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New Cancer Care Payment Model Reduces Health Care Costs

Program designed to sever link between drug selection and income

A new cancer care payment model that rewards physicians for focusing on best treatment practices and health outcomes rather than on the number of drugs they prescribe resulted in significant cost savings without affecting the quality of care.

The 3-year pilot study was conducted from October 2009 to December 2012 by UnitedHealthcare and five medical oncology groups in the U.S. and involved 810 patients with breast, colon, or lung cancer. The study demonstrated that the new cancer-care payment model resulted in a 34% reduction in medical costs.

The new findings were published in the July 8 issue of the Journal of Oncology Practice.

In the study, participating medical oncologists were reimbursed up-front for an entire cancer treatment program, marking a shift away from the current “fee-for-service” approach, which may reward volume or high-cost procedures regardless of health outcomes. This new “bundled payment” or “episode payment” model was based on the expected cost of a standard treatment regimen for the specific condition, as predetermined by the doctor.

The oncologists were paid the same fee regardless of the drugs administered to the patient — in effect, separating the oncologist’s income from drug sales while preserving the ability to maintain a regular visit schedule with the patient. Patient visits were reimbursed as usual using the fee-for-service contract rates, and chemotherapy medications were reimbursed based on the average sales price.

Researchers evaluated treatment regimens based on the number of emergency-room visits, the incidence of complications, side effects and, most importantly, health outcomes to determine which regimens do the best job of helping to fight cancer. By measuring the comparative effectiveness of different treatment options, the program aimed to uncover best practices and to identify and reduce unnecessary drug administration that does not improve the patient’s health.

The up-front fee to the oncologists covered the standard treatment period, which is typically 6 to 12 months. In cases of cancer recurrence, the bundled payments were renewed every 4 months during the course of the disease, which allowed the physician to continue overseeing his or her patient’s care even if drug therapy was no longer effective. The payments also were continued for patients who were no longer receiving chemotherapy or who enrolled in hospice care.

This approach was designed to reward oncologists at current levels for patient care while simultaneously severing the link between drug selection and income. Physicians were given the ability to earn an increased episode payment by improving their results.

The total cost of medical care for patients in the study was $64.76 million — a 34% reduction in medical costs, for a savings of $33.36 million. The cost of chemotherapy medications, however, was $13.46 million higher for the episode group than for the control group, but the tested pilot model still produced the 34% overall costs savings.

The study used a quality-improvement incentive to reduce the total cost of care and improve outcomes. While the goal of the study was to remove the link between drug selection and medical oncology outcomes by providing incentives for decreased chemotherapy costs, drug costs still were higher. This finding demonstrates that the bundled payment approach was able to reduce overall medical spending through other channels. The study was not designed to determine specifically how the cost savings were achieved, although an analysis suggested that the primary difference was hospitalizations.

Source: UnitedHealth Group; July 8, 2014.

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