Oncology Business News®
July 2017

Administrators Say OCM Monthly Payments Won't Cover Costs of Improved Care


Practices in CMS’ Oncology Care Model are individually receiving hundreds of thousands of dollars in new annual revenue, but physicians and administrators are not exactly celebrating the influx of cash.

Alti Rahman

Alti Rahman

Alti Rahman, MHA, MBA, CSSBB

Practices in CMS’ Oncology Care Model (OCM) are individually receiving hundreds of thousands of dollars in new annual revenue, but physicians and administrators are not exactly celebrating the influx of cash. The OCM requires substantial, ongoing spending on additional staff, software upgrades, and other infrastructure that has left some practices financially underwater on the model despite the new payments. Even those that are doing better must contend with the fact that the new funding counts toward their patients’ total cost of care. That total cost must be reduced if providers want to avoid being expelled from the program or possibly hit with financial penalties.

Table: How CMS Will Calculate Bonus Payment in the Oncology Care Model

The new disbursement, called the Monthly Enhanced Oncology Services payment (MEOS), provides practices with $160 per patient per month during 6-month treatment episodes. It is meant to help them develop systems to educate patients, collect extensive data, and prevent expensive emergency department (ED) visits and hospitalizations. After automatic federal spending cuts, a 6-month episode brings a practice $940.80, and payments may continue into multiple episodes. A hypothetical practice that continuously has 500 patients covered by the OCM would receive $940,800 a year. Individual practices may have very different totals.

At the same time, CMS’ Center for Medicare & Medicaid Innovation (CMMI) requires participating practices to allow patients to call in at any hour, which means hiring nurses to staff a phone triage system and giving them real-time access to patient records. Office hours are typically extended to evenings and weekends. Staffers must spend considerable time compiling 13-point care plans for each patient listing treatment goals, estimated out-of-pocket costs, care team members, and other elements. Many practices hire patient navigators and contract with data analysts who can go through masses of patient and claims data to find ways to improve the quality of care.

Oncology Consultants in Houston spent $300,000 ramping up for the model, with roughly two-thirds of those dollars going toward added personnel and one-third to technology, administrator Alti Rahman said. The practice has 15 physicians and 4 midlevel providers working from 9 medical oncology locations and 2 radiation centers. It had previously added some weekend hours and longer weekday hours, and for the OCM it assigned nurses to phone triage and purchased oncology-specific triage software.

Rahman said his practice had 322 patients in the OCM as of mid-May and is receiving more in MEOS payments than it is spending on new infrastructure. He said the practice is in that positive financial situation because it extended its hours and staffed up several years earlier, reducing the need for hiring when the OCM launched. Rahman said it’s also important to remember that any net gains are not pure profit; in a sense, the payments count against you when CMMI calculates whether you are meeting cost-reduction targets.

“Yes, it’s called the Monthly Enhanced Oncology Services payment, and you’re getting revenues from it, but your mindset really needs to be away from, ‘Well, this is additional revenues for me.’ You need to treat it as a loan that, at some point, will need to be repaid,” Rahman said. “If you look at it that way, then you focus your efforts on trying to see how you’re going to get the extra dollars of shared savings.”

MEOS payments count as part of the cost of care, along with all Medicare Part A and Part B expenses and some Part D costs. The model takes the total cost figure and adjusts it for disease type, patient comorbidities, geographic variation, and other factors, then reduces it by 4%—reflecting the goal of lower spending—and uses the result to calculate a target price. Practices that beat their target will receive performance-based payments next year, up to the amount of savings they achieved below the target. Those that do not could be expelled from the program (Figure, cover).

Eventually practices are expected to move into the 2-sided risk version of the OCM, although none have opted to do so yet. Under 2-sided risk, the target is eased somewhat and potential rewards are higher. Practices that fall short would be assessed large financial penalties that could force them to close their doors, making the cost calculation particularly important.

Robert “Bo” Gamble, director of strategic practice initiatives at the Community Oncology Alliance (COA), said it is helping care teams calculate the per-provider cost of transforming a practice to compare that amount to the MEOS payments they are receiving. He hopes to have a clearer picture in the next few months. “If I had to wager, I would say that the expense of this effort is outweighing the income so far.

“It’s essentially a break-even venture,” Rahman said. “The majority of the expenses are fixed costs. The following year, you’re still going to have the expanded-hours clinics and the additional staffing to support it, and you’re still going to be paying the same licensing fees for the software.” Furthermore, “at some point, if you’re not performing, then you’re going to be out of the program,” and MEOS payments will stop, he noted. “You can’t just say ‘I’m going to get rid of software and staff tomorrow because I’m not getting MEOS payments.’”

About half of the 190 OCM practices across the country are contracting with outside consultants for services related to the program, such as chart abstraction and data analysis, Gamble said. For some practices, that external spending combined with internal upgrades is consuming not only their MEOS payments but other revenues as well.

Robert Baird, CEO of Dayton Physicians Network, a National Committee for Quality Assurance-recognized oncology medical home in Ohio, said his practice spent $950,000 on infrastructure upgrades before the OCM began and has spent even more since then. It has between 600 and 750 patients covered by the program, he said.

Dayton Physicians has 18 medical oncologists and 7 radiation oncologists at 8 locations, as well as urologists and mid-level practitioners. It created a new triage department and hired nurse practitioners, an information technology staffer, a clinical informaticist, and 2 registrars to enter data, Baird said. The practice uses an outside consultant to analyze claims data and may add a patient navigator to facilitate the cumbersome data collection required by the OCM.

“Our costs are about double what the OCM is paying. They’re paying about $160 a month, and it’s costing us twice that to put all the emphasis and infrastructure in place for these patients,” he said. “We view it as a long-term investment, and how we’ve been able to manage is, to be honest, the income for our physicians has flattened. We’ve cut costs where we thought it was appropriate. We’ve consolidated offices. We’re doing everything we can to save money and to diversify our revenue.” Revenue sources included a clinical research program, imaging, pathology, a retail pharmacy and an advanced prostate cancer clinic.

For practice administrators, the financial equation is ultimately less about MEOS payments and more about being able to satisfy the OCM’s requirements and qualify for performance-based payments, which can also add up (Table, cover). In a hypothetical example published by CMMI, a practice—smaller than in the previous example—with 100 care episodes might have a target price of $2.47 million and actual expenditures of $2.3 million, for $172,480 in savings. The model applies a performance multiplier, which is based on several variables such as care-plan availability and the number of ED visits, along with a geographic adjustment and the federal sequester reduction, for a performance-based payment of $130,574.

The payment is thus a powerful incentive to conform to the OCM’s many detailed dictates. But Baird said he is concerned it is not even possible to provide the required level of care at the model’s discounted rate, and to satisfy CMMI’s “extremely heavy” documentation and reporting requirements with the available resources. “For example, documenting all the 13 points of the care plan through patient visits takes up a lot of time, so we’re finding ways to do that more efficiently, such as outside the visit,” he said.

Baird said CMMI will have to adjust its cost formula if OCM practices are to avoid financial difficulties and beat their targets. “If this program’s going to be successful, I know changes have to be made,” he said. “CMMI seems to be willing to listen and work and make tweaks. I just hope we don’t run out of time.”

While administrators like Baird and Rahman are focused on transforming their practices to improve quality and make the payment model work, Gamble said he’s heard suggestions that some providers may be less committed to reform. They may be thinking, “‘Wow, this thing’s complicated,’” he said. “They may be going about it a little half-hearted, saying, ‘I’m going to ride these MEOS payments as long as I possibly can, because it is important to the survival of my team,’ but they don’t have the energy or resources to make deep investments for the long haul.’” He does not know for sure that there are such practices, but said they may exist.

As providers manage the OCM’s added costs, administrative burden, and tough targets, they also have to decide how to integrate non-OCM patients into their new systems. At Oncology Consultants, the operational changes and data collection apply to all patients, whether they are covered by OCM or not, Rahman said. Baird said that is Dayton Physicians’ goal as well, although it is not there yet. “We started doing it with all our patients, and it became way overwhelming. So, we took a step back, and now we’re trying to refine the process on the OCM patients only. But our plan is to have this practice transformation for our entire practice,” he said.

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