Oncology Practice: Run it Like a Business

“Business? It’s quite simple. It’s other people’s money.”—Alexandre Dumas

Delayed reimbursements from private insurers and Medicare are an infernal albatross for physicians of all stripes. By crimping receivables, problem-ridden reimbursements dam up a practice’s cash flow.

In perhaps no specialty is this constriction more critical than in medical oncology. As oncology practices typically provide their patients with drugs with ascendant price tags, ever-escalating amounts of receivables doubtless will remain with insurers who will then use physicians’ money.

So oncologists must be administratively adroit enough to keep financial pathways clear. “With costs of drugs going up, it’s more important than ever to ensure cash flow from reimbursements,” explains Dean Gesme, MD, an oncologist at Abbott Northwestern Hospital in Minneapolis who previously served as managing partner of an oncology practice.

As cancer statistically tends to be a disease of the elderly, oncologists must deal with the vexing and chameleon-like rules and procedures for filing Medicare claims. “About half of all cancer patients are of Medicare age,” says Joseph S. Bailes, MD, a medical oncologist in Austin, TX who serves as government relations council liaison for the American Society of Clinical Oncology. “Most oncologists are disproportionately affected by Medicare policy.”

Reimbursement problems with private insurers can be no less troublesome. As the number and cost of available cancer drugs continues to rise, oncologists will be on the hook for greater amounts. And as longer-surviving patients receive these new and more expensive drugs, more will be bumping up against their insurance-coverage caps. The result: An increasing potential for oncologists to unwittingly treat patients who are effectively uninsured.

Docs in Deficit?Reimbursement problems have been so financially discombobulating for some oncology practices, says Gerald N. Rogan MD, a Medicare expert and healthcare consultant, that some oncologists “have actually had to go to the bank and borrow money to meet payroll” until tardy reimbursements finally arrived.

Dr. Rogan relates the rueful story of an oncology practice that, because of administrative disarray, had been classifying itself incorrectly with Medicare and hence for years had been erroneously seeking reimbursements that were too low. “The difference amounted to $200,000,” he says. “Nobody at the practice checked to see the payments coming in against the fee schedule to determine if they were correct. By the time they discovered the problem, the filing deadline had passed and as a result, the practice had to eat the loss.”

This nightmarish scenario of the federal government keeping money that rightfully belonged to oncologists is but one among many in a horrific drama that plays out perennially in the specialty. In other cases, costly administrative blunders are less subtle. “A lot of times, practices keep getting denials and fail to see the pattern to it,” says consultant Roberta Buell, MBA.

Because of these extraordinary cash-flow pressures, some oncology practices have become skilled at managing the reimbursement process. But to the extent that many haven’t evolved such structures, processes or expertise, their cash-flow remains at risk.

Have a SystemRegardless of whether oncology practices are efficiently managing reimbursements or suffering from cash-flow chaos, they’d do well to consider some basic principles and pointers offered by experts. These experts, whose advice is no less instructive for practices in other specialties, recommend that reimbursement-challenged practices start from square one to set up a sound administrative structure.

At the outset they should assign responsibility and accountability, and that means topping this structure with someone who has the knowledge and wherewithal to get the job done. “When you get into oncology, you get into a business that has a lot of receivables pending,” says Dr. Rogan. “So you’d better learn the complexities yourself or go to the trouble and expense of getting someone who does.”

Many smaller practices tend to assign one physician to oversee reimbursements. “But as these practices get larger,” Dr. Gesme explains, “more tend to bring aboard management expertise, such as those with hospital management credentials.” With more cash at risk, some practices are bringing in hired administrative guns sooner. Dr. Rogan cites the example of a four-physician practice that hired a former hospital administrator to “run the business” for a six-figure salary.

Once established or refined, this administrative structure should develop two primary obsessions: internal and external. Internally, administrators should vigilantly ensure that patients haven’t exceeded their caps while hectoring physicians to determine in advance whether treatments are covered. Buell says this means that physicians should provide constant feedback to the billing department on prospective treatments.

Externally, administrators should focus on monitoring and analyzing reimbursed amounts, delays and denials. To do this, experts advise that practitioners establish operational controls with specific objectives and reliable means of measuring success against them. “A reasonable control objective is to make sure that each account receivable is in within 30 days,” says Dr. Rogan. “But how does the practice know whether this objective and others are being met?”

The answer: By following up on every payment delay to see if there are other examples and identifying any systemic problems that can be addressed, and by spot-checking for problems. Crucial to following up on problems is constant communication between individuals working on reimbursements.

It’s a BusinessOnly after problems are identified can a practice develop a corrective action plan to eliminate them. “But,” Dr. Rogan stresses, “there’s no impetus do so unless the accounts receivable manager knows there’s a problem. This won’t happen unless the practices establish reimbursement vital signs and then checks them regularly to see if they’re off.”

So monitoring is crucial, lest oncologists and other specialists end up relinquishing large amounts of cash to the government, liked the ill-fated practice that lost $200,000.

Establishing operational controls is familiar terrain for most types of businesses. Yet Dr. Rogan says that too few medical practices are run like businesses. “That’s exactly what they are though, businesses,” he says. “Failing to think about it in these terms can be extremely costly for any physician—but especially for oncologists.”

Richard Bierck is an experienced business writer who has written for Bloomberg, U.S. News & World Report and Harvard Business School Publishing.

$760,839—Median annual gross charges for an oncology/hematology practice.(MGMA.com, 2007)