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Bundled Payments Come to Oncology (Part 1)

Butcher, Lola

doi: 10.1097/


Bundled payments—a hot concept on the health care payment front—are getting a try-out in oncology.

In a bundled-payment program, oncologists are paid for managing their patients' care, freed from relying on drug mark-ups for their incomes, and forced to accept some financial risk for the services they provide.

The concept has emerged as a way to eliminate fee-for-service payments, which reward physicians for the volume of services they provide rather than the value of care they deliver. While most cancer patients are not yet shopping for value—the best outcome at the lowest price—public and private payers are definitely moving in that direction, and they intend to educate consumers to be part of the trend.

“If we want people to come to us, we have to be prepared to give them reliable, comparable information about the quality that we offer, and about what it costs to come to us for care, and about the value that we deliver,” said Steve Bonner, President and CEO of Cancer Treatment Centers of America (CTCA), which operates four regional cancer centers. “That's a very different way to support the health care buying decision than where we have been historically.”

Earlier this year, CTCA introduced a bundled-payment program for evaluation and treatment planning for four common types of cancer. Meanwhile, five oncology practices are in the second year of UnitedHealthcare's pilot program to test bundled payments for the treatment of three tumor types.

Dayton Physicians Network, a multispecialty practice in Dayton, Ohio, that includes 17 medical oncologists, is a participant in that pilot. CEO Robert Baird said the program requires a lot of work, but he likes what he has seen so far.

“Being paid for managing patients and being paid for higher quality or higher value care is really what we are moving towards,” he said.

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Geisinger ‘Compact’

Bundled payments—sometimes called episode-based payments—first made headlines in 2006 when Geisinger Health System in Danville, Pa., began offering a guaranteed fixed price for coronary artery bypass surgery, preoperative services, and follow-up care. To offer that price, Geisinger required patients to sign a “compact” agreeing to follow physicians' orders and physicians to follow evidence-based care protocols.

Since then, Geisinger's bundled-payment program has expanded to include hip replacement, cataract surgery, obesity surgery, prenatal care, and a few other medical services. Meanwhile, many other health systems and payers have begun experimenting with bundled payments, including the Centers for Medicare & Medicaid Services, which piloted bundled payments for heart surgery and joint replacements.

CMS is sufficiently enthused with the idea to press onward. In August, the agency announced a new bundled-payments initiative that allows health care providers to propose a bundled price for a set of services. In this program, which is much broader than the demonstration project, physicians and hospitals can work together to deliver bundled services that span inpatient and outpatient care or work independently, providing a set of services for outpatient care for a specific medical condition or inpatient care only.

United Healthcare is the first national insurer to try bundled payments for oncology care. At a presentation at the American Society of Clinical Oncology Annual Meeting this spring, Lee N. Newcomer, MD, the company's senior vice president for oncology, said the goals of the program included identifying and rewarding best practices in cancer care, creating a “learning” atmosphere that allows for changes when new evidence emerges and maintaining oncologists' incomes at their current levels.

“I'm saying incomes, not revenues. I don't believe we pay the physician too much, but we have got to pay attention to what you spend as an oncologist,” he said. “So revenues may go down, but we are intending to keep income levels the same. And we want to break the dependency in the oncology world between drug selection and income.”

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United's 19 Categories, 20 Performance Measures

United created 19 different clinical categories for breast, colon, and lung cancer, and asked each of the five practices in the pilot to choose the chemotherapy regimen its physicians would follow for each category.

The oncologists guaranteed that they would achieve 85% compliance with the chosen regimen. Patients who have a contraindication for the standard treatment or are enrolled in a clinical trial are not counted against the 85% compliance requirement.

United is tracking 20 performance measures such as relapse rates and hospital admissions for uncontrolled pain to track health outcomes and overall costs.

Each year, these five groups meet together to review de-identified patient data and compare the results. Over time, this process should identify which treatment regimens generate the best patient outcomes, Dr. Newcomer said.

The oncology practices in the pilot no longer make any profit on the drugs used to treat patients who are insured by UnitedHealth. Rather, the insurer pays the practice a “patient care fee” that includes:

  • An amount equal to the profit margin that the practice would have received for the chemotherapy regimen under the buy-and-bill system
  • An amount equal to the physician fee associated with the typical level of inpatient care for a given clinical category (i.e., Stage 3 breast cancer)
  • A disease management fee.

The patient care fee is paid up-front. If the oncologist decides to change drugs because, for example, compelling evidence about a more expensive agent emerges, United will continue to reimburse the oncology practice for drugs at cost. The patient care fee, however, does not change.

For patients with metastatic disease, the oncology practice receives a patient care fee in four-month increments, regardless of whether the patient receives chemotherapy.

“If you and the patient make a decision to end therapy…the episode payments recur every four months as long as that patient is under your care,” Dr. Newcomer said. “That provides the financial support to do all the very difficult work with end-of-life care.”

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How It's Working So Far

The bundled-payment program is just what Northwest Georgia Oncology Centers (NGOC), with 21 medical oncologists practicing in 10 locations, has been waiting for.

“This program really plays into our strengths because we are finally getting paid for being thoughtful and not trying to provide chemo to the bitter end because it's somehow financially better for us,” said Bruce J. Gould, MD, a partner in the practice. “With this program, we are finally getting paid for taking care of hospice patients.”

At Dayton Physicians Network, about 20% of patients are covered by UnitedHealthcare. Baird, the practice's CEO, said he likes the fact that the practice receives the patient management fee upfront, does not have to worry about the financial consequences of choosing one regimen over another, and does not have to seek preauthorization for its United patients.

“The standardization of the protocols helps our clinical staff to be more confident because there is less opportunity to make any type of error,” he said.

On the other hand, the practice must manage the patients more closely to minimize their trips to the emergency department or hospital.

“The financial risk is whether we are covering our costs to manage these patients more closely, because it is a lot more involved,” he said.

Participation in the United pilot has been relatively easy for NGOC for two reasons, Dr. Gould said. The first is that its physicians use a fully implemented electronic health record system.

“We know the doses of the chemo that we provide, we know the different drugs we use for each of the various illnesses that are a part of this program, and we have very good financial data,” Dr. Gould said. “So we were really able to drill down to every aspect of our cost of providing care.”

The second is that the practice has been using standardized treatment protocols for a given disease state for at least 15 years. So agreeing on the regimens to be used for UnitedHealthcare patients presented no problem.

Of course, many oncology practices have no experience using standard treatment protocols or EHR systems that allow analysis of practice patterns and the costs associated with them.

“The biggest barrier to implementing this program on a larger basis is that many practices, particularly once you get beyond some of the very large, sophisticated practices, are not going to have the ability to drill down and know their cost and fully understand their data,” Dr. Gould said.

© 2011 Lippincott Williams & Wilkins, Inc.
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