Just three months after announcing plans to exit the PPM business, US Oncology may be reversing course again.
Resistance from physicians and Wall Street to the Houston-based company's attempt to purchase the nonmedical assets of its affiliated practices apparently has led US Oncology to slow its push to become a pharmaceuticals and facilities management company.
And heavy insider buying is fueling speculation that US Oncology soon may go private.
Healthcare venture capital firm Welsh, Carson, Anderson & Stowe, which counts among its partners US Oncology board member Russell Carson, stated in an Oct. 12 filing with the Securities and Exchange Commission that it "may explore from time to time a possible acquisition or restructuring of" US Oncology.
Neither Carson nor his partners would comment further, but regulatory documents show that the investment firm had purchased 10.4 million shares of US Oncology stock, or nearly 11% of the company, through Nov. 19.
Welsh, Carson began its buying spree in early October, shortly after US Oncology announced it would quit the practice management business in favor of what it calls a "service-line model." US Oncology stock tumbled 45% on the news.
The stock since has rebounded to above its Sept. 28 closing price of $7.45, in part because US Oncology assured its practices that it would not force them to sell. Instead, US Oncology only will require action by the 40% or so of its practices that still pay their physicians based on net revenue, according to spokesperson Alvis Swinney.
For the past year or so, US Oncology has been converting its practices to a compensation formula based on pretax earnings. "The real target is the revenue practices," Swinney says of US Oncology's decision to promote the service-line model.
Some familiar with the situation say that US Oncology has confused its physicians by not clearly explaining its intentions.
"A lot of groups are standing pat, waiting for further guidance from US Oncology," according to Steve Messinger of Alexandria, Va., healthcare consulting firm MedTactics.
John Hennessy, executive director of Kansas City (Mo.) Oncology and Hematology Group, a US Oncology affiliate, says the initial information received from the company was rather vague. But in recent weeks, "What we've seen is more clarity," he says.
"We're still evaluating the opportunity to go to the service-line model," Hennessy says. "Both seem like viable options."
Steven Westgate, M.D., is a radiation oncologist at the University of Missouri at Columbia. US Oncology manages the school's 12 cancer physicians, who are compensated on the old revenue model.
Right now, though, Westgate says he sees no clear advantage in switching to either the net earnings model or the new service-line model.
"It's a zero-sum game," he says.