Innovative Payment Models in Cancer Care

Tony Berberabe, MPH @OncBiz_Wiz
Published: Monday, Dec 15, 2014
Thomas Feely, MD

Thomas Feely, MD

Faced with steep regulations, slashed reimbursement rates, and a shift in focus from fee-for-service (FFS) to delivering value, insurers and physician groups are experimenting with new forms of payment incentives.

But don’t look for a new model in payment reform to be widely adopted overnight. Physician associations like the American Society of Clinical Oncology (ASCO), the federal government, and private payers have been at the forefront, but payment reform is going to take a slow, incremental shift with many stakeholders weighing in. Overall, there are 4 broad categories of payment reform incentives: pay-for-performance (P4P) programs, bundled or episode payments, pathways, and capitation P4P programs are the most prevalent model and reward physicians for meeting pre-specified goals and following established treatment protocols.

Early results by insurers and physician groups have been reported by CareFirst Blue Cross and US Oncology.1,2 Episode or bundled payments provide physicians a fixed amount of money for a defined time period. Although this form of payment minimizes the financial risk to physicians, the cost of therapy is a factor that requires vigilance.

“I happen to think that episode-based payment or bundled pricing for cancer care probably makes the most sense,” said Thomas Feeley, MD, head of the Institute for Cancer Care Innovation at the University of Texas MD Anderson Cancer Center. The Institute studies new and existing models of cancer care delivery and reimbursement.

The third innovative model promotes the use of pathways—specific treatment regimens identified by insurers. Given the complexity of cancer and all of the unique individual circumstances, it would not be possible to have a pathway for every specific situation. It is up to the oncologist to determine if one pathway treatment is a better option than another, given the patient’s circumstance.

“So if you have 2 to 3 different treatment options and 1 of them is clearly more efficacious, that option becomes the physician’s first choice,” said Jeffery Ward, MD, a private practice oncologist at the Swedish Cancer Institute in Edmonds, Washington. “That option takes precedence in your pathway and could be the only option in your pathway if the data are strong enough.”

After efficacy is determined, the second factor to consider is toxicity, said Ward. “Once you’ve addressed efficacy and toxicity, the third factor to consider is cost. So the pathway order of preference is to determine what works best, what is best tolerated, and what is the most value.” In the last category—capitation—physicians bear the cost risk for the care of a patient population. Capitation also tends to curtail freedom of choice, innovation, and research (see Table 1).

“We tried capitation in the 1980s and while it’s highly effective at controlling healthcare costs, it really curtails freedom of choice and can restrict access to care and certainly doesn’t promote innovation and research, which is essential in oncology,” said Deborah Schrag, MD, professor in the Department of Medicine at Harvard Medical School and chief, Division of Population Sciences, Department of Medical Oncology. Her research focuses on utilization of new cancer treatment technologies at the population level.

Ward says capitation might work for the big hospital system with employed doctors or a huge multispecialty clinic but a community oncology practice will have challenges. “If you give a community practice capitated dollars for patient care, how is the practice going to pay the surgeon, the radiologist, or the radiation oncologist? In addition, the practice is responsible for purchasing and administering chemotherapies, which the practice has no price control over and, which keeps increasing exponentially. How can anyone be expected to take on that risk?” Ward asked.

Table 1. Alternative Payment Models to FFS

Alternative Potential Advantages Potential Disadvantages
Capitation/Gatekeeper Highly effective at controlling costs Curtails freedom of choice
May restrict access to care
Pathway Adherence Promotes evidence-based practice, high quality Constrains choices
Challenging to maintain
Accountable Care Organizations Foster teamwork and efficiency Promotes quality
Constrains choice
Episode Bundling Predicability
Provides incentives to teams to work together to get good outcomes
Easier to construct for short episodes and a wellspecified team
Outliers expose providers to risk

Source: Schrag D. Aligning Incentives and Designing Payment Systems to Promote Excellence in Cancer Care and Innovation. Dana-Farber Cancer Institute. Presentation, November 7, 2014.

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