April 2014 Edition Vol.8, Issue 4

Spearheading a PSA and Co-Management Agreement Between a Practice and a Hospital: Making it Work!

Spearheading a PSA and Co-Management Agreement Between a Practice and a Hospital: Making it Work

By John McCleery


At the annual meeting of the 2014 Community Oncology Alliance in Orlando, Florida, Teri Guidi, President and CEO of Oncology Management Consulting Group, presented a real-life case scenario of a Physicians Service Agreement between a community-based oncology practice and a primary care hospital. Her enlightening examination, titled: “Analysis of Oncology Practice Value to Hospital in an Independent Physician’s Service Agreement” detailed the process of bringing these two entities together.

Guidi elucidated the tale of a small multispecialty practice that has three medical oncologists and two radiation oncologists competing in a market where there are two hospitals with one “gobbling a lot of things up,” she said, including acquiring other independent hem/oncs and pulling referrals away from this particular practice.

The unique market dynamics were making it difficult for the practice to sustain itself, when it’s already difficult for practices, in general, to keep pace with rising costs and dwindling reimbursements. In their market the hospital had already acquired the last competing oncology practice in the community. So, this particular practice was beginning to get concerned with its ability to remain a viable option for patients in the community.

Also, wanting to remain somewhat independent, the practice began to engage in some conversations with the 240-bed, radiation-based, primary care, surgical group hospital to discuss options for a Professional Services Agreement coupled with a Co-Management Agreement. How might they work together and continue to provide with community-based quality cancer care?

Enter Guidi, who has more than 30 years of experience in oncology management, and is an expert in the areas of strategic planning, reimbursement, program development, and market assessment. Her role, she said, was to be the independent eyes on numbers, really, in the end.

“The practice had already decided they were interested in working with the hospital; the hospital decided they were interested in working with the practice,” Guidi said. Guidi was in the best position to iron out the details as she essentially was working for both sides to make the deal a reality. The question became how could the two entities make it happen and what would it look like?

So running the numbers, including coding, billing, and an operational assessment, Guidi looked at what the infusion business might look like if it shifted from the a practice-based setting to a hospital-based setting. She did a line-by-line-by-line assessment to see what the revenue would look like under different types of contracts and what the expenses would look like under a different structure. She also considered how a hospital-based infusion center might impact on everyone’s bottom line and get it to a point where it was still sustainable for everyone so patients would still have access to that kind of care.

“So they’re treating the patients, while I’m behind the scenes, running numbers and doing a lot of analysis with spreadsheets,” she told OBR in a separate interview. The goal was to demonstrate the value the practice could bring to the hospital system and to see if this was the right thing to do for everyone. One of the first things she pointed out was how CMS pays hospitals differently from practices. “Hospitals get paid more money, that’s just the way things are,” she said.

Figure 1 shows the rate of reimbursement for administration that CMS pays in a physician-fee setting versus the hospital outpatient setting. The only items the hospital gets paid less than a practice are in bold face, everything else the reimbursement rate for hospitals is much higher. 

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