As recently as ten years ago, cancer care was provided by a number of separate entities and providers. Patients diagnosed with cancer received their chemotherapy at their medical oncologist’s office (what was known as “community-based oncology”), they received their radiation therapy at a hospital or at a free-standing independently owned radiation center, they went to an independent surgical group to see their surgeon who performed surgery at his/her primary hospital or surgery center, and finally, they sought ancillary and supportive services from a variety of different sources. For most, this structure was sufficient, not as good as we might hope it could be, but it worked well enough. Then something happened. In 2005, the old way of providing cancer care began to change as CMS instituted major changes in the way chemotherapy was reimbursed. AWP was gone, and ASP plus 6% was in place. As a result of this change, chemotherapy delivery was no longer profitable for the community-based oncologists. Additionally, change was occurring as oncologists began to seek hospital employment or options to offset their losses in chemotherapy. This change has served as a catalyst for many hospitals and health systems to start building coordinated and comprehensive cancer programs.

Today, cancer care is still a growing service line, and because of all it brings to a hospital, it is generally a profitable service for hospitals. It is also very competitive, and maximizing your competitive position is essential if you are going to leverage your investment. We have seen some organizations do this well, and some mishandle it. Below, we talk about some of the best practices that lead to success.

Care Coordination.
One of the distinguishing characteristics of leading programs is coordination in care planning and delivery. Some programs have caregivers doing this in isolation, but the best ones do not. Information technology also plays a key role in this capability. As top cancer centers expand their markets, they will promote this model and its advantages to the detriment of your program.

Quality Physicians.
Pick your physician partners (medical and radiation oncologists) wisely. It is difficult to overcome physicians who are of poor quality or have poor reputations. We always counsel that it is easier to never employ them than to get rid of them. It is easier to never affiliate vs. un-affiliate. Keep this in mind as you are adding physicians to your program.

Few other healthcare services are viewed as being more intertwined with the science of diagnosis and treatment. The capital requirements for linear accelerators and diagnostic imaging are substantial, and the program must be able to sustain such investments.

Surgical Oncology.
A reasonable part of the profits in cancer are derived from the surgical procedures. The quality of those surgeons varies greatly, and for most clients, a plan to upgrade those capabilities over time is required. Major programs have dedicated surgical oncologists, and it may be difficult to compete with that model utilizing general surgeons who do cancer work part-time, no matter how good the general surgeons are at their craft.

Clinical Trials and Research.
Clinical trials have value in two ways: they provide more treatment options, and they position your cancer center because they are the latest. Being associated with quality clinical trials and research also brings notoriety, prestige, and resources to a cancer program. Understand that such programs likewise require management resources, generally a dedicated nurse manager(s), to deal with the mountains of paperwork required.

HSG has worked with some community hospitals that elected to affiliate with well-known cancer programs such as MD Anderson. This affiliation comes at a cost, but for some, the resources and positive community perception that comes with the association is well worth the cost.

Patient Navigation.
Navigating the “system” is difficult under any circumstance, but particularly burdensome when you are fighting cancer. Navigators help cut that burden by helping patients access the system, including support systems that help the patient with the bureaucratic paperwork. They also help the organization by better managing the patient’s care and reducing the “leakage” to outside providers.

340B Drug Pricing Program Eligibility.
340B is a federal program that provides reduced drug prices to facilities with a DSH adjustment percentage greater that 11.75%. Eligible centers can save between 15 and 60% on select drugs, making chemotherapy delivery extremely profitable.

HSG has worked extensively with clients on their oncology service lines, whether building comprehensive programs or working with the physicians in the service, such as medical oncologists.

For more information on those services, contact Neal Barker, Senior Manager, at (502) 814-1189 or

Neal D. Barker

Partner and Managing Director, Compensation and Compliance