November 2013 Edition Vol.7, Issue 10

Are GPOs Helping Community Oncology Survive?

Are GPOs Helping Community Oncology Survive?

By Lynne Lederman, PhD

Community oncology practices are under unrelenting financial and administrative pressures, with increasing closures of community oncology physician-owned practices, increasing hospital purchases of practices, and increasing numbers of clinics facing financial problems or merging with or being acquired by other practices.1 In the next 12 months, it is likely that smaller practices will continue to close and lay off oncologists and oncology-certified nurses, and that larger practices will buy out other practices.2 In a look at the potential role of group purchasing organizations (GPOs) to help community oncology practices remain viable, we are defining community oncologists as those who work in private practice, either alone or in a group in a free-standing facility that is not part of a hospital or academic or teaching institution.3

One community oncologist, Jeffery Ward, MD, was part of a nine-physician practice that recently became a hospital-based practice with the Swedish Cancer Institute in Edmonds, Washington. Until two years ago Dr. Ward’s practice had been a US Oncology practice, but the practice left US Oncology and on the way to joining Swedish, formed a not-for-profit foundation with Swedish as a member of the foundation. During the interim period they continued to use US Oncology as their GPO. Dr. Ward’s practice chose to become hospital-based because the practice’s physicians were not convinced that the GPO was going to help their practice remain viable.

Geographic-specific economic drivers affecting the practice include a Washington State business and occupation tax. Dr. Ward also cited the reimbursement structure, saying, “It is a terrible thing that we are in a position that we are underpaid for what we do and expected to make it up by buying and selling drugs. It is not a reimbursement structure we asked for, it is a reimbursement structure we have been given, and the screws have been tightened to the point where it is not viable in many settings.”

Dr. Ward thinks that although GPOs have provided a variety of useful services to practices, currently the main service GPOs provide is to prop up practices that are dependent on drug margins and a reimbursement system that is failing. He expressed concern that GPOs may have conflicts of interest, deriving much of their income from selling services, such as client practice prescribing information, to pharmaceutical companies while they are providing other services to those client practices. A solution might include “a reimbursement structure that takes buy and bill chemotherapy out of the reimbursement equation, pays the practice a management fee not related to the drug price and otherwise compensates fairly for the things that we now don’t get paid enough for, and puts the burden of finding the best price for a drug on someone other than the physician. Perhaps that’s where GPOs could fit in. If GPOs were, for example, Medicare-certified and demonstrated that they were truly seeking and getting the best price for patients and for payers, then that would be a value to medicine.” Meanwhile, he says that although GPOs “can say they are saving private practice, they are also saving themselves.”

Consequently, we asked representatives from three GPOs how they are helping to save community oncology, particularly concerning services beyond the traditional GPO drug purchasing activities. They all mentioned the lower cost and improved quality of care, e.g., reductions in hospitalizations and emergency department visits, associated with the community practice vs. the hospital-based setting.4-6

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