Cancer Economics

Hippocrates Meets Wall Street

Albert B. Einstein, Jr, MD
H. Lee Moffitt Cancer Center & Research Institute

Introduction

The rapid evolution of managed care in many health care markets is driving the reevaluation of the traditional institution-based cancer care program paradigm. For the past twenty years, community hospitals, academic hospitals, and medical centers have focused on developing and refining the multidisciplinary hospital-based cancer program. However, the restructuring of the health care system in response to the competition for patients controlled by managed care organizations creates the need for new paradigms of providing cancer care. One strategy is the development of physician oncology networks that manage cancer care and compete for capitated contracts in a geographically defined health care market.

Then . . .

The traditional cancer program paradigm as promoted by the American College of Surgeons and the Association of Community Cancer Centers has been structurally oriented with inpatient oncology nursing units, outpatient infusion and radiation centers, cancer committees, cancer registries, program administrators and medical directors, and a variety of support services for patients and their families. Many hospitals administratively organized cancer care into a product line with dedicated medical directors, administrators, budgets, and resources. Most programs were vertically integrated to provide the full continuum of cancer care. The emphasis has been on the collaboration of providers to produce the best quality - but not necessarily the most efficient - cancer care possible. The cancer programs marketed the menu of services that they provided, and individual patients accessed the cancer programs by the primary physician's referral or by self-referral. Physicians were at liberty to prescribe clinical evaluations and treatments based on their own judgment as well as on tumor-board recommendations. The patient care costs associated with clinical trials were routinely reimbursed by the third-party payers without challenge. The traditional fee-for-service reimbursement methodology covered the costs of patient care including the support services.

. . . and Now

Currently, in most health care markets, for-profit managed care corporations are focused on obtaining health care services at as low a cost as possible while providing as large a profit as possible to satisfy their Wall Street investors. To control costs, these corporations carefully control patient access to services by means of primary care physician gatekeepers, precertification of tests and hospitalizations, review of treatments using guidelines derived from insurance companies, and refusal to fund patient care costs associated with clinical trials. To be financially successful, they strive to dominate in their market by controlling as many "lives" as possible. In turn, physicians, hospitals, and other medical service providers have been selected based on their ability to provide low-cost services regardless of location, patient convenience, or established cancer program relationships. Because of cost-driven contracts, patients may be required to see different cancer specialists at different institutions based on insurance-determined provider panels, they may be admitted only to contracted hospitals, and they may have laboratory and radiological procedures performed at facilities unrelated to the traditional cancer program. Patients in strictly managed plans may not have access to the specialists or cancer program they would choose in their community. Access of patients to advanced technology or clinical trials may be severely limited based on cost rather than patient benefits.

In the managed care environment, physicians have had to add office staff to handle the additional "red tape" required to care for their patients. Patient care time has been displaced by time spent on the telephone and writing letters to justify their treatment plans or to respond to cost management. The for-profit insurance corporations, controlling large populations of patients, currently micromanage the physician's practices. The physician in this system no longer has unilateral ability to make judgments regarding the care of his or her patients.

Restructuring the Health Care System

The oncology physician network is one of several alternative cancer care paradigms that is gaining support. This network is capable of managing cancer care in a shared-risk arrangement with the payer. Cancer is an easily definable disease that affects a relatively large segment of the population. It is predicted to become the No. 1 cause of death in the United States by the year 2000. The services required to care for a patient with cancer are identifiable and relatively predictable based on the disease site and stage. Many insurers see advantages in sharing or passing on the financial risk of caring for cancer patients to the provider as a means of predicting and controlling their costs.

Physician provider networks that are willing to share risk with the insurers provide an opportunity to return the control of patient care to the physician and to restore quality to the managed care equation. In this model, the physician group typically contracts to provide specified oncology services for a fixed payment and assumes the responsibility of providing care according to its own clinical guidelines and quality standards. The members of the network must be willing to function in a system of care management if the network and the providers are to be financially successful. In this ideal model, broad guidelines of care based on disease site, stage, and clinical pathology are defined and agreed on by the providers. Using provider-defined guidelines and pathways, case managers review and approve treatment plans, and medical directors discuss exceptions to the guidelines with the prescribing physician to better understand and pass judgment on the particular situation and recommendations. Information systems need to be established to track compliance with guidelines and to link the cost information with the clinical outcomes. Participating physicians need to have information on clinical outcomes, cost, utilization, and patient satisfaction that compares their practices with their aggregated peers. Compensation formulas need to provide incentives for physicians regarding use, quality outcomes, and patient satisfaction.

Three examples of oncology carve-out networks are SalickNet, City of Hope Cancer Center, and Quality Oncology. SalickNet, a publicly owned, for-profit corporation, was the first network to sign a risk-sharing carve-out contract for oncology care with a major insurer (PCA) located in Miami, Fla. This network employs and contracts with physicians and also contracts with hospitals for defined oncology services. The City of Hope Cancer Center in Duarte, Calif, has joined with the community oncologists to form a physician network to contract with IPAs and health maintenance organizations in the Los Angeles area to provide oncology care. Quality Oncology, a network of community and academic oncologists in Florida, has the capacity to contract for and manage radiation and medical oncology services in a discounted fee-for-service or capitated contract management.

The National Cancer Center Network has been formed by a number of the National Cancer Institute-designated cancer centers. Its goal is to provide a network of nationally recognized academic cancer centers that can provide oncology services in many locations to national insurers or major national corporations. Its first tasks have been the development and publication of clinical guidelines for cancer management designed by committees of nationally recognized experts.

In the past three years, several Wall Street-driven for-profit physician management corporations have been created. American On-cology Resources and Physician Resources Network have been contracting with oncology physician groups around the country to manage or purchase their practices. They offer potentially more efficient practice management that can position the practices to better negotiate managed care contracts. The value of the physician practices is their practice revenue streams. Whether these for-profit corporations will be able to forge true integrated networks to manage cancer care over a broad geographic area remains to be seen.

To be successful, these physician networks will need to provide cost-competitive and highly efficient cancer care that does not sacrifice defined quality. The networks have the advantage over single-hospital cancer care programs in their ability to provide and manage cancer services in a wider-defined geographic area. Ultimately, the successful networks may be well positioned to negotiate di-rectly with large employers or employer coalitions rather than with powerful, controlling, profit-oriented insurance corporations. In the interim, their challenge is to effectively provide quality oncology care within the agreed-upon economic parameters.