Reflecting the growing financial pressure on oncology practices, including recent and pending changes in Medicare reimbursements for administered drugs, U.S. Oncology said last week it now receives the bulk of its revenue from group practices under contracts that require physicians and the company to share in rising group expenses.
The Houston-based company provides oncology practice-management services for 850 physicians at 450 sites in 30 states. Medicare accounts for 38% of revenue for affiliated physicians, the company said.
U.S. Oncology announced 83% of its net revenue is derived from contracts with physicians in which the company pays and is reimbursed for all operating costs of a physician practice and then is paid a management fee based on a percentage of the remaining operating income of the practice. At the end of 2000, just 41% of U.S. Oncology contracts with physicians contained such a percentage guarantee of net operating revenue.
The other U.S. Oncology payment model-still used by the company but to a much lesser degree-allows physician groups to retain a fixed portion of their revenue before any management fees are paid. Under this model, if practice expenses and the fixed portion of revenue exceed total revenue, U.S. Oncology would be on the hook for the loss, the company said.
With the conversions in payment models, U.S. Oncology Chairman and Chief Executive Officer R. Dale Ross said, "We have seen a significant increase in practice involvement in local management, as well as enhanced opportunities to expand and diversify practice offerings."