Joint ventures for cancer centers have proliferated in the last few years. These arrangements can take a variety of forms and can involve community hospitals, regional medical systems, academic centers of excellence, national cancer care companies and both medical and radiation oncologists. Frequently, the oncologists surrender their right to bill and collect for patient encounters in return for a stipend in the form of an employment or professional services agreement. In many cases, the ownership of the actual equipment or facilities is allocated among the parties to align interests and share risk. Although every situation is unique since healthcare is still driven by local culture and community needs, there are a few key rationales behind many of these oncology joint ventures.

Improving clinical care and cancer patient experiences should always be the chief objective for a cancer center joint venture. The availability of care is generally enhanced when different elements of the healthcare delivery system work together. A joint venture often is the only mechanism to bring comprehensive cancer care to a community. Because cancer patients frequently require prolonged treatment over a number of weeks, having state-of-the-art treatment facilities closer to the patients’ homes and patients’ family members is optimal. Moreover, better coordination of care may be achieved when the physician, local hospital and national experts work together from the same facility.

Patients and their family members may also feel more comfortable remaining in their own community for cancer treatment when the local facility is affiliated with a world-renowned academic medical center or national oncology company. This comfort level may decrease the incidence of out-migration where patients leave their local communities for treatment. Cancer care is certainly evolving with dramatically increasing cure rates in many areas. Joint ventures may provide a meaningful opportunity for a community to stay “cutting edge” based on best practices across multiple cancer centers and the latest research.

New technologies such as specialized linear accelerators, CyberKnives or Proton Therapy are often extremely expensive to acquire and to operate. Relatively small groups of physicians or community hospitals may not want to borrow the money to bring these services to their practice. The physicians or local hospital may prefer that the regional system or national cancer care company provide some of the capital for this expensive but clinically important equipment. Frequently, national companies or large healthcare companies may be able to purchase and maintain the required equipment on more favorable terms because of their buying power. Their involvement in multiple cancer centers may also create lowered operating costs and economies of scale.

If a Certificate of Need is required for new technology or cancer treatment service, it often behooves the various parties to work together to obtain a certificate of need for the joint venture rather than opposing each other in an extended competitive process. Although most physician owned and operated cancer centers function as an extension of the oncologists’ practice and do not require a Certificate of Need, many cancer centers cannot fit within the exemption for regulatory reasons. Due to participation by multiple physician practices and the need to access higher hospital-based third party payor and Medicare reimbursement, many cancer centers will require certificates of need in states such as Alabama and Georgia which regulate the number of these centers.

In addition, the 340B drug program has created an impetus for cancer joint ventures. Much to the chagrin of national pharmaceutical companies, Congress authorized this program in 1992 to ensure that certain facilities serving indigent or low income patients are able to purchase their drugs at the lowest possible cost. The 340B program allows certain nonprofit or governmental facilities with high percentages of Medicaid patients to purchase drugs for their outpatients at a deeply discounted pricing. Because chemotherapy often requires the frequent long-term use of expensive drugs, any opportunity to purchase drugs at a significant savings without decreasing reimbursement represents a mechanism to stabilize physician incomes and better cover the costs of uncompensated care.

Joint ventures, of course, are not right for every situation and require a significant amount of time to implement and to operate with the involvement of multiple parties. There are significant regulatory issues inherent in any healthcare joint venture. The parties have to negotiate complex legal documents and be prepared to devote time to ongoing joint venture governance and decision-making. Furthermore, all parties have to accept an inevitable loss of autonomy that being part of a joint venture will necessarily involve. However, in many circumstances, these downsides are minimal compared to the positive clinical and economic outcomes that can be achieved in a successful oncology joint venture.

Colin Luke is the former chair of the Alabama Bar’s Health Law Section and is a partner with Waller where he specializes in healthcare law.