates (GHOA) joined Florida Cancer Specialists & Research Institute (FCSRI), a larger, privately owned hematology/oncology regional practice. The merger established FCSRI’s presence in the Gainesville area, and offered expanded benefits to the GHOA physicians already at that location. This article describes the processes involved in creating this mutually beneficial opportunity for both practices and the patients they serve.

The Options Wanting to position the practice for future growth, GHOA researched a number of potential practice models, including affiliating with the local hospital, joining other oncology groups, and remaining a small, 5physician practice. “We came to believe that joining a strong group with a lot of know-how, specifically in oncology, would be more beneficial for us and our patients than joining a hospital,” explained Lucio Gordan, MD, a medical oncologist in the Gainesville office. Associates at both practices had conversed informally over the years at medical conferences and oncology society meetings, which ultimately led to FCSRI being identified as the ideal group with which to affiliate. Meanwhile, FCSRI was in search of strategic ways to expand their services. “We had been looking to grow the group where there were good opportunities,” said William N. Harwin, MD, a medical oncologist in Ft. Myers and president of FCSRI. “Gainesville had a very strong group

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and strategy, as well as a strong presence in the market, which fit well with our business model.”

The Steps During initial meetings, FCSRI explained the components of its corporate business model: operational strategies, management structure, and the financial aspects of physician remuneration, including partnership and voting rights. Dr Harwin and Brad Prechtl, CEO of FCSRI, also visited the practice in Gainesville. According to Dr Harwin, this not only provided the opportunity “to see the doctors in operation in their office,” but also furthered development of the “trustworthy personal relationship” needed for long-term success. Physicians in both practices agreed that trust, along with a transparent process, was essential. Together, they developed a template for their agreement before involving legal representatives to finalize the deal, noted Dr Gordan. The Challenges During the merger process, the groups were faced with several hurdles. “Working through the emotions of transforming from a small practice to a large organization and instilling a level of trust and confidence was paramount to the success of the merger,” explained Prechtl. Another challenge was how to reduce the number of staff at the Gainesville office. “A selection process was instituted to determine who would be the best fit in the FCSRI model,” said Dr Gordan. Merging the 2 electronic health

ONCOLOGY PRACTICE MANAGEMENT

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April 2011

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Special Edition

record (EHR) systems was also no small feat, because the 2 systems could not be seamlessly integrated. This necessitated manual data transfer, which took over 3 months to complete. After that task was accomplished, the staff in Gainesville had to be trained on the new EHR system and become comfortable using it.

The Payoff “In our overall business model, there are a lot of benefits from economies of scale,” said Prechtl. “These include advantages in pharmaceutical purchasing, new business opportunities, a supplementary in-house pharmacy practice, and favorable contracts with payers, to name a few.” However, the benefits derived from the merger extend well beyond business matters. As a combined practice group, the physicians in Gainesville have improved many aspects of their patients’ care. For example, they now are able to serve more patients because the chemotherapy unit is in the same location as the clinic. In addition, the new EHR system has enhanced communication with referring physicians; and access to clinical trials will soon expand because of FCSRI’s thriving research program and association with the Sarah Cannon Research Institute, one of the largest community-based clinical trial organizations in the nation. “As a part of the Florida Cancer Specialists network, we have become quite a lot stronger here in Gainesville,” said Dr Gordan in summing up the advantages of the merger, “and I think FCSRI has benefited, as well.” l


Your goal is to give him a cancer treatment that’s right for him. When you choose a Lilly Oncology product, our goal is to make sure he has access to it.

Medication Access Support. A cancer diagnosis presents many challenges for your patients— and for those who love and care for them. That’s why PatientOne offers reimbursement support and financial assistance for eligible patients who are prescribed Lilly Oncology products. It’s the kind of support that can make access to medication easier—and make a difference in the lives of your patients. To learn more, visit www.LillyPatientOne.com or call 1-866-4PatOne (1-866-472-8663). MG69852 02/11 PRINTED IN USA © 2011, Lilly USA, LLC. ALL RIGHTS RESERVED.

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Implementation Checklist: Collaboration

q Assess the oncology market in your community q Evaluate your current organization q Envision the future organization q Research the alignment options and determine which will work with your business goals

q Consider diversification into oral dispensing, durable medical

equipment, clinical trials, occupational therapy, laboratory analysis, imaging, or pain management

q Explore business partner options for physicians with similar goals and alignment vision

q Identify a physician champion for the proposed new entity q Prepare your financial information for review and negotiation q Define your exit strategy q Consult an attorney to ensure any new venture is in line with Stark and other regulations

April 2011, Vol 1, No 1 For detailed articles on Collaboration, visit www.OncPracticeManagement.com


Implementation Checklist: Payer Contracting

q Study the national trends in oncology reimbursement q Know the terms and deadlines of your payer contracts q Identify your must-have items, your like-to-have items, and the items you can give up

q Prepare your patient activity profile for each of your payers q Ready information on your value-added services q List your relationships with other providers in each payer’s network q Develop statistics on your cost of medically necessary denials q Compile utilizations and outcomes data q Plan to include a termination policy

April 2011, Vol 1, No 1 For detailed articles on Payer Contracting, visit www.OncPracticeManagement.com


April 2011, No 1, Vol 1