Daily Report has obtained documents that shed light on the key differences that led up to the recent split between the Mary Bird Perkins Cancer Center and Our Lady of the Lake Regional Medical Center.
The two providers were partnered on cancer care in the market until August, when MBPCC announced it will end its affiliation with OLOL at the end of the year, partnering instead with an out-of-state network provider of independent oncology services, OneOncology.
Documents show the two sides had been negotiating for the first half of the year on a strategic growth plan to create a Joint Operating Company that would have been called the Mary Bird Perkins Cancer Institute. Under the terms of the deal:
- The JOC would have been owned 50-50 by MBPCC and OLOL.
- MBPCC agreed to transfer its real property—namely, its six-story building on the OLOL campus, as well as its facilities in Covington, Natchez and Hammond—to the JOC.
- OLOL and MBP each agreed to invest $40 million in the JOC to fund working capital and strategic investments in new service lines like bone marrow transplants and cellular therapies, as well as a new office building.
- The JOC would have a 15-member board comprising members of MBPCC, OLOL, and at-large community members appointed by a JOC nominating committee.
The deal could have been a win-win for both sides, but there were ongoing differences over governance, regulatory compliance and how to structure physicians services agreements with the local oncology groups that would provide patient care.
The biggest sticking point, however, was over ongoing funding for the new JOC. Though both sides agreed to put up $40 million for new capital investments, MBPCC wanted OLOL to contribute 15% of its chemotherapy revenues back to the JOC to fund ongoing cancer care operations, a commitment OLOL was not willing to make—at least, not in early August.
To put that issue in context, it’s important to understand that while MBPCC is the facility at which chemotherapy treatments are provided on the OLOL campus, OLOL owns all the equipment and technology used to provide the infusions. It also employs all the infusion therapists and nurses who provide treatment, as well as one of two oncology groups that practice at MBPCC.
As such, OLOL is the “provider of record” for chemotherapy treatments performed at MBPCC, which means OLOL collects 100% of the revenues generated by chemotherapy.
OLOL officials cannot immediately say how much those services generated for OLOL in 2020. But the margins are high—an estimated 11%, according to an OLOL spokesman. That’s because OLOL, as a tertiary care hospital that provides uncompensated care, gets a special government discount on pricey chemotherapy drugs.
In other words, it’s a profitable business line that OLOL does not want to give up, and it helps explain why the battle between the two entities is so heated.
From the perspective of MBPCC, which felt like it was essentially giving its assets to the JOC, 15% of chemo revenues to fund ongoing operations was the least OLOL could do, especially since the two sides had been talking for months and OLOL knew MBPCC was talking to OneOncology as a backup plan.
From the perspective of OLOL, there was a need to do still more modeling. It was not a delay tactic, OLOL officials say, but rather a way to ensure the best deal for both sides.
“We needed more time to do more modeling to make sure the JOC, the Mary Bird Perkins Cancer Institute would be properly funded,” OLOL Spokesman Ryan Cross says. “It could have needed 15 percent. It could have been 20 percent. We wanted to continue working with them.”
MBPCC is expected to finalize its deal with OneOncology in the coming days, though it’s not clear if that will occur in this week.
In the meantime, there are ways the two sides could continue talking about working together outside of the chemotherapy infusion business, according to sources familiar with the negotiations.