Book Excerpt: Elements of a Successful Oncology Transaction
If the transaction includes medical oncologists that currently perform infusion therapy services outside the hospital, the parties should conduct a thorough assessment of 340B drug pricing eligibility to identify options that maximize the program's benefits. Organizations should at a minimum consider the following questions when evaluating 340B pricing:
- Does the hospital or an affiliated hospital within the system qualify for 340B?
- If the hospital participates in 340B, how large is the practice's chemotherapy program? How many medical oncologists are expected to participate?
- If the hospital participates in 340B, how can it increase its participation through partnerships with community oncologists? And how will the alignment model engage physicians in the program?
- How many qualifying patients (e.g., outpatients, patients with an established relationship with the provider) are expected to participate in the program? What is the expected economic gain?
Ensure Proper Due Diligence
The due diligence process is critical for every transaction and is typically conducted in an iterative fashion, wherein increasingly detailed information is requested from the group.
Questions about compensation typically are initiated early in the process. It is critical for the hospital to conduct a thorough assessment of the oncologists' current practice, understanding all revenue streams and expense drivers, before presenting a financial offer to the physicians. This process is important for any specialty acquisition; however, it is particularly important for oncology practices due to the complexities of the practices (e.g., large reliance on ancillary income).
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