Alternatives to Fee for Service Involve Risks

March 1, 1996
Daniel Rosenblum, MD
Daniel Rosenblum, MD

Volume 5, Issue 3

To do better than merely survive under managed care, oncologists who are accustomed to fee-for-service practice must plan new strategies, particularly if they expect to stay in practice more than a few more years.

To do better than merely survive under managed care, oncologistswho are accustomed to fee-for-service practice must plan new strategies,particularly if they expect to stay in practice more than a fewmore years.

Oncologists, like other specialty physicians, will be more likelyto preserve their professional integrity in this new era if theirskills in making business decisions are on par with their clinicalskills in evaluation and management. Thus, they should be awareof the risks and benefits involved when choosing an alternativeto private practice.

First, however, oncologists ought to ask themselves why they needto change.

A majority of oncologists have cared for patients without regardfor cost, because costs were borne by third parties. Oncologistsachieved high quality aided by a broad latitude of clinical choicesthat permitted high variability in clinical practice and innumerablepaths to the same end--a paradise for individual practitioners,the opposite for anyone trying to simplify choices in oncologiccare.

Indeed, oncology may be an extreme example of variability in medicalpractice, given the wide range of methods of diagnostic evaluation,therapeutic intervention, and palliative support. Treatment objectiveshave also varied widely. The intense economic scrutiny of thecurrent era has forced us to recognize that latitude of choiceis, in itself, costly.

In the current environment, a rapidly growing segment of the health-carebudget is controlled by economic managers intent on reducing thedisproportionate growth in the cost of health care with respectto the gross national product. Managers regard the escalationin diagnostic and therapeutic choices as a major cause of thecurrent crisis.

These health-care managers may be expected to exert pressure ononcologists because of the costs of hospitalizations, outpatientinterventions, and supportive care. They will cite high relapserates, ineffective therapies, and fatal outcomes in defense ofbudgetary cuts.

While oncologists may counter that their methods offer some hopewhen the outlook is poor, managers may argue that false hope isworse than no hope at all, especially if it is expensive.

Managers are unlikely to demand that cancer treatment be uniformbecause resistance to such a demand would likely be overwhelming.But they will support a trend in the direction of clinical pathwaysto eliminate some of the extremes.

Documentation of effectiveness, for example, is a reasonable formulafor eliminating useless treatments. Chemotherapy that fails toreduce tumor size need not be continued. High doses of expensivebiologicals might be restricted to patients whose disease is refractoryto less expensive supportive treatments.

Experimental protocols are optimal clinical pathways. Managerswould be wise to support them, since protocols provide an objectivemeans of resolving disputes about effectiveness of therapy.

Management, budgeting, and formulas can be expected to combineto produce a new environment for individual oncologists planningstrategies for their professional futures. To present firm evidencethat they can deliver accurately valued services, some oncologistsare likely to turn to incorporated groups that are subject togovernance, credentialling, and a pledge to provide cost-effectiveoncol-ogic services to managed care patients.

Corporations provide accountability, management structure, andcontinuity that individuals and small groups are often unableto deliver.

The emerging practice corporations should not be confused withcorporations designed principally to generate pension funds andtax shelters. The newer practice corporations will be designedto provide their members with a competitive edge in a managedcare climate.

The CEO is likely to have a masters degree in business administration.The president may spend significant time adapting the corporation'sstructure to the demands of the market and developing relationshipswith other corporations.

To produce a mature, functioning corporation that succeeds inaccomplishing its mission takes talent, dedication, and hard work.The ingredients are not always readily available. As a consequence,not all practice corporations will succeed.

Oncologists in private practice may be approached by large corporationsseeking to purchase oncologic practices. If a sale is being considered,professionals should be brought in to provide needed legal andaccounting services.

Although the corporation's goals may be attractive and the purchaseoffer difficult to resist, oncologists should be aware of thenegative aspects before taking the irreversible step of selling.Factors to consider include loss of autonomy, irreversibility,expectations of the purchaser, and profit margin needed by thepurchaser to recoup the investment. If equity is offered, whatis its real value? What is the risk if the enterprise does notsucceed?

Other Options

Before considering selling a practice, oncologists should be awareof two other widely available options: networks and multispecialtygroups.

Networks link practices with a shared goal, sometimes even a sharedspecialty. A network may wish, for example, to sell contractsto managed care companies. Networks do not own the individualpractices; they do not need to make a profit but can survive aslong as their members pay for their operational costs.

A network's success depends on the profitability of its missionand the extent to which its organizational structure supportsthe achievement of its mission. Even when those conditions aremet, success is not guaranteed in an unpredictable marketplace.Among the risks is the strength or weakness of the bonds thatenforce compliance among members. Without compliance, a networkcould become a mechanism for magnifying disaster.

Incorporated multispecialty groups are likely to prove attractivein communities in which physicians have well-developed collegialrelationships that they would like to preserve. However, thesegroups are likely to discover political obstacles in devisingcompensation formulas because of the range of professional incomesamong specialties.

As with a network, the group's identification of a profitablemission and its organizational structure play major roles in predictingits success. Multispecialty groups are critically dependent onthe balance between specialists in their composition. Oncologistswho are considering membership in a multispecialty group shouldseek advice about the composition of the group from professionalswho have objective information about regional utilization of specialtyservices.

All of these options have risks and benefits, but with the adventof managed care, a rigid maintenance of the status quo may bethe riskiest position of all.

Dr. Rosenblum is clinical assistant professor of medicine, GeorgetownUniversity, Washington, DC. Dr. Presant is president, CaliforniaCancer Medical Center, West Covina.

The Oncologist's Dilemma

By Cary Presant, MD, Series Editor

Two roads diverged in a wood and I--I took the one less traveledby, And that has made all the difference.

--Robert Frost

As Dr. Rosenblum points out in this month's Oncology & ManagedCare column, each of us, as medical oncologists, is now facedwith a choice of roads. Maybe not only two, but perhaps six ormore--solo practice, multispecialty group, oncology IPA (independentpractice association), oncology network, practice buyout, groupparticipation.

The decision for each practice will "make all the difference."The variables each physician needs to consider are the personalitiesinvolved, the practice styles of the doctors in the new structure,and the need for security vs independence vs immediate financialneeds.

Fortunately, there are "help buttons" just like on yourcomputer that can assist you in making the decision. Oncologistsshould consider using all of the following prior to finalizinga choice:

Is this too much help to seek? Not at all, considering that thewelfare of your patients, your family, your employees, and yourcolleagues as well as your own practice satisfaction depend uponyour choice.