Consolidation Versus Independence in Cancer Care

Is consolidation in cancer care truly the best path forward, or does independence offer greater benefits?

In this episode of Value-Based Voices Sarah Alwardt, PhD, President, Avalere Health, and Jeff Patton, MD, CEO, OneOncology, discuss the nuances of consolidation versus independence in cancer care, the impact of policy and capital access, and the future of value-based oncology. Gain insights into sustainable models, data utilization, and patient-centered strategies.

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Transcript

Episode: Consolidation vs. Independence in Cancer Care
Host: Sarah Alwardt, PhD, President, Avalere Health
Guest: Jeff Patton, MD, CEO, One Oncology

 Sarah Alwardt (00:00.33)
Welcome to Value-Based Voices, a podcast from the Association for Value-Based Cancer Care. Each episode dives into the shifting terrain of cancer care in the United States, exploring what value means in today's clinical policy and patient-centered environments. Our mission is to spark informed dialogue, promote transparency, and equip every stakeholder from payers to providers to patients with the insights they need to navigate cancer care with clarity, confidence, and purpose.

Sarah (00:35.79)
So let's get into it. My name is Sarah Alwardt. I am the president advisory of Avalere Health and I will be your host for today's episode. With me is Jeff Patton, CEO One Ecology. And today we'll be talking about consolidation versus independence in cancer care. Welcome Jeff. Thanks for joining us.

Jeff Patton
Thank you. This is the topic you know something about. You kind of live with it every day.
I do.

Sarah
Awesome. Maybe first question. What comes to your mind when you say—
Not there.

Sarah (01:01.698)
Consolidation versus independence, consolidated versus independence. Maybe we start there for the…

Jeff
Yeah, so that's a great question because I don't think they have to be versus. So in the One Oncology model, we consolidate and aggregate practices, but they stay independent. They still retain their tax ID. So they're independent, but they're aggregating purchasing and back office and other operational functions. And so they benefit from economies of scale, but they're still independent. They still own their own tax ID. They're partners in their business. They run their business. We just help them.

Do think when people say consolidated, they're thinking private equity owned companies came in and swooped up and bought a bunch of practices? Do you think some of that comes from? Because I agree.

Jeff
For sure and there are such things as roll-ups out there and when people you know compare us to a rollout I get really mad because you know roll-ups aggregate a few practices into an MSO, but they don't really build out much functionality in that MSO and they're trying to do a financial arbitrage. And it's a rollout. We are not—we're a sustainable model that's built on a model that has been around for over 30 years.

So our competitor—and you know what's the old saying that imitation is the best form of flattery? So our model is built very similar to US Oncology. US Oncology has been operating this model for 30 years. That's not a roll-up. US Oncology is not a roll-up. One Oncology is not a roll-up. And so we did have private equity backing, but ours was growth equity. They cut a nice return. We grew. It was a benefit.

One of the big things that private equity does bring is access to capital. Insurance companies…

Jeff (02:44.07)
…well capitalized by definition and by design. Hospitals, mostly pretty well capitalized. Independent physician groups, not capitalized. Mostly not at all because they're mostly either PCs or PLLCs. They zero out their books at the end of every year and they start the next year from scratch. That's not capitalized.

Sarah
What does that let you do? What does that let you do for your practices today with that access to capital?

Jeff
Grow into ancillary businesses. If you want to get into a linear accelerator business, it's somewhere between five and $10 million of capital. If you want to stand up a PET CT, maybe a million dollars for a center. So it allows us to diversify.

Two, it allows us to grow. So our model is that we try to find a successful, clinically outstanding practice, and we call it land and expand. And so we affiliate with them, and then we help them grow in their market.

Well, to attract two doctors here and recruit a doctor there, that can be dilutional if you don't have access to capital. So we bring capital to protect them from the dilution that growth could encumber and enable them to grow.

You know, healthcare is local and it's about market share. So he or she who has the most market share, whether it's the hospital, the insurance company or the independent provider, has… you have to have enough market share to have a voice.

Sarah (04:13.644)
I would say that when you talk to people about what healthcare means, they'll say health is good and it's warm hugs and it feels all nice and care is loving and all of that and then you put them together and you go all of a sudden… But how often are you protecting against independent or community being bought out by hospitals?

Jeff
A lot. That consolidation a lot. And so if you're in a market and you don't have scale and the government's paying you less every year, so your profitability is going down. And if you're not getting rate or decreasing rate from your commercial contracts, you're at risk of going out of business.

Your choices are someone like us or a hospital. There's not a third option really. So that's one case where we're protecting. And they should have that option. Like if they want to join a hospital, great. I don't like it when there's not a community or independent option in a service area. I think every patient should have option to choose a hospital, an academic medical center, or a community center that's close by.

So we have been able to protect. And then we have actually—this will sound harsh—but we call them extractions. So we have taken full practices that were independent, joined a hospital, had that experience, and decided that that wasn't the perfect experience for them. And often it's when that contract’s up—the next contract is offered not in the same spirit as the first one.

So we've, six different times, taken groups that were hospital-based and stood them up in a community practice. That takes a lot of capital. They could not do that on their own. You know how the payer works…

Sarah
How do you get through that transition? Because those are two tough transitions for a practice, I would think. How do you help them through that? Culturally, financially, all of it?

Jeff (05:57.458)
I mean, the culture is probably the easiest because they go—at least coming back out—they go from an employed Dr. Widget model to we stand them up and they work for themselves with our help. And then we have the operational expertise to do the contracting, find office space, hire their staff. I mean, it's a lot.

You're paying bills day one, you're buying chemotherapy day one. Payers aren't paying you for 30 to 90 days. So that working capital is—and you know how expensive chemotherapy is—the working capital is, it's just not something they would do without the financial resources that we have and the expertise, quite frankly.

It's a little daunting. But now that we've done it six times, we know how to do it. Starting from a brand new tax ID—that's really hard. If we have an existing practice that they can join, that's a lot easier.

Sarah
I was going to say there's probably a couple different versions of that depending on who else you have in that market to kind of adjoin or stand up completely new. I think financially, the consolidation is definitely a good option for getting scale. How are some of the pressures—I'm a consultant, spend a lot of time thinking about policy, Inflation Reduction Act—how are some of these more political or policy existential threats impacting?

Jeff (07:55.878)
It's yet to be known, as you know. I don't yet know. What I say, and I get this question from the providers all the time—they're like, what if—I'm like, well, let me tell you what. The reason we're here today is that your margins are at risk. And so if you need us now, if that is catastrophic, you're going to need us more.

And so if you look at the airline industry, the distribution business that's adjacent to us, there's only X number because if there's limited margin, you need scale. Healthcare provider margins are decreasing. So if you don't have scale, I don't know how you survive.

Sarah
What would you like to see happen?

Jeff
I would like to see—so there is an unlevel playing field right now. I'd like to see the playing field a little more level and I would like to see incentives a little more aligned. What do I mean by that? Hospitals get paid a lot more than we do, not just on the commercial side, on the government side. It's just not fair.

So level the playing field. I say this on stage, I'll probably say it later today. If healthcare was a free market, community oncology would have won a long time ago. Our outcomes are at least as good. Our patient access and accessibility and experience is lots better than going to a hospital. And we do it for about a third of the cost on the commercial side and for about 90% of the cost on the government side. There's not many places in a free market where that equation doesn't win.

Sarah
Yeah, that sounds like a pretty good math there. For this conference, we're talking about value-based care and oncology. That's been a tough nut to crack, I think, over the last couple of years. How do you think about that today? How do you think about that moving past today? What is the future of value-based care and oncology?

Jeff (09:13.942)
Yeah, it's pretty simple math. I'll answer that question with the same theme I just talked about. If there is a site-of-service differential where we can provide care less than half the cost, and that's not the needle, if that's not moving the needle, tell me a value proposition that's gonna move the needle.

So again, until the incentives are aligned, I don't see… you know, there's value-based care going on out there. I call it enhanced fee for service. Someone’s like, “90% of our contracts are value-based.” Really? Tell me about that. What percentage of your revenue is based on value or is it fee for service? It's all fee for service.

There's almost no one out there taking full risk. Not on both sides. So how do you define value? Now if you want to define value as outcomes and patient experience, we can compete on those things. But if you're just talking about the economics, we have a value proposition that—if you have a lever that will save 70%—let me know what that is, because I want to invest in whoever's doing that.

I have a great value-based proposition—you know, site-of-service. It's happening in surgery centers. They're providing surgeries at a better patient experience at about a third to 50% of the cost. And the surgeries are moving, but chemotherapy is not. And we can talk about why that might be.

Sarah
I was going to ask value to whom because that's always my favorite next question.

Jeff
I have to agree. It's like fairness. It's in the eye of the beholder. So, value to whom? Right now, I think that the TPA insurance companies—they’re just fine with how things are going. I don't think the employers are fine with how much it's costing, but they don't really know how to get there. And so we're kind of stuck.

Sarah
It is a very interesting model. We get very accustomed to getting the actuaries in a room and doing all of the math and getting very comfortable with a number that isn't necessarily valued to anyone, but we're comfortable with the math, so therefore…

Jeff
It's predictable. I get, like, if you're underwriting something, you need predictability. I'm trying not to be as judgmental as I'm thinking.

Sarah (11:26.996)
Well, one of the challenges that I've had trying to figure out—I love your thoughts on this—is understanding and how to quantify, because dollars are going to need to be included in the math somewhere, but how to really quantify patient value, because that experience intuitively, I would say, leads to better outcomes, better quality of life, and then valuing that in dollars is hard.

I'm curious your thoughts on that because I think that that's where community really has a tremendous opportunity of keeping people at home and keeping them in there with their families.

Jeff
And I think until you level the playing field, I don't know how we'll know. That's why I like a free market where you see by choice. Like people buy an Apple phone because that's what they want. I think if it was a level playing field, people would choose our experience. Otherwise, how do you prove it? How do you quantify it? And then it's going to be, you know, an eye of the beholder.

Sarah
Yeah. Maybe along the same lines. I spent time talking to pharmaceutical manufacturers, some in very early development. One of the things that's come up several times now is how to include community in cell and gene therapies and in the trials very, very early—where those tend to go to other places, go to academic medical centers.

And if they go to academic medical centers, they don't figure out how to do that in the community, and then they don't, and you're stuck in a situation where you've got someone needing to leave their home to go to medical center. And your mom and home three kids, 70 miles is Mars. So it's like—and so then they're gonna forego what could be an innovative therapy.

I'm curious your thoughts, and like if we were to aim the conversation to the manufacturers listening today on what they should be thinking or what they should be doing differently in early development, because by the time you get to your later…

Sarah (13:21.262)
…your later phase trials, it might even be too late. But what advice would you give audience?

Jeff
Yeah, so I have studied this over the years as well. I call it technology adoption. How does technology get adopted and then how does it diffuse? And it always does. Cell and gene is a challenge. One, because it's very expensive, more so than the others. And two, because of the toxicity profile, you have to have a hospital partner.

One of our practices—and now two of our practices—has stood up and are performing CAR-T therapy in the community as predominantly outpatient, but they have to have a hospital partner. So if you think about it, you've got an independent practice, a hospital (which is not the easiest), big pharma (not the easiest to navigate), and a payer. So you have four parties that have to agree on this.

You've got a perfect storm there.

Jeff
Exactly. The key is going to—and it will happen as the toxicity profile improves and it can just be done as an outpatient—then it'll happen. It'll be adopted. The bispecific is probably the next iteration of that. So you're going to ask the folks at Amgen: One Oncology community-based practice is the highest utilizer of their small cell lung cancer bispecific. So if it can be given safely in the community, we'll give it and then it will defeat it.

Sarah (14:44.654)
Engage the community in the trials, you're going to get adoption and uptick and all of that. It's a tremendous thing. Looking at older data, if you have the trialists and they're doing the trials, they're going to use your product.

Jeff
Oh yeah, the advocacy of—I've shared this with, because we've done a lot of clinical research over our days—and the halo effect for how well your commercial launch is going to go. If the doctors are comfortable with already using it, they're going to use it day one of launch. If they've never seen it or thought of it and it has some weird toxicity, it's going to take a while. The halo effect—there's a significant halo effect—that I wish they would value that.

Sarah
Percent.

Jeff (15:26.382)
How do you pass that value down?

Sarah
Exactly right, but it's like the conversations that—it's funny because I'm a data-will-save-the-world person. So you start to take a look at addressable market and like where are your populations? Who are your people? Where do we think they're going to be seen? Where are they being seen from past history? All of that.

And you would present that to some of my clients and you're like, “Sixty percent of your population is going to be in the community. But you don't have a commercialization plan for how to engage the community. What were you thinking you were going to do there?” And if you say it at the very last—I mean, I've heard some wackadoodle from some clients like, “This is our strategy.” I'm like, “Yeah, but your strategy…”

Jeff
That's gonna work. Smart.

Sarah
And I get to be—I can say these things out loud. They're paying you to.

Jeff
Exactly.

Sarah
So that's generally really good. But at the same time, it's like if you had thought about this 18 months ago, or even two years ago, you would have had very different approach to a very different world. So I think that there's some underlying like how we get some of that message out. And I'm a huge community advocate. So it's like that comes through in some of the consulting that we do.

Jeff (16:36.344)
You'll get this right away. So the companies that have been in oncology for a long time and they understand that buy‑and‑bill mentality—they get it. But I call them the big pill‑pushing pharmas that then get into oncology—they don't have a strategy. They just think, “Well, we have the best drug and it'll just jump off the shelves.” It's a little more complicated than that.

Sarah
No, it is—we could write a book.

Jeff
Yes, we could.

Sarah
Because some of the things I have heard said—I'm like, yeah, but you've been doing chronic cardiovascular disease. It's not the same. It's really different. This is rare disease. And we tend not to think about cancer as rare disease because it is prevalent, but it's still rare comparatively.

Jeff
Yeah, for sure.

Sarah
And then you get like sub…

Jeff
And it's so nuanced. It’s at least a thousand diseases. It's a non‑small cell lung cancer.

Sarah
Yeah. Exactly. It's a little bit different world and even having some of these very interesting conversations upfront just ends up being just enlightening on some of the kind of the bias or the nuance or just the kind of the misinformation kind of coming in. So I spent a long time trying to educate on how to get better.

Jeff
I just don't understand the Bears and Cartier is a perfect example because they are struggling.

Sarah
It is.

Jeff
But it's hard. I mean, it's—you have four stakeholders and you're only one of them. We can't just wish it to happen.

Sarah (17:59.342)
We did a study recently and it was, you know, there was a misconception that it was like, “Well, the oncologist wants to keep the patient because if the patient goes to the academic medical center, then they're gone forever.” But we started talking to patients and it's like, “No, I can't go. I can't afford to do this. I can't afford to leave my family. I can't afford to go the 200 miles or whatever to this other place because my doctor is here.”

Jeff
Or my cows are here.

Sarah
Exactly. Like the rest of my life is here. I can't do it. While many of us even listening to this would have the benefit of going wherever we would want to go, wherever in the world we wanted to have treatment, that is not a choice that most people…

Jeff
It's not. You probably have data on this. So we've done surveys of the number of people who are living paycheck to paycheck. It's the majority of your—You know what? It's also the majority of people that work for a hospital or work in a medical office.

Sarah
It's true.

Jeff
It's paycheck to paycheck.

Sarah
It's true.

Jeff
So if you're paycheck to paycheck and you get some little wrench, what are you going to do?

Sarah
It's incredibly devastating and definitely spending time thinking about—that's where my question came from—on patient value and really understanding what's important to patients and really how to value that as part of the conversation.

Jeff (19:16.428)
What I'll say is, and one of the beauties that we feel about community-based oncology is that our focus is on the doctor first, because the doctor is the only one who's stated a Hippocratic oath and really the main advocate for the patient. And so if you enable the doctor to have every tool he can, he or she will do the right thing. And that should be a winning strategy.

Sarah
I think so. Talk about data for a second. Like I said, data will save the world. My favorite topic. I like data. How do you guys use data? Talk about data.

Jeff
So we have a—what's the latest—I used to call it a data warehouse, now it's a data lake, I guess. So all of our molecular data, we have direct feeds from all the testing companies. We have all of our EMR data, we have all of our data in our data warehouse. And then we purchase claims data.

So One Oncology—it's one of the big differences—you could never do this as a practice. We have 20 data scientists on our team that use our DataOcean to analyze. And so we can do KPIs, we can find… so if there's a molecular defect that's not actionable that you tested for two years ago and now there's a commercial product that you use, we can identify those patients and email the doctor and say, “You have six patients that qualify for this therapy.”

Sarah
That's amazing.

Jeff (20:09.898)
We use a lot of data.

Sarah
That's amazing. I love it. I love it. It's been the frontier that we've gone through the last couple of years in just unleashing, especially with the molecular data. For a long time, it was—you would get a fax. I always was wondering who was using fax machines and it was because we were using fax machines to get medical offices.

Jeff
Yeah, exactly.

Sarah
It's really the craziest thing to even say.

Jeff
It is.

Sarah (20:56.184)
But unlocking some of those data when it was just in a faxed piece of paper was just unthinkable even a few years ago. So that's amazing progress.

Jeff
When I was at Tennessee Oncology, when we decided to form One Oncology, it was one of the use cases I said—that we will never… at that time, seven years ago, we thought you were going toward population health like at that time, right? You did too, as a consultant.

Sarah
For sure. Sure.

Jeff
And if you can't manage your data, you're not going to survive. So I'm like, we can't afford the data analytics that we need to be successful. Well, that didn't come true, but we still need the data analytics, and with AI it's going to go even more, and it's going to explode.

But it's still like—it's not going to happen for free. And so you need those economies of scale and access to capital to do the right thing.

Sarah
I think that's one of the biggest advantages of some of the community models that exist today is just unlocking some of the data that are there. You would never, independent, completely rural Tennessee, independent, you're not—you’re gonna use the data you have in front of you on that day and that's not the best you've got and it's not enough. I'm curious, maybe one of the things that I think a lot about is that time to treat, time to diagnosis, partnership with pathology. Have we cracked that nut yet?

Jeff (22:07.958)
No. And it's because again, it's siloed. And so we at Tennessee Oncology employ pathologists. And if it's a blood sample, we can do that ourselves. We have access to it. If it's a biopsy that's done in the hospital, they don't work for us. They almost see us as competitors. Getting that block is—exactly. And so no, it's not seamless.

Just like we don't share data seamlessly, there are so many barriers out there. The world comes down to incentives. Behavior follows incentives. And as long as we have misaligned incentives, we're not going to have the best outcome.

Sarah
It's one of those things that I talk about, data democratization, and a lot of people make a lot of money in data. So that's going to be a tough thing to overcome. But even thinking through what we could do if systems talked to each other better, if we had…

Jeff
But we have like HIPAA—I guess it's a good thing—but it's often a bad thing. It gets in the way. That's why we still have faxes, by the way. Tennessee Oncology gets tens of thousands of faxes every month. If a new patient comes in, all that effort comes by fax.

Sarah (23:18.67)
It's incredible. It's incredible.

Jeff
I was on a panel this morning with a colleague and he's probably 10 years younger than me and he was talking to his daughter who's in college and she asked him what a fax was.

Sarah
Well, no one's seen it. Over the years—I know, it's terrible. It's like, it isn't a good—we're not proud of this. But when I think about like who is still using fax machines, it's oncology office, doctor's office, pharmacy—like specialty—like getting scripts through.

Jeff (23:40.91)
I'm not anything… care option.

Sarah
Because it's HIPAA compliant.

Sarah
What did we miss talking about? What did we miss talking about today?

Jeff
I guess that—what does it mean for the future? And so, and I talked a little bit about barriers. So, you know, at least in oncology, the biggest barrier to a level playing field is 340B pricing and the abuses of 340B. We're good, but we can't compete with 500% margin on our 10% margin. Like that's just not going to work.

So until you level the playing field, you know, it's hard for every patient to have that choice. Every patient deserves a choice.

Jeff (24:21.378)
So I'd like to see a little more leveling of the playing.

Sarah
I've heard the math ain't mathin' sometimes.

Jeff
That sounds like somebody from the South. I may use that one. I've not heard that one. I'm surprised. I'm a Southern boy. The math ain't mathin’. It's true.

Sarah
Fantastic. Well, I think that wraps up this episode of Value-Based Voices brought to you by the Association of Value-Based Cancer Care. A heartfelt thank you to you, Jeff.

Jeff
Thank you.

Sarah
For sharing your insights today and to you, our listeners, for joining the conversation. If you found today's discussion thought-provoking, be sure to subscribe to Value-Based Voices wherever you get your podcasts. Stay tuned for more episodes that spotlight the voices shaping the future of oncology.