Navigating Ethical, Financial Considerations When Delivering Cancer Care

To conduct a comprehensive financial analysis, health care providers must understand the interplay between cost structures, reimbursement models, payer preferences, and sites of care, as differences in these factors have the potential to dramatically shift financial outcomes. However, balancing these variables might leave some feeling overwhelmed.

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At the Hematology/Oncology Pharmacy Association Annual Conference 2024 in Tampa, Florida, Drug Topics interviewed Scott Soefje, PharmD, on his presentation titled “The Great Financial Debate: Cost vs Margin for Cancer Care Drugs” to address whether cost or margin should act as the primary financial driver at an infusion center pharmacy and glean guidance on making financial analyses.

Drug Topics: Can you elaborate on specific scenarios where prioritizing cost might be more beneficial, and conversely, where prioritizing margin might be a better strategy for an infusion center pharmacy?

Scott Soefje, PharmD: Margin is kind of the easier one. You prioritize margin whenever you would lose money if you use a drug. And then you look at that margin and say, ‘Which drug do we use to make sure that we're at least making money or breaking even from a revenue perspective?’ On the cost side, our philosophy—and I think what we're looking at—is that we have a societal responsibility to be good stewards of health care and that if we don't take ownership of driving down the cost of care, then the cost of care will never come down. Ultimately, someone's going to force us to do so. I think in those situations where you can use the lower cost of the drug, you should, because it's going to help the overall societal perspective. That begins to break down, though, when that low-cost drug is the one that you're losing money on. So, now maybe you need to go up to the next one and use that kind of philosophy to really get through the process.

READ MORE: Balancing Cost and Margin for Sustainable Cancer Care

Drug Topics: Considering the different sites of care (inpatient, hospital-based, physician-based, home care), how does the financial analysis for cost and margin change depending on the location where the infusion is administered?

Soefje: From a cost perspective, there are subtle differences in how much things cost at different sites of care. Hospitals and hospital-based infusion centers usually pay the most, then physician practices usually get discounts of some sort. So, there's cost differences there; knowing that will be very, very important as you're doing your [financial] analysis.

On the reimbursement side, it's understanding how the different types of care are reimbursed. Inpatient care is from the government, pretty much capitated care—you get a fixed amount. In that scenario, if it's a fixed amount capitation, you always want to lower cost, because you want to minimize what you're charging to get your fixed rate back. On a fee-for-service or percentage-care reimbursement, then it becomes a balance again, and we're back to that balanced process.

Knowing what each side is doing [and] knowing what each payer is doing at each site is very beneficial in doing your financial analysis. As more and more payers are making demands about specific sites of care, you have to understand [how] that's going to impact your analysis. I mean, if the payer is not going to pay you to [provide care] at the hospital, then that's zero revenue. You can't do it in the hospital, you got to take it somewhere else. You got to sit down and figure out what all these [factors] are as part of your analysis.

READ MORE: Oncology Resource Center