Transforming Oncology Payments From Fee for Service to Value

Oncology Business News®April 2014
Volume 3
Issue 2

Cancer is challenging in many ways. Trying to contain the costs of disease management may be the biggest challenge of all.

Jay Sultan

Cancer is challenging in many ways. Trying to contain the costs of disease management may be the biggest challenge of all.

For a patient without cancer who simply needs a hip replacement, for example, the surgical procedure is the same whether the patient is a 25-year-old tennis player or a sedentary but elderly 70-year-old.

“There are variations in care, as well as comorbidities such as whether the patient is morbidly obese or is positive for hepatitis C,” said Jay Sultan, the chief product portfolio architect for the TriZetto Corporation, a health care IT company headquartered in Englewood, Colorado.

“But overall, the evidence-based guidelines are well established and the outcomes are much simpler. There is less reason for warranted variation in care.”

But for the patient diagnosed with any kind of cancer, it’s not so straightforward. “Cancer is not the same for everyone,” said Matthew Farber, MA, the director of provider economics and public policy for the national Association of Community Cancer Centers, based in Rockville, Maryland. “What works for one person doesn’t necessarily work for another.”

It’s not just cancer itself that’s complicated— treatments can be, too. With the development of targeted therapies over the past few years, as well as differences in the genetic development and stage of the disease, a patient who learns she has breast cancer may have one of 25 variations of that particular cancer. Determining how to treat patients and keep spending down, in light of spiraling health care costs, is paramount.

Different payer models and concepts have emerged as an alternative to the traditional fee-for- service method, which reimburses physicians for whatever treatment they prescribe; it is based on the quantity of care. Collectively, these alternative models focus on value, as insurance companies pay physicians for following particular standards of care. They include treating via clinical pathways (standardized treatment plans for particular diagnoses), establishing accountable care organizations (ACOs) (practitioners being paid based on saving money and having their patient outcomes meet certain quality standards after receiving medical care), and bundled payments (payers paying based on specific medical episodes and expected costs of those episodes), among others. There’s a lot of overlap, notes Farber.

“Many of these have pieces similar to others, and providers are keeping a close eye on all of them,” he said. “It’s not as if we operate in a vacuum.” What does this all mean for the community oncologist trying to navigate the changing landscape?

You Can’t Be an Ostrich

Physicians shouldn’t ignore how payment reform is affecting the world of oncology, said Farber. “While there’s lots of waiting to see how different payer models will play out, we tell our members that ‘sticking your head in the sand’ and doing nothing is not an option,” he said.

Doing so will only ensure that change will continue around you and leave you behind. As an example, Farber said that an oncology practice in one state may decide not to join a local ACO when approached to do so. But that practice may find that local primary care physicians involved in that ACO will refer their cancer patients only to oncologists in the ACO network, “even if the non- ACO oncologists have a prior relationship with those patients,” he said.

Lessons From an ACO Model

So what can oncologists do when faced with changing trends in how their work is reimbursed by insurance payers?

Leonard A. Kalman, MD, has some insights. As the chairman of Advanced Medical Specialties in Miami, Florida, Kalman’s group has been involved as a partner in an oncology- specific ACO with insurer Florida Blue and Baptist Health South Florida for the past 1½ years as part of a 3-year program. As reported on in December 2013, Kalman said the ACO had a —2% trend in its first year, a change from an annual 10% increase up until the year before the pilot began.

As a shared savings program, the ACO operates on a fee-for-service basis, but the partners share any savings as long as quality criteria are met. In the December article, Kalman admitted that he wasn’t sure exactly where the savings had come from, though he suspected that a reduced per member per year spend on chemotherapy was a major source in the first year. In the second year, there are plans to focus on reducing hospital admissions, especially toward the end of life.

More recently, Kalman said he believes this kind of “total cost of care” model, rather than bundled payments, will be the key mode of payment reform in oncology. “Management of an attributed cancer population, initially with fee-for- service, then evolving to shared or full risk, is the road I really think is best,” he said. But bundled payments are attractive to insurance companies, Farber said, because they provide predictability. “You know, for 6 months of treatment, I’m going to have to pay $X. Payers really do crave predictability. However, that is a very difficult trade-off to ask of providers.”

How to Adapt

Having oncologists take on a “population management” mind-set is a culture change that takes education, discussion, and time, Kalman said.

With the model he is working with, “Physicians aren’t threatened as they learn to manage a population, because they are initially getting fee-for-service with a shared savings component. When they become competent to manage a cancer population, they become a very attractive partner to hospital systems, to employers, and to insurance plans,” he said.

Using electronic medical records that embed chemotherapy pathway regimens, based on considerations of efficiency first, toxicity second, and cost third, is a key component of cancer population management, Kalman said.

Hiring a separate team of physicians and mid-level providers to provide “supportive care” to patients with metastatic disease, simultaneous with their active therapy, is another important point, Kalman said. It’s also important to be proactive to avoid unnecessary admissions by designating personnel who are available at all hours to triage calls from patients, he added.

Do Bundled Payments Work?

Many stakeholders are looking forward to seeing the results of a bundled payment plan between UnitedHealthcare and 5 cancer centers across the country that began in 2010. Lee N. Newcomer, MD, MHA, the senior vice president of oncology, genetics and women’s health at UnitedHealthcare, said in an e-mail that the final results of the 3-year study were done and in press; he could not comment on the results prior to publication. The physicians involved in the study, however, worked together as they worked in a bundled payment model instead of the more traditional fee-for-service. “The process was very collaborative,” he said. “We shared data and insight throughout the entire program.” Insurers debating a similar move should consider working in the same way with physicians: “Open transparency with information is critical,” he said.

In a 2013 report titled “Tying Payment Incentives to Quality Measurement” published in the Journal of Oncology Practice, Newcomer and colleagues wrote that “The standardization of processes is difficult” and that due to the small sample size of 175 patients with breast, colon, or lung cancer that were studied, “The primary question about this project—‘Does it lower the cost of cancer therapy?’—could not be answered yet.”

Echoing Kalman, Newcomer also wrote about the importance of leadership, as “It took a tremendous effort for each medical group to choose and commit to a single regimen for each episode.”

And finally, Newcomer noted that making a change to a different payer system is, frankly, a lot of work: “It is, however, a daunting task to correctly identify the patients, to change the billing systems for these patients, and to adhere to the selected regimens. The medical groups expend substantially more administrative effort for each patient to participate in this program and these costs were not measured in the initial effort,” he wrote.

The report concluded by noting that “The episode payment program has taught participants methods for measuring performance. Outstanding performance can be rewarded with multiple payment methods. The most important lesson from this program has been that collaboration with data and measured performance are possible for cancer care.”

More Insights

Newcomer’s study echoes Kalman’s advice about changing payment models. “Everyone—the oncology physicians, their staffs, the insurers, and the hospital staff—has a day job already. Managing a cancer population to achieve the “triple aim” takes additional full-time employees and careful planning, said Kalman.

Also, change doesn’t happen quickly. “These programs, to be successful, take time and should be years in the making to achieve optimal results. It’s all a work in progress,” he said. But how do you measure success? “Ultimately, cost control is key, but one must maintain or improve quality, and achieve high rates of patient satisfaction,” he said.

Finally, when considering partnering with others to create an oncology-specific ACO or other payer model, find like-minded people and organizations who share your values, said Kalman.

“Pick your partners carefully—make sure you all have aligned goals,” he said.

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