"This positions us for a value-based environment," Bahl said in a conference call with reporters Wednesday, adding that their purchasing and care standardization scale would help lower costs.
Independent practices often struggle with regulatory and back-office tasks. This can take away from time with the patient, which has been one of the factors that has driven consolidation.
Consolidation can help streamline administrative work by handling communication with insurers and drug companies as they navigate performance-based contracts as well as combining information technology tasks, legal functions and sales and marketing operations.
Flatiron's IT platform will help doctors at each practice stay up to date with clinical trials, said Robin Shah, OneOncology's chief development and marketing officer and former vice president of provider marketing and strategy at Flatiron Health.
The providers will pool their institutional knowledge to adopt best practices related to diagnostic testing and genomics, executives said. OneOncology also looks to embrace value-based contracting that ties payment to a drug's performance.
"We believe this will be the future of oncology," Shah said on the call.
Private equity money has been gravitating toward lower-cost delivery models, according to Bain & Co.'s recent private equity report. For instance, Goldman Sachs Principal Investment Area, Pagoda Investment and QIC paid $746 million last year to acquire Australia-based Icon Group, which operates cancer care centers.
Insurers generally pay higher reimbursement rates for specialty care like cancer treatment and there is built-in demand given how complex it is, the aging population and the estimated 38% of Americans who will be diagnosed with cancer in their lifetimes. Private equity firms can also pump money into growing practices that would otherwise be cost prohibitive.
Healthcare private equity total disclosed deal value reached $42.6 billion in 2017, the highest level since 2007.
"PE funds latched onto trends that make healthcare a compelling investment: aging populations, the development of innovative drugs and devices, and a still fragmented and inefficient delivery system that is ripe for consolidation," the Bain report said.
The OneOncology leadership team includes David Chernow, co-founder of American Oncology Resources, the predecessor to US Oncology; Phil Watts, former general counsel and executive committee member at US Oncology; and Shah. The CEOs of the three founding practices — Dr. Jeff Patton of Tennessee Oncology, Dr. Jeff Vacirca of New York Cancer & Blood Specialists and Dr. Lee Schwartzberg, of West Cancer Center — will also serve on the board.
