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Why are so many community clinics being taken over by hospital systems?

Updated: Jun 14, 2021

The data below was directly from the Community Oncology Practice Impact report for 2020.

The 2020 Community Oncology Practice Impact Report data shows that over the last 12 years, 1,748 community oncology clinics and/or practices have closed, been acquired by hospitals, undergone corporate mergers, or reported that they are struggling financially. Specifically, the data show:

  • 435 clinics closed

  • 722 practices acquired by hospitals

  • 203 practices merged or have been acquired

Since the last Community Oncology Practice Impact Report issued in 2018, there has been a 20.8 percent increase in practices merging with, or being acquired by, another community oncology practice and/or acquired by a corporate entity. The most important reason that community clinics are being acquired by hospital systems is the 340b program. A brief history of the evolution of cancer reimbursement. For years, cancer care was paid for directly for the services provided. There were many centers, however, which served a population of uninsured or underinsured patients. In order to help institutions that serve this population, the government created a program called the 340b plan which was rolled out in 1992. That program allowed hospitals, not outpatient clinics, to purchase chemo drugs at very discounted rates and then bill at hospital rates (which are significantly higher than outpatient rates). Therefore, they could still provide care with the larger margin and still be solvent. There are strict criteria for being a part of a 340b program, namely, that a certain percentage of the patients are required be underinsured or have no insurance. However, these programs get to purchase all of their chemo at the low rates, not just the chemo for the indigent patients. The 340b institutions then get to bill all of the patients, including those with commercial insurance, for the hospital rates. Over the years this program has grown exponentially. This is a major source of revenue for most large institutions and organizations. This has unfortunately driven up the cost of cancer care substantially. This is absolutely the biggest reason that hospitals are taking over community cancer clinics. In theory, the 340b program was meant to help hospitals that served the underinsured or those with no insurance. Community practices at this time cannot be a part of the 340b program no matter how many underinsured or no insurance patients we see. An article in JAMA advocated the inclusion of community oncology practices in the 340b program, but that is not a reality at this time. Hospitals can then buy their drugs far cheaper than we can and sell the drugs to payors at far higher rates. Their profit margin is far greater, but it is also one of the prime reasons that cancer costs are increasing.

Mark Bettag, M.D.

Sheboygan Cancer & Blood Specialists

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