Can Bundled Cancer-Care Payments Save a Bundle?

A major insurance company is betting that oncology practices can handle cancer-care payments as if they were like the household grocery budget or a weekly allowance: Be frugal and you’ll have some left over for next time. Spend too much, and you’ll have to borrow from the future.

Photo credit: National Cancer Institute

The idea of its pilot study, says UnitedHealthcare, based in Minnetonka, Minn., is to separate drug costs from treatment costs by paying oncologists an up-front, per-patient fee. (In insurance-speak, this is called a "bundled" or "episode" payment.) The payments will be based on best medical practices for three common malignancies: breast cancer, colon cancer, and lung cancer. Decisions about optimal treatment for each disease state will be determined by consensus among clinicians, and not by the insurer, the company said in a press release.

"By paying medical oncologists for a patient’s total cycle of treatment, rather than the number of visits and the amount of chemotherapy drugs given, this program promotes better, more patient-centric, evidence-based care with no loss of revenue for the physician," said Dr. Lee N. Newcomer, UnitedHealthcare’s senior vice president for oncology. "Everyone wins. As oncologists share best practices from the program about which treatment regimens are most effective, we expect to see consistently improved patient outcomes."

The company is working with five small- to mid-size oncology practices based in Dayton, Ohio; Fort Worth, Tex.; Kansas City, Mo; Marietta, Ga.; and Memphis. Analysis is to begin after a year’s data are collected.

"Over the course of the pilot, the various treatment regimens selected by the medical groups will be evaluated to identify which are the most effective for a range of clinical presentations [such as physical signs and symptoms and diagnoses]. UnitedHealthcare will play no role in determining which treatment plan the oncologists choose, but the intent of the pilot is to identify and reduce unnecessary drug administration that does not improve the patient’s health outcomes," the company stated.

Under this payment system, the insurer will determine its cancer-care payments based on the difference between drug costs and the current fee schedule of the oncology group, with payments made on the first day on which an insured patient receives care from that practice. The payments will include case-management fees to cover patient management costs.

Thus, if during the course of an individual patient’s care clinicians decide to switch to a more expensive drug, there would be no additional payments to compensate for the difference.

Each of the agreed-upon regimens in the pilot will be evaluated based on health outcomes and the frequency of adverse events, emergency department visits, and other consequences that can drive up costs without additional treatment benefit, the insurer says.

Worth a Look

The proposed payment model is an interesting approach to the goal of containing medical costs while fairly compensating clinicians and protecting high-quality patient care. But it also raises many questions about its applicability across a broad range of clinical and financial situations, say medical economists and oncologists who were interviewed for this article.

"We are pleased to see experimentation taking place around how oncology care is paid for," said Dr. Allen S. Lichter, CEO of the American Society of Clinical Oncology. "The oncology community needs to do these pilot projects, and understand whether moving away from the current models based on fee-for-service and some percentage of margin off the chemotherapy agents can be replaced by something else – and if so, what should that something else look like and how does it work?"

"I think it’s an interesting experiment and an important one, one that Dr. Newcomer and United can run because of their large claims-based database, and we’re all interested to see how it works," agreed Dr. Samuel M. Silver, chair of the subcommittee on reimbursement for the American Society of Hematology and a professor of internal medicine at the University of Michigan in Ann Arbor.

Jack Hoadley, Ph.D., a health policy analyst and research professor at the Health Policy Institute at Georgetown University in Washington, D.C., noted that "Medicare has tried a number of experiments with various types of bundled payments, and it seems [as if] Medicare could either watch what’s going on in this private-sector pilot and use that as a way to learn, or – sooner than that – try bundled-payment structures to see how they work."

Outliers Could Be a Problem

One of the many questions that remain to be answered about the pilot project, however, is the problem of outliers (patients whose care doesn’t fit neatly within the prescribed protocol, such as those with significant comorbidities or adverse drug reactions that require a change in the treatment regimen).

"When one starts to deal with individual practices who have just a couple of these patients, one outlier can make it financially very difficult, so the question is, how often is that going to happen?" Dr. Silver said.

Dr. Hoadley said that the system needs to have flexibility to account for differences in the patient population. "Obviously, you’ve got to get that bundled amount right and appropriately adjusted for the average, across the kind of patients the practice is going to see, with some particular adjustments for patient severity," and other factors, he commented.

Where there are outliers, there are also inliers (patients who, for medical or other reasons, don’t undergo a full course of prescribed therapy), and in these cases, bundled payments would result in additional income for a practice, Dr. Lichter said. Over time, the outliers and inliers tend to balance out, and in the case of the extraordinary outlier – the patient who is admitted for a planned 2-day stay but ends up being hospitalized for 6 months – some sort of contingency payment would be made, he added.

"In talking to United Healthcare, while they didn’t sit down and write rules for every possible situation, I know that if a case is so far beyond the norm, they will sit down and look at it and agree to some type of remedial payment for it," he said.

Rare Cancers and Cherry Picking

A related issue of concern is how bundled payment systems would handle rare cancers, or clinical situations for which there is little or no consensus on optimal therapies, such as the use of chemotherapy for some soft-tissue sarcomas.

As vice-chair of the board of the National Comprehensive Cancer Network, Dr. Silver is an advocate of evidence-based guidelines, but said he’s aware that many patients have variations that don’t fit neatly into the standard chemotherapy guidelines that are acceptable under a bundled-payment system.

"Which brings us to another issue: Would there be cherry picking?" he asked. "Because it would be the patients who are young and healthy and can go through those therapies, and [who] don’t have comorbidities and variations on their disease that would best fit into these bundled programs. So what happens to the others?"

In such cases, the burden of care for the more severely ill patients would fall on teaching hospitals, and it’s unclear whether they would be adequately compensated under a bundled-payment system, he said.

Stifle Drug Development?

Matt Farber, director of provider economics and public policy for the Association of Community Cancer Centers, said that bundled-payment systems could have a dampening effect on drug development. He points to sipuleucel-T (Provenge), the recently approved autologous immunotherapy vaccine for advanced prostate cancer that uses antigen-presenting cells unique to each patient.

"Would payment systems like this stop those drugs from being developed? Because if it’s a personalized treatment, would it therefore not be included in whatever benchmark is deemed the most appropriate or most effective care for most people?" Mr. Farber asked.

And what happens when novel drugs or new versions of conventional chemotherapeutic agents (such as palifosfamide, an active metabolite of ifosfamide) come on the market?

"They’re working right now with these five practices to determine what are the best courses of treatment currently for the disease states that they’re looking at. So when a new drug comes down the line, what’s the process and how quickly do they update?" Mr. Farber said.

Similarly, said Dr. Silver, if patients are being treated and oncologists are being paid according to best medical practice, there would be fewer incentives for patients to enroll in clinical trials, which are the principal means whereby the science of medicine advances.

Define ‘Costs’

It’s also unclear just how drug costs would be defined under the proposed system, Georgetown’s Dr. Hoadley said.

"The company says, ‘Chemotherapy drugs will be reimbursed at manufacturer’s cost.’ But as Medicare has learned, that’s an ambiguous term. Medicare has gone from reimbursing based on average wholesale price to now the average sales price, and has come up with new mechanisms to define fairly what the price is for the practices that are paying to get those drugs. So the details need to be filled in about how they’re going to go about doing that," he said.

"The good news, potentially, is that you can get away from this old system that has existed for much of the past, where the practices could make money on drug reimbursements (which is how they made money to finance other things), but it would create potentially distorted incentives. You’ve still got to get it right, though," he added.

Although it’s still early, the pilot program is a good place to start, according to Dr. Lichter.

"One wants to start a pilot project in situations where there’s a lot of grounding in the types of therapies that are appropriate, so the choices are relatively limited and you can draw a box around the universe of care. If you find out that this works – if the patients are satisfied, the payers are satisfied, the system seems to be working well, and you’ve done the appropriate tweaks and nips and tucks to make it better – then you have to begin to expand it," he said.

A major insurance company is betting that oncology practices can handle cancer-care payments as if they were like the household grocery budget or a weekly allowance: Be frugal and you’ll have some left over for next time. Spend too much, and you’ll have to borrow from the future.

Photo credit: National Cancer Institute

The idea of its pilot study, says UnitedHealthcare, based in Minnetonka, Minn., is to separate drug costs from treatment costs by paying oncologists an up-front, per-patient fee. (In insurance-speak, this is called a "bundled" or "episode" payment.) The payments will be based on best medical practices for three common malignancies: breast cancer, colon cancer, and lung cancer. Decisions about optimal treatment for each disease state will be determined by consensus among clinicians, and not by the insurer, the company said in a press release.

"By paying medical oncologists for a patient’s total cycle of treatment, rather than the number of visits and the amount of chemotherapy drugs given, this program promotes better, more patient-centric, evidence-based care with no loss of revenue for the physician," said Dr. Lee N. Newcomer, UnitedHealthcare’s senior vice president for oncology. "Everyone wins. As oncologists share best practices from the program about which treatment regimens are most effective, we expect to see consistently improved patient outcomes."

The company is working with five small- to mid-size oncology practices based in Dayton, Ohio; Fort Worth, Tex.; Kansas City, Mo; Marietta, Ga.; and Memphis. Analysis is to begin after a year’s data are collected.

"Over the course of the pilot, the various treatment regimens selected by the medical groups will be evaluated to identify which are the most effective for a range of clinical presentations [such as physical signs and symptoms and diagnoses]. UnitedHealthcare will play no role in determining which treatment plan the oncologists choose, but the intent of the pilot is to identify and reduce unnecessary drug administration that does not improve the patient’s health outcomes," the company stated.

Under this payment system, the insurer will determine its cancer-care payments based on the difference between drug costs and the current fee schedule of the oncology group, with payments made on the first day on which an insured patient receives care from that practice. The payments will include case-management fees to cover patient management costs.

Thus, if during the course of an individual patient’s care clinicians decide to switch to a more expensive drug, there would be no additional payments to compensate for the difference.

Each of the agreed-upon regimens in the pilot will be evaluated based on health outcomes and the frequency of adverse events, emergency department visits, and other consequences that can drive up costs without additional treatment benefit, the insurer says.

Worth a Look

The proposed payment model is an interesting approach to the goal of containing medical costs while fairly compensating clinicians and protecting high-quality patient care. But it also raises many questions about its applicability across a broad range of clinical and financial situations, say medical economists and oncologists who were interviewed for this article.

"We are pleased to see experimentation taking place around how oncology care is paid for," said Dr. Allen S. Lichter, CEO of the American Society of Clinical Oncology. "The oncology community needs to do these pilot projects, and understand whether moving away from the current models based on fee-for-service and some percentage of margin off the chemotherapy agents can be replaced by something else – and if so, what should that something else look like and how does it work?"

"I think it’s an interesting experiment and an important one, one that Dr. Newcomer and United can run because of their large claims-based database, and we’re all interested to see how it works," agreed Dr. Samuel M. Silver, chair of the subcommittee on reimbursement for the American Society of Hematology and a professor of internal medicine at the University of Michigan in Ann Arbor.

Jack Hoadley, Ph.D., a health policy analyst and research professor at the Health Policy Institute at Georgetown University in Washington, D.C., noted that "Medicare has tried a number of experiments with various types of bundled payments, and it seems [as if] Medicare could either watch what’s going on in this private-sector pilot and use that as a way to learn, or – sooner than that – try bundled-payment structures to see how they work."

Outliers Could Be a Problem

One of the many questions that remain to be answered about the pilot project, however, is the problem of outliers (patients whose care doesn’t fit neatly within the prescribed protocol, such as those with significant comorbidities or adverse drug reactions that require a change in the treatment regimen).

"When one starts to deal with individual practices who have just a couple of these patients, one outlier can make it financially very difficult, so the question is, how often is that going to happen?" Dr. Silver said.

Dr. Hoadley said that the system needs to have flexibility to account for differences in the patient population. "Obviously, you’ve got to get that bundled amount right and appropriately adjusted for the average, across the kind of patients the practice is going to see, with some particular adjustments for patient severity," and other factors, he commented.

Where there are outliers, there are also inliers (patients who, for medical or other reasons, don’t undergo a full course of prescribed therapy), and in these cases, bundled payments would result in additional income for a practice, Dr. Lichter said. Over time, the outliers and inliers tend to balance out, and in the case of the extraordinary outlier – the patient who is admitted for a planned 2-day stay but ends up being hospitalized for 6 months – some sort of contingency payment would be made, he added.

"In talking to United Healthcare, while they didn’t sit down and write rules for every possible situation, I know that if a case is so far beyond the norm, they will sit down and look at it and agree to some type of remedial payment for it," he said.

Rare Cancers and Cherry Picking

A related issue of concern is how bundled payment systems would handle rare cancers, or clinical situations for which there is little or no consensus on optimal therapies, such as the use of chemotherapy for some soft-tissue sarcomas.

As vice-chair of the board of the National Comprehensive Cancer Network, Dr. Silver is an advocate of evidence-based guidelines, but said he’s aware that many patients have variations that don’t fit neatly into the standard chemotherapy guidelines that are acceptable under a bundled-payment system.

"Which brings us to another issue: Would there be cherry picking?" he asked. "Because it would be the patients who are young and healthy and can go through those therapies, and [who] don’t have comorbidities and variations on their disease that would best fit into these bundled programs. So what happens to the others?"

In such cases, the burden of care for the more severely ill patients would fall on teaching hospitals, and it’s unclear whether they would be adequately compensated under a bundled-payment system, he said.

Stifle Drug Development?

Matt Farber, director of provider economics and public policy for the Association of Community Cancer Centers, said that bundled-payment systems could have a dampening effect on drug development. He points to sipuleucel-T (Provenge), the recently approved autologous immunotherapy vaccine for advanced prostate cancer that uses antigen-presenting cells unique to each patient.

"Would payment systems like this stop those drugs from being developed? Because if it’s a personalized treatment, would it therefore not be included in whatever benchmark is deemed the most appropriate or most effective care for most people?" Mr. Farber asked.

And what happens when novel drugs or new versions of conventional chemotherapeutic agents (such as palifosfamide, an active metabolite of ifosfamide) come on the market?

"They’re working right now with these five practices to determine what are the best courses of treatment currently for the disease states that they’re looking at. So when a new drug comes down the line, what’s the process and how quickly do they update?" Mr. Farber said.

Similarly, said Dr. Silver, if patients are being treated and oncologists are being paid according to best medical practice, there would be fewer incentives for patients to enroll in clinical trials, which are the principal means whereby the science of medicine advances.

Define ‘Costs’

It’s also unclear just how drug costs would be defined under the proposed system, Georgetown’s Dr. Hoadley said.

"The company says, ‘Chemotherapy drugs will be reimbursed at manufacturer’s cost.’ But as Medicare has learned, that’s an ambiguous term. Medicare has gone from reimbursing based on average wholesale price to now the average sales price, and has come up with new mechanisms to define fairly what the price is for the practices that are paying to get those drugs. So the details need to be filled in about how they’re going to go about doing that," he said.

"The good news, potentially, is that you can get away from this old system that has existed for much of the past, where the practices could make money on drug reimbursements (which is how they made money to finance other things), but it would create potentially distorted incentives. You’ve still got to get it right, though," he added.

Although it’s still early, the pilot program is a good place to start, according to Dr. Lichter.

"One wants to start a pilot project in situations where there’s a lot of grounding in the types of therapies that are appropriate, so the choices are relatively limited and you can draw a box around the universe of care. If you find out that this works – if the patients are satisfied, the payers are satisfied, the system seems to be working well, and you’ve done the appropriate tweaks and nips and tucks to make it better – then you have to begin to expand it," he said.

A major insurance company is betting that oncology practices can handle cancer-care payments as if they were like the household grocery budget or a weekly allowance: Be frugal and you’ll have some left over for next time. Spend too much, and you’ll have to borrow from the future.

Photo credit: National Cancer Institute

The idea of its pilot study, says UnitedHealthcare, based in Minnetonka, Minn., is to separate drug costs from treatment costs by paying oncologists an up-front, per-patient fee. (In insurance-speak, this is called a "bundled" or "episode" payment.) The payments will be based on best medical practices for three common malignancies: breast cancer, colon cancer, and lung cancer. Decisions about optimal treatment for each disease state will be determined by consensus among clinicians, and not by the insurer, the company said in a press release.

"By paying medical oncologists for a patient’s total cycle of treatment, rather than the number of visits and the amount of chemotherapy drugs given, this program promotes better, more patient-centric, evidence-based care with no loss of revenue for the physician," said Dr. Lee N. Newcomer, UnitedHealthcare’s senior vice president for oncology. "Everyone wins. As oncologists share best practices from the program about which treatment regimens are most effective, we expect to see consistently improved patient outcomes."

The company is working with five small- to mid-size oncology practices based in Dayton, Ohio; Fort Worth, Tex.; Kansas City, Mo; Marietta, Ga.; and Memphis. Analysis is to begin after a year’s data are collected.

"Over the course of the pilot, the various treatment regimens selected by the medical groups will be evaluated to identify which are the most effective for a range of clinical presentations [such as physical signs and symptoms and diagnoses]. UnitedHealthcare will play no role in determining which treatment plan the oncologists choose, but the intent of the pilot is to identify and reduce unnecessary drug administration that does not improve the patient’s health outcomes," the company stated.

Under this payment system, the insurer will determine its cancer-care payments based on the difference between drug costs and the current fee schedule of the oncology group, with payments made on the first day on which an insured patient receives care from that practice. The payments will include case-management fees to cover patient management costs.

Thus, if during the course of an individual patient’s care clinicians decide to switch to a more expensive drug, there would be no additional payments to compensate for the difference.

Each of the agreed-upon regimens in the pilot will be evaluated based on health outcomes and the frequency of adverse events, emergency department visits, and other consequences that can drive up costs without additional treatment benefit, the insurer says.

Worth a Look

The proposed payment model is an interesting approach to the goal of containing medical costs while fairly compensating clinicians and protecting high-quality patient care. But it also raises many questions about its applicability across a broad range of clinical and financial situations, say medical economists and oncologists who were interviewed for this article.

"We are pleased to see experimentation taking place around how oncology care is paid for," said Dr. Allen S. Lichter, CEO of the American Society of Clinical Oncology. "The oncology community needs to do these pilot projects, and understand whether moving away from the current models based on fee-for-service and some percentage of margin off the chemotherapy agents can be replaced by something else – and if so, what should that something else look like and how does it work?"

"I think it’s an interesting experiment and an important one, one that Dr. Newcomer and United can run because of their large claims-based database, and we’re all interested to see how it works," agreed Dr. Samuel M. Silver, chair of the subcommittee on reimbursement for the American Society of Hematology and a professor of internal medicine at the University of Michigan in Ann Arbor.

Jack Hoadley, Ph.D., a health policy analyst and research professor at the Health Policy Institute at Georgetown University in Washington, D.C., noted that "Medicare has tried a number of experiments with various types of bundled payments, and it seems [as if] Medicare could either watch what’s going on in this private-sector pilot and use that as a way to learn, or – sooner than that – try bundled-payment structures to see how they work."

Outliers Could Be a Problem

One of the many questions that remain to be answered about the pilot project, however, is the problem of outliers (patients whose care doesn’t fit neatly within the prescribed protocol, such as those with significant comorbidities or adverse drug reactions that require a change in the treatment regimen).

"When one starts to deal with individual practices who have just a couple of these patients, one outlier can make it financially very difficult, so the question is, how often is that going to happen?" Dr. Silver said.

Dr. Hoadley said that the system needs to have flexibility to account for differences in the patient population. "Obviously, you’ve got to get that bundled amount right and appropriately adjusted for the average, across the kind of patients the practice is going to see, with some particular adjustments for patient severity," and other factors, he commented.

Where there are outliers, there are also inliers (patients who, for medical or other reasons, don’t undergo a full course of prescribed therapy), and in these cases, bundled payments would result in additional income for a practice, Dr. Lichter said. Over time, the outliers and inliers tend to balance out, and in the case of the extraordinary outlier – the patient who is admitted for a planned 2-day stay but ends up being hospitalized for 6 months – some sort of contingency payment would be made, he added.

"In talking to United Healthcare, while they didn’t sit down and write rules for every possible situation, I know that if a case is so far beyond the norm, they will sit down and look at it and agree to some type of remedial payment for it," he said.

Rare Cancers and Cherry Picking

A related issue of concern is how bundled payment systems would handle rare cancers, or clinical situations for which there is little or no consensus on optimal therapies, such as the use of chemotherapy for some soft-tissue sarcomas.

As vice-chair of the board of the National Comprehensive Cancer Network, Dr. Silver is an advocate of evidence-based guidelines, but said he’s aware that many patients have variations that don’t fit neatly into the standard chemotherapy guidelines that are acceptable under a bundled-payment system.

"Which brings us to another issue: Would there be cherry picking?" he asked. "Because it would be the patients who are young and healthy and can go through those therapies, and [who] don’t have comorbidities and variations on their disease that would best fit into these bundled programs. So what happens to the others?"

In such cases, the burden of care for the more severely ill patients would fall on teaching hospitals, and it’s unclear whether they would be adequately compensated under a bundled-payment system, he said.

Stifle Drug Development?

Matt Farber, director of provider economics and public policy for the Association of Community Cancer Centers, said that bundled-payment systems could have a dampening effect on drug development. He points to sipuleucel-T (Provenge), the recently approved autologous immunotherapy vaccine for advanced prostate cancer that uses antigen-presenting cells unique to each patient.

"Would payment systems like this stop those drugs from being developed? Because if it’s a personalized treatment, would it therefore not be included in whatever benchmark is deemed the most appropriate or most effective care for most people?" Mr. Farber asked.

And what happens when novel drugs or new versions of conventional chemotherapeutic agents (such as palifosfamide, an active metabolite of ifosfamide) come on the market?

"They’re working right now with these five practices to determine what are the best courses of treatment currently for the disease states that they’re looking at. So when a new drug comes down the line, what’s the process and how quickly do they update?" Mr. Farber said.

Similarly, said Dr. Silver, if patients are being treated and oncologists are being paid according to best medical practice, there would be fewer incentives for patients to enroll in clinical trials, which are the principal means whereby the science of medicine advances.

Define ‘Costs’

It’s also unclear just how drug costs would be defined under the proposed system, Georgetown’s Dr. Hoadley said.

"The company says, ‘Chemotherapy drugs will be reimbursed at manufacturer’s cost.’ But as Medicare has learned, that’s an ambiguous term. Medicare has gone from reimbursing based on average wholesale price to now the average sales price, and has come up with new mechanisms to define fairly what the price is for the practices that are paying to get those drugs. So the details need to be filled in about how they’re going to go about doing that," he said.

"The good news, potentially, is that you can get away from this old system that has existed for much of the past, where the practices could make money on drug reimbursements (which is how they made money to finance other things), but it would create potentially distorted incentives. You’ve still got to get it right, though," he added.

Although it’s still early, the pilot program is a good place to start, according to Dr. Lichter.

"One wants to start a pilot project in situations where there’s a lot of grounding in the types of therapies that are appropriate, so the choices are relatively limited and you can draw a box around the universe of care. If you find out that this works – if the patients are satisfied, the payers are satisfied, the system seems to be working well, and you’ve done the appropriate tweaks and nips and tucks to make it better – then you have to begin to expand it," he said.