Florida Doctors Trade Independence for Security in Epicenter of Merger Wave

Raul Storey, MD

Just 2 years after oncologist Raul Storey, MD, finished his training and joined a private practice in Vero Beach, Florida, he was already eager to make another change.

He and his partner Noor Merchant, MD, who founded the practice 30 years ago, found themselves battling a familiar set of confounding problems: patients who had to be turned away over insurance issues, limited access to new drugs, narrowing profit margins, and the demands of office administration.

So last October they took the plunge and merged with Florida Cancer Specialists & Research Institute, the nation’s largest independent, physician-owned medical oncology practice. Now they have relationships with 6 times as many insurers, a centralized business office, and access to more than 100 clinical trials, which Storey called “a dream come true for hematology-oncology.”

“We are able to basically focus on the clinical part of the treatment of patients with hematological diseases and cancer, instead of all the administrative business and work you have when you run a practice on your own,” he said.

The array of services and opportunities with which Florida Cancer Specialists & Research Institute provides its physicians, while still allowing them a high degree of autonomy, has proved a powerful draw since the group was founded as a solo practice by William Harwin, MD, in 1984.

The organization now boasts 180 doctors, most of whom are or will become partners, and 120 nurse practitioners, at more than 85 locations around the state. The total staff numbers more than 2000 across a variety of professions. The firm treats 50,000 new patients and takes in more than $1 billion in fees each year, more than 3 times the amount it collected in 2012.¹

The company has a practicewide electronic medical record (EMR) system, a central pathology laboratory, an oral oncolytics pharmacy, and on-site radiation facilities at many locations, as well as access to clinical trials through its partnership with Sarah Cannon Research Institute in Tennessee. Thanks to its size, the company can negotiate better drug prices and guarantee patients access to all FDA-approved chemotherapy and immunotherapy treatment options, Harwin said.

Building a Trendsetter

Harwin said he did not originally intend to turn his solo practice into a “great entity.” Initially it grew slowly, to just 48 doctors in 17 offices as of 2008. Over time, however, mounting economic pressures on small practices,the advantages of size, and a reputation for good management allowed Florida Cancer Specialists to become a merger machine and a poster child for the consolidation trend of recent years. By 2011 it had doubled in size to 40 sites and close to 100 doctors, and since then it has nearly doubled again.

William Harwin, MD

Another factor contributing to Florida Cancer Specialists & Research Institute's growth may be the state’s size and its large elderly population. Florida’s cancer rates are among the highest in the nation and it has the second-greatest number of people with cancer after California, according to National Cancer Institute data.² The state has the fifth-highest number of oncologists after New York, California, Texas, and Pennsylvania, according to the Kaiser Family Foundation.³

Florida also has seen the most mergers and acquisitions: from 2008 to 2014, at least 30 oncology practices have been acquired by hospitals and 46 by group practices and other non-hospital entities like Florida Cancer Specialists & Research Institute, according to the Community Oncology Alliance’s most recent Practice Impact Report.

Harwin, who practices in Fort Myers and serves as the company’s president, described its initial expansion as serendipitous. A radiation therapy group in adjacent Charlotte County told him the area needed better oncologists, so his practice started consulting there and eventually hired 2 doctors out of training to staff a new office, he said. Then a staff physician who wanted to be closer to family opened an office in Bonita Springs, a struggling practice in Naples asked for help and was acquired, and many others followed.

“In the early ‘90s, there was a lot of concern about managed care and how that was going, and the thought was, well, if we were a little bit larger we’d be in a better position to compete in what appeared to be a new healthcare environment,” Harwin said.

Unlike some other large groups, the business had a head start on the merger trend because it was already growing and benefiting from its billing efficiencies and economies of scale when the Medicare Modernization Act, passed in 2003, began slashing the profit from drug margins on which small oncology offices had survived. Florida Cancer Specialists & Research Institute was poised to start absorbing such practices as the financial pressures tightened.

The partners made the key decision to turn down acquisition offers from 2 companies that were precursors of US Oncology in favor of remaining independent, Harwin said. Florida Cancer Specialists & Research Institute also started making merger deals with larger groups of several doctors each, and growth further accelerated after CEO Brad Prechtl, a CPA who previously worked at US Oncology, joined the company in 2009.

“We’re enamored with the idea of still being a private practice group that’s physician-centric and patient-centric. We were never interested in becoming a publicly traded company,” Harwin said. “It doesn’t matter if it’s US Oncology or a hospital-based system; we just really like being in charge of our own business.”

And the growth continues. Among other projects, in December the group launched construction of an $11-million cancer center in Brandon, near Tampa, that will house a linear accelerator, PET/CT, and high dynamic range imaging equipment.⁴ The company is also spending $2.5 million to expand its corporate headquarters in Fort Myers, adding 21,000 square feet for administration and its Rx to Go specialty pharmacy.

An Abundance of Caution

Harwin said he’s much prouder of his work as an oncologist than his success as a businessman. He maintains a busy practice, dedicating just a day a week to his managing partner duties, and said that for 4 years he’s led the company in the number of patients participating in clinical trials.

But he said that all the back office support and infrastructure the company has built up over the years has helped Florida Cancer Specialists & Research Institute stand out in the field and prosper despite the headwinds the profession is facing.

Working on behalf of 180 doctors, specialized staffers handle contract negotiations, purchasing, drug regulations, purchasing, human resources, and the whole range of regulatory and compliance issues, he said.

“We have to be so careful with healthcare compliance. We feel like because we’re big there’s a target on our back. So we’re just so ultra-careful about everything,” he said. “Every bill that goes out for an office visit, there’s someone measuring and checking to make sure there’s a documentation that goes with that. If somebody billed an office visit and forgot to dictate or forgot to document, we’ll catch it. We have people really checking every little thing.”

Despite that vigilance, the firm was singled out in a Wall Street Journal article last year for its oncologists’ frequent use of the anemia drug Procrit, which increases red blood cell levels but carries significant health risks.⁵

Use of the drug declined nationally after 2007, when the FDA warned it was linked to increased stroke risk, tumor growth, and early death in cancer patients. Yet a number of Florida Cancer Specialists & Research Institute doctors continued using it frequently, and in 2012 one-sixth of Medicare payments to oncologists to administer the drug went to the company, according to the article.

Harwin responded that the group’s use of the drug was medically correct, Florida Cancer Specialists & Research Institute doctors were using it less often since 2007, and doctors had no financial incentive to choose a drug based on its margin. The firm also described the cited data as skewed because Florida Cancer Specialists & Research Institute's high volume of patients in various stages of cancer and with multiple conditions made use of Procrit necessary.¹

The company got in the news for a different reason when insurer Humana announced it would drop the group from its network in March 2014. Harwin said the insurer gave little explanation and didn’t respond to requests to discuss the decision. He noted that Humana CEO Bruce Broussard formerly headed US Oncology, a competitor that has lost 3 groups to Florida Cancer Specialists & Research Institute over the years.

Further Expansion Planned

The firm plans to keep growing and is currently talking to more doctors who are likely to join up, Harwin said. It recently came close to acquiring some groups in North Carolina, but big hospitals in the Charlotte area threatened to start hiring their own oncologists rather than work with Florida Cancer Specialists & Research Institute, scotching the deal, he said.

Expanding to another state is also tricky because, for regulatory reasons, practices in other states could not use the central laboratory in Florida, and the company would not immediately have a large enough presence in the new state to justify building another lab, he said.

While growth has many advantages, he admitted that he misses recruiting and knowing all his colleagues personally. “It’s impossible to have as personal a relationship with every doctor as I once had,” Harwin said. But he said that does not affect patients’ perspectives on their own doctors.

“The small, homey, close to home approach, that doesn’t change,” he said.

Storey said that when he and his partner were contemplating a merger, they weighed the potential downsides of being swallowed up by a large health provider. They considered joining a hospital but rejected that option.

“You are coming from having an independent practice, where you are your own boss and you make your own decisions, and then you become part of a big monster, you know?” he said. “We were worried about the potential of losing our autonomy and then having someone try to rule what you do or what you don’t. But that was not the case at all with Florida Cancer Specialists & Research Institute.”

Storey said he believes that in the near future small independent practices will no longer be able to survive, and that large groups like his company, offering many community oncology offices scattered throughout a multitude of towns, are the best solution to serve Florida’s population. The state’s handful of giant cancer centers are far from many people’s homes, he said, and on their own they cannot provide the access patients require.

References

1. Gordon M. Get bigger. Business Observer. http://www.businessobserverfl.com/section/ detail/get-bigger. Published July 11, 2014. Accessed May 15, 2015.
2. National Cancer Institute. State cancer profiles. http://statecancerprofiles.cancer.gov. Accessed May 15, 2015.
3. The Henry J. Kaiser Family Foundation. Physicians by specialty. http://kff.org/other/ state-indicator/physicians-by-specialty-area. Accessed May 15, 2015.
4. Rotolo C. Florida Cancer Specialists coming to Brandon in fall 2015. Tampa Bay Times; December 12, 2014. http://www.tampabay.com/news/health/florida-cancer-specialists-coming- to-brandon-in-fall-2015/2210022.
5. Weaver C, Mathews AW, McGinty T. Cancer doctors ring up big Medicare bills for tarnished drug Procrit. The Wall Street Journal; June 19, 2014. http://www.wsj.com/articles/ cancer-doctors-ring-up-big-medicare-bills-for-tarnished-drug-procrit-1403203821.