Healthcare Investments: Analyzing the Surge in Infusion Centers

Morgan Ribeiro: Welcome to Counsel That Cares. This is Morgan Ribeiro, the host of the podcast and a director in the firm's Healthcare Section. On this episode, we are looking at the growing sector of infusion centers and the significant surge in investments in the area over the last few years.

Joining me for the conversation are Jennifer Rangel, a partner in the firm's healthcare regulatory and enforcement group, and Reece Norris, founder and COO of WeInfuse. Jennifer and Reece, welcome to the show.

Reece Norris: Thanks for having me.

Jennifer Rangel: Thank you.

Morgan Ribeiro: Great. So before we jump into our key topic for today's episode, I'd like for each of you to give some background on yourself. I think that will provide us with some helpful context for why I've asked you both to join me today. So Jennifer, I'll start with you. Can you tell us more about your practice and, particularly, the work that you do in the infusion space?

Jennifer Rangel: Absolutely. I'm a healthcare regulatory compliance partner with Holland & Knight in Austin, Texas, and I've been practicing exclusively in the area of healthcare for about 27 years. I represent all types of healthcare industry clients and have a very broad practice helping my clients comply with the myriad of laws and regulations that apply to them. Some areas of my practice include everything from fraud and abuse, structuring arrangements and compliance with Stark and AKS (Anti-Kickback Statute), state nurse practitioner, scope of practice, telehealth requirements, corporate practice of medicine and HIPAA, just to name a few.

One area of my practice is representing infusion pharmacies and infusion clinics and how they are set up, and then in their operations in compliance with a vast number of state and federal laws that apply to them. As well as reimbursement regulations, things like state pharmacy laws, looking at if they're utilizing a nurse practitioner, what that scope of practice is, medical director requirements, Stark, Anti-Kickback, HIPAA, state licensing — some states require licensing for clinics. So just all the laws that kind of touched on how you operate and structure those types of companies.

Morgan Ribeiro: Great, thank you. And Reece, can you tell us more about yourself and your company WeInfuse?

Reece Norris: Sure. I guess my genesis in the infusion center dates back to the early 2000s, but even before that. I am a lawyer, so don't hold that against me. No offense, Jennifer. But again, excited to be here. Graduated law school, went to work for a judge, and then a big law firm, was attracted to all things healthcare.

My dad and a college friend of mine had started an infusion management business. And so I was always intrigued by, it would have conversations, but eventually an opportunity arose where I could become a partner in the business. And so I left the law firm I was working with and joined forces with them. And ultimately, my dad gave Brian Johnson and I the keys to the business. And so we had an infusion center management business, and really we were young, green, drinking from a fire hose, learning from healthcare regulatory attorneys on how to navigate a very vast healthcare landscape of changing laws — state and federal regulatory laws.

Fast forward, we transitioned that management model to an ownership model. So we wound down our management, and we actually owned and operated our own infusion centers by hiring nurse practitioners. Along that journey, we started the National Infusion Center Association to advocate for infusion centers at the federal and state level, and then we built a legacy proprietary software system as well.

So we were very involved in the industry. Trying to figure it out ourselves, trying to gather others to help us understand the industry through NICA, but ultimately sold that business to Paragon Healthcare, which is where I crossed paths with Jennifer for the first time. We sold the business. They continued to grow the, what we now call AICs, ambulatory infusion centers. And then that led me to where we are today, which is starting WeInfuse.

So after four years of helping Paragon grow their AIC division that they bought from the company, we left and we started WeInfuse, which is an infusion center. Now an infusion therapy software platform where we power the workflow for over 750 locations across the U.S. that are infusing these very complicated specialty drugs and biologic medications. So we're essentially an EHR for infusion therapy. Additionally, we have consulting services where we help folks start infusion centers or navigate and optimize their existing operations. I'm very deep in one specific area now, to make a long story short,

Morgan Ribeiro: It's very needed, right? Given the growth in the space and having experts like yourself to be able to consult on a pretty complicated business model, and certainly I think the regulatory aspects too can be quite complicated.

So, and there's really no shortage of information or data out there demonstrating the growth in this space. And for this conversation, we'll look at both the in-home and outpatient or ambulatory infusion center spaces. The over $100 billion infusion therapy market is projected to continue growing at 8.6 percent through 2025. And a lot of this is due to ongoing shifts in care from hospitals to outpatient and in-home settings. I think that makes sense to a lot of us. I think that reimbursement is also driving a lot of this shift towards that space. But I would love to hear from both of you, and I'll start with Reece, on what other key factors are propelling this expansion.

I think it's good for us to explain to the listener like, why is all of this happening? It's not just a random move towards this. And Reece, to your earlier point, you got into the space in the early 2000s. So this shift has been occurring for a while, but it seems like it's really ramped up in the last few years.

Reece Norris: For sure. So like when we were operating infusion centers, there was two main specialty drugs that we infused in the non-oncology environment. That was Remicade and IVIG. And today there's dozens of drugs. So one, I think you have a really robust pipeline of medications that are on the market today, treating various disease states, various autoimmune disorders.

Now that you have so many drugs, payers have tuned in and now they're saying, OK, let's get these out of the hospital. Let's move these patients in a lower cost care settings like infusion centers. So you have payer side of care optimization. So, they're also driving the patients to the home. So you have the expansion of home infusion pharmacies as well as specialty pharmacies. So lots of tailwinds.

These drugs are often blockbuster drugs, meaning they may be the only drug treating an autoimmune disorder. So for example, we have a drug that's been launched in the last, I'd say five, six years, that treats lupus. Now we have a drug that treats a thyroid eye disease. We have several drugs that now treat MS. Multiple drugs treat rheumatoid arthritis, Crohn's, etc. So, it's been an incredible amount of growth in terms of just the number of drugs and the drugs that now treat these disease states that never had a therapy before, and the only therapy there was, was maybe an invasive surgery or steroids, which that has its own side effects and own costs as well.

So it's an exciting time in the industry. Lots of tailwinds.

Jennifer Rangel: I think just to add to that, another driver is the rise in technology. That is making home-based and outpatient care much easier to provide and making it so much easier to provide care in different settings. As well as that payer shift, we talked about reimbursement, but also towards value-based care. I think that's also helping to kind of drive providing care in lower cost environments and making it more able to do that in a quality manner.

Morgan Ribeiro: So I want to dive into a few of the points that you all made.

First, I want to look at the aging population and some of these chronic conditions. You mentioned Crohn's, for instance, or lupus. Why does this lead to there being growth in the infusion space?

Reece Norris: From one experience of operating an infusion center and now just watching our clients operate theirs and trying to provide that technology. So thank you, Jennifer, for leading with technology. Shameless plug for WeInfuse. But we see patients, maybe they're older and they have osteoporosis and rheumatoid arthritis, so they're getting a drug called Prolia, which is a specialty injection, and they're on Remicade or Actemra for rheumatoid arthritis. Or maybe they're suffering from an autoimmune disease, so they're on IG and they're also getting another drug for osteoporosis or another disease they may have. So certainly the aging population is weighing into this. And one of the things I did mention earlier, which again goes right into the aging population, is now there's drugs on the market for Alzheimer's.

I think if you go back, there's a study by Rand when they were looking at Alzheimer's, when the first drug was about to be launched, but never made it through the FDA at that time. They were like, the number of Alzheimer's patients will certainly exceed the number of infusion centers that are available. So, demand will exceed supply, and I think we're going to have that same type of situation here. As the number of Alzheimer's drugs start to come onto the market, treating the various stages of Alzheimer's, which is really interesting.

Jennifer Rangel: And I also, from my experience with friends and family, we're also seeing, I think, a rise in diagnosed chronic conditions at younger ages. So in a younger population too, which will also contribute to the use of AICs and home infusion.

Reece Norris: Yeah, 100 percent.

Morgan Ribeiro: So, I think we've largely laid the foundation of why this area has seen a surge in activity, and we will continue to see this growth into the future. One thing we've not discussed yet is the regulatory and reimbursement landscape and how that is driving some of the growth.

I think, Jennifer, you touched on value-based care, which is a huge piece of this, particularly from the reimbursement standpoint. Jennifer, I'd love to hear from you. And Reece, I know you have some perspective to share as well in what we're seeing with the reimbursement landscape.

Jennifer Rangel: The reimbursement, I think, landscape that we're kind of seeing, and changes are happening on pretty much a global basis throughout healthcare.

We're really starting to see a shift towards more risk-based care. Again, value-based care and done very thoughtfully and often focused on a particular chronic population. So that comes into play with infusion quite a bit when you're looking at certain chronic populations, chronic conditions that have infusion drugs that are tied to them that are effective treatments.

So that kind of move towards focusing on particular types of conditions and a certain type of population, whether that's aging or lupus or various autoimmune conditions, I think is one push in reimbursement that is putting a highlighted kind of focus on AICs and home-based infusion as being much more cost-effective. And also part of an overall treatment of the patient so that you're seeing a focus on how to keep a particular person healthy, how to keep their disease from progressing, how to keep other conditions from developing. Infusions play a role in that. And because of that, I think that there are some changes in the reimbursement landscape.

I'm seeing payers even acquiring or starting their own specialty pharmacies. You're seeing, also though, a move towards payers overall acquiring and or building in-house a lot of provider type capabilities. Some of that does include home infusion and AICs as they're focusing on how to best provide full, total care to their patient population.

From a Medicare perspective, certainly there is also a move towards keeping patients out of the hospital and focused on outpatient care. So we have seen growing reimbursement for providing infusion services in a home or outpatient independent AIC environment, as opposed to at a hospital based infusion center, which is typically even on an outpatient basis, much more expensive.

So there's been, I think, a variety of things in the shift in reimbursement that has really moved that, which then of course, leads to additional regulatory risks. Anytime you have an increased focus on reimbursement, you're going to also have regulatory risks that go with that as well.

Morgan Ribeiro: Before we jump into the regulatory piece of this, you know you mentioned fraud and abuse earlier, Jennifer, and so I'd love to dive deeper into that. But Reece, anything you'd add on the reimbursement front?

Reece Norris: I mean, Jennifer nailed it. I just to reiterate, hospitals are typically two to three times the cost for the same therapy that an infusion center or a home infusion pharmacy could provide the same therapy and service. So payers are certainly tuned in.

I mean, when this was a two drug issue, Remicade and IVIG, it was certainly not necessarily hitting every radar for a payer, but today it certainly is. And so what we call payer Site of Care Optimization, shifting the site of care from the health system to these outpatient and ambulatory care settings, is certainly on the rise to the extent in some markets. Not all markets by any means, but some markets where you're seeing payers like pay patients to move from the health system to these ambulatory care settings or alternate site care settings is definitely something that actually happens.

And to Jennifer's point, you're also seeing payers vertically integrate. They're acquiring pharmacies, they're opening their own provider clinics. We haven't seen a lot of infusion clinics being owned or operated by payers, although that could certainly change. They're dialed in now, 100 percent.

Morgan Ribeiro: Yeah, and I know we'll talk about that later on. Just some examples of some of the interesting models that we're seeing in companies that are expanding and growing.

So let's dive deeper into the regulatory piece of this, Jennifer. As you said, obviously with the reimbursement changes come new regulations, and I know we've certainly seen it at Holland & Knight. Clients that have grown quickly, and I would say that that's not just in the infusion space. I think in any arena where there's a lot of dollars flowing into investments, there's rapid growth. Building a compliance program and making sure that you're identifying those risks and that the companies are being structured properly — all of that stuff needs to be considered as you continue to grow.

So Jennifer, I'd love to hear just from your perspective, some of the things that these infusion centers and these companies and even the private equity backers need to be aware of and be mindful of as they look to grow in this space.

Jennifer Rangel: Absolutely. There are, yeah, tremendous regulatory risks just in healthcare overall.

It's a heavily regulated industry, so that certainly impacts everything you do. And you have both these state laws, sometimes local laws, as well as federal laws that all interplay when you're trying to either form or operate an AIC or a home-based infusion clinic. Some of those include things like what type of license do you need. If you're operating an AIC in Texas versus Florida, that's going to look very different. Florida has a clinic license that can come into play and be required depending on how you've structured your entity, whereas Texas does not. So you really have to get granular and look at what licenses are required. Is the home health agency license required? If you're going into patient homes, it typically would be. What are the obligations and requirements to set that up and to keep it operating in compliance? You have to be ready for surveys, accreditation.

Are you owning and operating a pharmacy? There's going to be state law pharmacy requirements there, as well as federal requirements if you are dispensing any controlled substances in your infusion clinic. You may be doing some waived testing before an infusion, so they have to look at exactly what services are you providing and what type of licensing might be required. How are you getting rid of medical waste? Does the state require license for that as well? So there's a lot of different licensing issues.

And then even getting into the actual provision of care, we look at things like, how are you structuring? A lot of AICs have a nurse practitioner who is on-site and providing that in-person supervision over the infusion services. Some states require nurse practitioners to collaborate or be supervised by a physician. So making sure that nurse practitioner has the right collaboration agreement in place. That the medical director for the facility is meeting his obligations. Looking at how we have to structure it under Stark and in anti-kickback, do we have those sort of risks?

Is this a state where we have corporate practice of medicine prohibitions? About half the states — I want to say 27, but I don't have the exact number — prohibit the corporate practice of medicine and would place restrictions on how you set up, say, an ambulatory infusion clinic. As to whether it would need to be owned by a physician, in which case we have even more Stark and anti-kickback issues to consider. So there's a whole lot of different things to think about.

You're enrolling in Medicare. How are you enrolling? Are we enrolling appropriately? Are you billing correctly? What checks and balances do you have in place? How are you handling the drugs when they are delivered from the pharmacy? Is that in compliance? Are there any sort of state pharmacy requirements that are applicable to the AIC or the home health agency that might be doing that?

I think I've gone through a little laundry list, but that just gives you a taste of the many state and federal laws that apply, and they're different. Again, the federal laws stay the same, but the state laws are different in every state. So if you're looking at operating in multiple states, you're a home-based infusion center that is operating across many different states' platforms under the same company, you have to think through how do we regulate that. How are we making sure we're complying with each state laws? Or the same with an AIC, if you're putting locations in five states or more. And as they grow, you have to look at each new state you grow into.

And then the other thing I would just quickly throw in is that these laws are constantly changing. So you have to have a process to stay abreast of what might be coming down the pipeline in a particular state, and checking periodically, at least once or twice a year, what has changed from a regulatory and a legislative perspective, or even just reimbursement, that might impact how you operate or how you bill.

Morgan Ribeiro: Reece, anything else you'd add to that from your experience?

Reece Norris: I would just say if you engage us in consulting for all the reasons Jennifer mentioned, we're going to say you also have to have engaged a healthcare attorney. No more than three in the country, that I know of, that understand this space very deeply. And Jennifer's at the top of that list. So we recommend Jennifer often.

So I think Jennifer's nailed it. Like every state's different, every class of trade and meaning, like a home infusion pharmacy has nuances versus an infusion clinic, which will have its own nuances. So I think to enter in the space without healthcare regulatory counsel would be — foolish may be a harsh word, but maybe that's what the right word is. You have to have healthcare regulatory counsel.

Morgan Ribeiro: Jennifer, I mean you touched on this, but there's one thing when you're going to invest in a center or a clinic in a new state — maybe it's a new frontier for that company — and understanding at the state level, the regulatory environment there. But then once you've actually opened a center, you still have to stay on top of it because it is changing so rapidly. And counsel that is keeping a pulse on what's happening at a state-by-state level.

So Reece, piggyback on what you were saying. Your company, solely focused on infusion centers, describes an environment in infusion centers. There's complex medication delivery model, inefficient processes, staff burnout, which I would, again, say is across the healthcare industry right now. Infusion centers often face big challenges with overbooking, uneven patient loads. Some days you're super, super busy, other days it's slow. So how do you figure out that staffing model as well and keeping those operations flowing?

And you're challenged by both patients waiting for treatment and nurses providing the care. Your software and consulting services enable centers to decrease lost profits, clinician confusion, risk of human error. Can you just tell us more about how you do that and how that touches on the number of pain points that were noted by Jennifer earlier?

Reece Norris: Yeah, so I would say in addition to just a highly complicated, highly regulated industry, because these drugs are so expensive, there's just so much at stake from the payer perspective and from clinically treating the patient, etc. The payer is pushing down quite a bit of utilization management, meaning they are trying to ensure that if a patient has MS, that this very expensive drug that's been prescribed is truly needed.

So there's just a lot of hoops you're jumping through to get the patient on the drug. Broadly speaking, benefits investigation, then verifying insurance eligibility, getting a prior authorization, which often requires you to submit medical documentation. Then there's a scheduling component. These drugs are given at a set cadence or frequency. Oftentimes they have a loading dose, and they're getting more of the drug and smaller amounts at first before they get the drug, and larger amounts at a less frequent cadence. So a lot of variables just in the accepting of patient into your clinic. Getting that order through and approved through insurance, getting them scheduled at these varying cadences of the therapy. Then you have to manage this very expensive inventory, and we haven't even treated the patient yet, right?

So WeInfuse was built with, honestly, the years of experience that Brian and I had actually making all these mistakes and trying to solve them through technology. And we put this all in a software solution. It's not perfect by any means, but we certainly built it through the lens of an operator operating an infusion clinic. And now we actually are moving into home infusion pharmacies and specialty pharmacy software as well. So we are super passionate about this space. We feel like we can empathize with our end users, not only the owners and operators. Also the clinicians, because we certainly saw firsthand clinicians treating these patients. So we're trying to solve for all these complexities in this very unique, very high-stake healthcare delivery channel.

Jennifer Rangel: Building on what Reece said, I do think that technology plays a really important role in compliance.

Certainly digital healthcare is creating new ways and better ways of doing things, but they also have a purpose of helping to reduce compliance risks. So, one thing we really didn't talk about was how important ongoing compliance is for all healthcare providers, but certainly in the infusion space as well. Given the complex billing, the complex structures, whether you have physician ownership or not, Stark Law implications you have to consider. It's just vital that you have these checks and balances and are using technology and using people appropriately to confirm that you are doing things right. You're both staying abreast of the regulatory and changing reimbursement requirements, what each payer may require. Because those are all a little bit different too. And having some technology to do that is, I think, very helpful, and certainly one tool that is very important in a well-run compliance program.

So I just wanted to touch on briefly how important compliance is and how important, whether you're taking on an investor or looking at growing. Certainly the more you grow, the more attention you may garner, more audits you may see. Payers are very active auditing in this space, and most spaces in healthcare, as certainly the federal government. So it's really very important that you are in compliance with all the many billing requirements that are at play and as they keep changing.

And the other thing I was going to mention on the prior auths is there's been a lot of news lately about payers moving away from prior auths talking to various providers. I haven't necessarily seen that to be the case. And I was interested in Reece's perspective in the infusion space in particular, because in speaking to many of my clients, I've certainly seen prior auths be a lot of hoops to jump through. Have not seen any of that getting any easier. So I was interested just briefly in your perspective there, given that there's been all these articles about less authorizations being required going forward.

Reece Norris: Jennifer, you nailed it. We're not really seeing that in our space ease or lighten up. Payers are still very much utilizing the prior authorization process as a true mechanism to make sure that the therapy's appropriate for the diagnosis, given that the drugs are so expensive. Certainly it creates a lot of labor on our clients. We are trying to do everything we can to leverage technology to automate and streamline that process. We just developed a partnership with SummaCare, who their entire model is around automating and streamlining the prior auth process on the medical benefit side.

Now, I think on the pharmacy benefit side — again, this is where just these nuances actually make huge differences — there is a lot of strides that have happened, but that's the paths that are clearer for reimbursement than the medical benefit, which is where a large portion of these drugs are administered and ultimately processed to the medical benefit of a member or patient's insurance. They're still very much heavy utilization of prior authorizations.

Now when you leaned into technology being used for compliance, I couldn't agree more. When we were very early on developing our software, one of our earliest clients had a Medicare audit, and because we were able to line up the order or the prescription for this particular medication that they were being audited on across all their patients receiving this particular medication, we have the order, the supervising and referring provider all lined up for this client and the clinical documentation matching the order and the inventory tied to the clinical documentation, which is all what our system does. And we are able to run these reports for that audit. They didn't have any recoup or receive any penalties when they were on our software.

Now, they couldn't say the same for the prior period when they weren't on our software. They did have some recoup and receive some penalties because they couldn't line up all those components. So, very much want to lean into use technology, whether it's ours or another, to make sure everything lines up. The order has to match what was clinically documented, what was administered. You have to ultimately show the inventory coming out and being documented on the clinical documentation as well, making sure you have the complete loop of that therapy.

Morgan Ribeiro: Jennifer, I'm curious — as you were talking — do these companies have chief compliance officers or someone that's tasked with compliance, or like is it a spread responsibility to make sure that you're tracking all that? Because it just sounds like this is a lot to manage, and it may or may not be the main focus of someone's job.

Jennifer Rangel: It rarely is. I think it depends on the size of the company. So certainly if you have a large national or regional provider of infusion services, they are likely to have somebody tasked with compliance. They're likely to have a formal compliance program, which is recommended for all sizes of providers. But your smaller providers that may have one or two clinics or are just starting out, they're not. So typically it ends up falling to whoever has the time. So it could be a CEO, COO. It could be the CFO. It could be someone they just task with hey, you're responsible for this.

A lot of my clients will ask, say they're entering into a new state, they'll ask us to look very closely at the requirements in those states. And often we'll put together a chart of, here's what you need to be thinking about if you're starting an infusion business in Arizona or wherever. And then they'll go back and try to update that periodically or at least annually, but it tends to be very haphazard.

I think initially with startups, it is just hard to find the money to put the right people in charge of that. And that is where technology and consultants can come to play, as well as trade associations. The national trade associations are very helpful with kind of keeping abreast of what's going on, particularly on a federal basis, but also in some state chapters on a state basis. So there are different ways to do this without having to engage a lawyer, just to update them and make sure you're staying in touch with what's going on.

So there are different ways of doing it, and every company has to figure out what works for them. But oftentimes I find compliance to be really a split role among a variety of different key leaders within the organization that make the time and understand how important it is. So they try to fit that in, but it's hard depending on the size of the company. And then as they grow, they will often add that role as a dedicated leadership role, which is certainly the preference.

Reece Norris: And two organizations come to mind, which is the National Infusion Center Association, that's NICA, and the National Home Infusion Association, which is NHIA. Both are great organizations in terms of, to Jennifer's point, keeping abreast of federal regulatory changes. And I know it's hard to keep up with every state regulatory change, but NICA and NHIA do at least try, but lean into those organizations for resources for sure.

Morgan Ribeiro: Great. Well, we've talked a lot about the various different players in this sector and the increasing number of companies and platforms that are popping up. Are there any companies in particular that you all are tracking, watching closely, or ones that you've worked with that you want to call out?

Reece Norris: It's hard for me to call out certain clients. They really are the reason why we exist. It's been really neat to watch. FlexCare, for example, was the number six fastest privately held growing company in the country, which is amazing, right? To see them make the Inc. 5000.

So to your point, all these tailwinds are driving growth, and then WeInfuse, along with the actual service providers, which are ultimately our clients. Like, I think I just mentioned, Twelve Stone, FlexCare, Paragon, they're growing fast as well. What I really think is interesting, though, is someone like FlexCare who started out with just infusion clinics, is now adding infusion pharmacies. Or take it the other way around. Paragon, which was a home infusion pharmacy, didn't have infusion clinics, which is why they bought our company and then added a whole infusion clinic division, which is now a very large division within Paragon. So I do think you're seeing the intersection of the two classes of trade, pharmacy and clinic starting to come together.

Now, this is where compliance becomes even more important to make sure you're not commingling inventories. And for the pharmacy division and the pharmacy entity, they're complying with pharmacy law. And for the clinic entity, they're complying with the clinic laws and regulatory requirements. So I think you just have to be really careful when you start to blend the two.

But the vertically integrated players, I think are becoming more and more, I don't want to say common, but it's a trend we're seeing.

Jennifer Rangel: It certainly is. Certainly something I think we're seeing across the healthcare industry. But this consolidation of providers with a focus on both vertical and horizontal consolidation, that is really trying to provide more kind of total comprehensive care, again, to the patient, which also is a byproduct of value-based care.

I think that you see that both on the payer side as well as on the provider. I have a number of specialty pharmacy clients that now are getting into the clinic space or the home infusion space. So certainly we're seeing a lot of that growth both ways and certainly a lot of consolidation across the market.

Morgan Ribeiro: Great. Anything else you all want to add to the conversation before we wrap up?

Reece Norris: I've just really enjoyed the conversation, Jennifer. It's always great to connect. So thank you guys for having me.

Morgan Ribeiro: Thanks for being here.

Jennifer Rangel: Thank you. Yes. This has been a great discussion and I look forward to continuing it.