Alternative Payment Plan Works Only With Large Patient Cohorts

Tony Hagen @oncobiz | September 11, 2015
Thomas Feeley, MD

Thomas Feeley, MD


Key Takeaways
  • Bundled care requires cohorts of hundreds of patients to balance out costs.
  • Smaller practices can participate in bundles through aggregation.
  • Administrative chores and lack of automation erode savings for providers.
  • Innovation in care under bundled plans takes the form of “efficiencies.”
The experiment with bundled care in oncology is moving forward despite mixed results and lingering concerns about the administrative difficulty of implementation, potential care compromises, and whether innovation can thrive under fixed payments. Various players and observers discussed their experiences and thoughts on bundled care with OncLive.

“We’re not sure this is where alternative payment models are heading for cancer in terms of bundled care,” said Thomas Feeley, MD, head of the Institute for Cancer Care Innovation at University of Texas MD Anderson Cancer Center, which is 9 months into a bundled program for head and neck cancer.

However, he remains optimistic and is tweaking the program as it progresses. In this experiment with single payments for complete care, MD Anderson has found a great working partner in UnitedHealthcare, according to Feeley.

MD Anderson expects to enroll about 150 UnitedHealthcare-covered patients over a 2-year period. Thirty-five have been enrolled so far, mostly younger, non-Medicare patients with few or no comorbidities. According to Feeley, clinicians are not told whether or not the patients are involved in the bundled program, and the fact that MD Anderson employs its physicians on a salaried basis helps to facilitate the effort.

MD Anderson differs from a community-style oncology practice in that it delivers a full spectrum of care without the need to refer patients to outside physicians and other care specialists. The cancer center and UnitedHealthcare sought to determine whether or not an integrated care system that includes hospital services could work successfully with a bundled care program. “Our major aim was feasibility: could we do this bundling for everything [all oncology care services] that a patient gets in a cancer care episode? We’re finding that out,” Feeley said.  

Proper Automation Needed

Bundled care arrangements often involve administrative challenges that include working with dual payment systems, where some elements of care are covered by bundle payments and others are not. At MD Anderson, a key administrative challenge has been the lack of automation available to enroll and track patients separately from the established fee-for-service system. Because the program is separate from the fee-for-service system, claims have to be handled manually and UnitedHealthcare has to be alerted that bundled claims are on the way. All of this takes time, Feeley emphasized.

Cost Concerns

In addition to automation, cost is another major concern, particularly as it relates to the administrative side of the bundled program, as much information needs to be handled manually.

“Many believe that bundled reimbursement for cancer care will control the ever increasing costs of cancer care,” Feeley said. “Unfortunately, there is no evidence that is the case. We undertook this pilot with the primary aim being feasibility; however, we have set up a careful financial tracking system to attempt to analyze our financial performance in this pilot. At this point no patient has been in the pilot long enough to answer any financial performance questions, but we hope to have some answers after the pilot is complete. We have learned that there are significant administrative challenges involved with executing a bundled payment system that relate to identifying patients and claims processing which, owing to a lack of appropriate software, must be a manual process for both MD Anderson and UnitedHealthcare.”

When the program was announced, consumer groups expressed concerns that care quality would suffer under single payments, as physicians might feel the incentive to reduce the level of service to avoid running into payment ceilings imposed by bundles. That is not an issue at MD Anderson, according to Feeley, as practically everything is done in house, and all physicians are on salary.

One patient advocate who remains skeptical about the true value of bundled care is Patricia Goldsmith, former executive vice president and Chief Operating Officer of the National Comprehensive Cancer Network (NCCN) and current Chief Executive Officer of CancerCare, a patient assistance group.

“I know that the oncology community is attempting to work with these bundled payment models and work collaboratively with payers. But that said, I don’t really see the systems in place to easily administer bundled payments. It is still basically a fee-for-service world, good, bad or otherwise – number 1; and number 2, I am very concerned that these bundled payments are going to stifle innovation. If the standard of care advances, will bundled payments account for that?” Goldsmith says.

In the search for ways to end the ballooning of medical costs under fee-for-service programs, Goldsmith thinks that bundled payments may eventually find their place. “I think that bundled payments could definitely be an answer as long as there were some administratively simple way to accommodate them in the fee-for-service environment and as long as they accommodate for innovation and changes in standard of care in a rapid way.”

Is There Room for Innovation?

According to Lee Newcomer, MD, senior vice president of oncology for UnitedHealthcare, an episode payment pilot that completed in 2012 concluded that oncologists spent more—not less—on drugs. The study of 810 patients with breast, colon, and lung cancer demonstrated a reduction in anticipated spending of $33 million, though an increase of $13 million in chemotherapy drug spending.1

In addition, two findings from that study were statistically significant, according to Newcomer: a decrease in the hospitalization rate and less use of radiation oncology.

Health Care Incentives Improvement Institute (HCI3) Executive Director Francois de Brantes takes exception to the idea that innovation is more likely to occur under fee-for-service. “Some of the innovation that has been introduced in the market has a very marginal effect and an incredibly high price point. In the fee-for-service world, that’s what is encouraged.”

The new emphasis on value-based payment is spurring many innovations that are streamlining operations without a consequent loss of quality in medical care, he contended. “It’s the type of innovation you would expect: ways of making care processes more efficient, ways of getting information faster from one place to another, ways of eliminating duplication of unnecessary tests, and none of that innovation was possible before we started moving toward value-based payment.”

The UnitedHealthcare program measures physician performance under the bundled payment program in two ways: outcome (survival) and total cost of care. Newcomer thinks the emphasis on outcomes helps to ensure that physicians won’t compromise on care in the bundled care system. “If they can improve survival and lower the cost of care, they’re going to get rewarded. So, they’re having more thoughtful discussions about innovation. If the innovation isn’t bringing anything to the table, they won’t use it, but if it’s clearly a good drug, they’ll adopt it immediately because they’ve got the survival incentive, and they’re not penalized on the cost side.”

Lee Newcomer, MD

Lee Newcomer, MD

The lack of automation is an issue, and according to Newcomer, UnitedHealthcare is working to introduce modern systems to handle payment and patient enrollment.

Healthcare savings kick in when physicians practice better medicine so that complications, such as hospital visits, are reduced, and they avoid patterns of care that don’t contribute to the welfare of the patient, according to Newcomer. However, under the fee-for-service program “physicians are being penalized, because there’s less revenue coming into the practice. What we’re trying to do with both the episodes and bundled is say, ‘Take great care of the patient and be as efficient as possible, and third, equally important, minimize the complications,’” Newcomer said.

Measuring Validity

Large patient cohorts are necessary to generate the data necessary to model costs against the different types of disease and survival. “The differences in cost among patients with breast cancer is immense, depending on their stage and genetic status, so finding a comparison group that can give you a good picture of how the group is doing is absolutely essential, and it does take a large number of patients in order to do that accurately. It takes hundreds of patients, per practice,” Newcomer said.

“It took 800 patients in our episode program to have the kind of statistical validity we needed. We know those guys saved us money. There’s no question of that, but it took 800 patients to be that certain,” he said.

That makes it a challenge—but not an impossible one—to bring bundled care to smaller practices that are also under pressure from the Centers for Medicare & Medicaid Services (CMS) to adopt value-oriented alternative payment models, according to Newcomer. “We’re constantly finding that these practices are not large enough, and so we’re pooling them. We’re putting five practices together and evaluating them as a team.”

Though the experimentation with single-payment systems continues, Newcomer believes that lung cancer care could realize a high degree of benefit under these programs. “The data around the United States is showing us that patients with lung cancer are treated very inconsistently. Their staging and surgical evaluation is fairly erratic, and we think that putting centers in big metropolitan areas that are focused on lung cancer only, would improve the results. That’s the next area I’d like to get involved with.”

Another group experimenting with bundled care is Horizon Blue Cross Blue Shield of New Jersey, which in October 2014 established a collaboration with Regional Cancer Care Associates, a group of 25 oncology practices throughout New Jersey, on a breast cancer bundled care program designed in part by HCI3.

Lifting the Pre-Authorization Burden

De Brantes thinks that the administrative complexity of single-payment system is balanced by the freedom that physicians have to make decisions independently of authorization requirements. “The underlying goal around these payment arrangements is to free up the clinicians to do their job without having to comply with the inspection control mechanisms that are currently in place in fee-for-service. On the flip side, you’re probably going to have to do some reporting of data on the particular patients, but many cancer centers do that anyway, and almost all oncologists should be doing that.”

Under the HCI3 plan, dubbed Prometheus, the goal is not necessarily to save money for payers but to bring the annual percentage rate of medical cost inflation to zero, according to de Brantes. “This could help to bring a halt to the constant upward march in premium costs,” he said.

Physicians often don’t immediately recognize the benefit of bundled care because they think in fee-for-service terms and cannot imagine that fixed payment programs could lead to higher income, according to de Brantes. He notes that once physicians start to eliminate unnecessary care, the savings are shared with them. “Typically what we see in a total episode of care for patients with complex conditions is that the physician portion ends up being at most 40% of the total, so you have another 60% there for facility costs, including emergency departments, durable medical equipment, pharmaceutical or therapy costs. If you reduce that other part by 10%, then your piece goes from 40% to 50%. That’s a 25% increase in your revenue. What we’ve seen in all other bundles is that’s exactly what is happening,” de Brantes said.

If practices are too small to participate in bundles, they can still achieve savings by having physicians meet in person each week to review operations and individual cases. “Have a conversation and not just a call or an e-mail, but get together and review the charts of the patients,. That’s the behavioral change that makes a difference.”


Newcomer L, Gould B, Page R, Donelan S, Perkins M. Changing physician incentives for affordable, quality cancer care: results of an episode payment model. J Oncol Pract. 2014. http://jop.ascopubs.org/content/early/2014/07/08/JOP.2014.001488.full. Accessed August 31, 2015.



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