Spotlight on Health Care

Radiation-therapy groups battle moratorium

Premium content from Minneapolis / St. Paul Business Journal by Katharine Grayson, Staff reporter Date: Friday, March 2, 2012 Katharine Grayson Staff reporter - Minneapolis / St. Paul Business Journal Why would a medical practice with a dozen doctors spend $720,000 to lobby the state Legislature in one year? At stake is their share in the lucrative market for radiation therapy, a common treatment for cancer patients. The physicians practice, Minneapolis Radiation Oncology (MRO), is battling to keep in place a 2007 moratorium on building new radiationtherapy centers in the Twin Cities metro area. The moratorium will expire in 2015 unless legislators extend it. Edina- based MRO spent $720,000 to lobby for maintaining the ban in 2010, the most recent full year where data is available. At the time, MRO was the sixth-biggest spender on lobbying in Minnesota, according to Minneapolis/St. Paul Business Journal research. On the opposite side of the decade-long battle is St. Paul-based Minnesota Oncology, a group of 58 physicians that spent $160,000 in 2010 to lobby for overturing the moratorium. The Legislature enacted the moratorium partly in response to Minnesota Oncologys effort to construct a radiation-therapy center in Woodbury via a joint venture with Allina Health. Some lawmakers voiced concerns that overbuilding such centers would drive up the cost of care. Both MRO and Minnesota Oncology have spent years and hundreds of thousands of dollars to win the fight. MRO says the law is needed to prevent Minnesota Oncology from building a raft of new centers and dominating the Twin Cities market, driving up the cost of care and putting competitors out of business. Meanwhile, Minnesota Oncology says the moratorium unfairly stifles competition and could deny some patients convenient access to care.

Major money at stake Why is the radiation-therapy market worth such an extended and costly battle? Its very, very profitable, said Steve Renard, president and CEO of Diagnostic Radiology and Oncology Services, a Roseville, Calif.-based facilities-planning and management-consulting firm that serves the radiation-oncology market. Treating one patient with radiation therapy can bring in between $35,000 and $50,000 in revenue, he said. However, the centers are costly to construct and require the purchase of multimillion-dollar machines called linear accelerators. MRO has a strong foothold in the Twin Cities market. It operates nine out of the 20 centers in the metro area. It owns eight of those, and operates the other at Methodist Hospital, which is owned by St. Louis Park-based Park Nicollet Health Services. Minnesota Oncology has one radiation-therapy center located in Maplewood and operates another at the United Hospital cancer center in St. Paul. MROs perspective The competitive landscape could change swiftly if the moratorium is lifted, MRO argues. MRO only provides radiation-therapy services, so it relies on outside physician referrals for its nine centers. Minnesota Oncology is primarily staffed by physicians who diagnose patients and then refer them to radiation centers for treatment. If Minnesota Oncology could build more centers, its physicians would have a financial interest in sending people primarily to Minnesota Oncology facilities, MRO argues. Its a closed-loop, anti-competitive system, said Dr. Robert Haselow, president of MRO. If Minnesota Oncology expands under that model, it also could hurt

community hospitals that rely on revenue from radiation therapy to offset necessary, but far less profitable, health care services to large patient populations, said Mark Skubic, vice president for governmental relations at Park Nicollet, which supports the moratorium. In addition, Minnesota Oncology might have deep enough pockets to mount an aggressive expansion due to its relationship with health care technology giant McKesson Corp., which owns Minnesota Oncologys assets and manages its business operations, MRO claims. That deal stretches back to the mid-1990s, when Minnesota Oncology entered into a managedservices agreement with a Texas firm called U.S. Oncology, which McKesson acquired in 2010. MRO refused to strike a similar deal with U.S. Oncology during the 1990s. Even if the moratorium is lifted, Minnesota Oncology couldnt go it entirely alone, however. A 2003 Minnesota law requires that new radiation-therapy facilities be built by an entity controlled or owned by a hospital. Thats why Minnesota Oncology formed a joint venture with Allina when it tried to build the new facility in Woodbury. Limiting competition Minnesota Oncology wants to end the moratorium because it unfairly limits competition, said Dr. Tom Flynn, president of the group. Also, more centers may be needed to make it easier for patients to seek treatment close to home. [The moratorium] interferes with patient choice and patient access to care and isnt really based on sound public policy. Flynn also denied his group would build unnecessary facilities to outcompete MRO. Hes uncertain whether Minnesota Oncology would still move forward with the Woodbury facility if the moratorium is lifted. Our intent has never been to duplicate facilities, he said. We look at where theres need. Minnesota Oncology sends about 40 percent of its patients to the Maplewood and St. Paul facilities, Flynn said. Geography plays a big role in referrals, as patients dont want to drive far to receive care.

The majority are referred outside of the centers based on the patients issues, he said. Still, Flynn acknowledges that Minnesota Oncology benefits financially from referring patients to its facilities. He said those additional profits allow the group to give back to the community through efforts such as its Angel Foundation, which provides social services and cash grants to cancer patients. Debate goes on The debate in the Legislature will likely continue in some form this year. Two competing bills emerged in the last session, one that would repeal the moratorium and another that would extend it through 2017. Neither bill became law. However, there likely will be a hearing on such legislation during this years session, said state Sen. David Hann, R-Eden Prairie, sponsor of last years bill that would have lifted the moratorium. Hann has had discussions with both sides and is confident there might be an opportunity for compromise. For instance, he could amend his bill to lift the moratorium, but limit on how close together radiation-therapy centers can be located. Meanwhile, outside the moratoriums boundaries, there still appears to be an appetite for building such centers. In Western Wisconsin, six community hospitals banded together to build a $9 million cancer center in New Richmond, Wis. It opened last year. Also last year, Mayo Clinic built a $10 million radiation-therapy facility in Northfield. Overall, its still uncertain as to whether federal health reform legislation will make radiation therapy less profitable down the road. However, neither side of the debate shows any sign that they plan to give up the fight. Minneapolis Radiation Oncology Headquarters: Edina

Radiation oncologists on staff: 12 Medical oncologists: 0 Number of radiation-therapy centers operated: 9 Web: mropa.com Minnesota Oncology Headquarters: St. Paul Radiation oncologists on staff: 5 Medical oncologists: 53 Number of radiation-therapy centers operated: 2 Web: mnoncology.com kgrayson@bizjournals.com | (612) 288-2106