Given how common cancer is within the Medicare population, Medicare pays for a large percentage of oncologic care. As the population ages, both incidence and prevalence of cancer in Medicare beneficiaries will increase—and so will the cost. It’s clear that Medicare needs a proactive cancer strategy, hence the launch of the Oncology Care Model (OCM).

For most commercial payers, cancer affects fewer than 1% of covered lives yet makes up 11% of the healthcare spend. But the cost of care for individual patients can be astronomical. Considering the hype surrounding the efficacy and cost of advances in cancer care, a cancer strategy has become a priority for payers. As in many other areas of medicine, rising costs are blamed on the fee-for-service delivery model and its encouragement of volume over value. Many other factors, such as innovation, contribute to this cost trend, but for the moment, the payer focus is on changing providers’ incentives.

What do payers blame for the high cost of cancer care? Most believe the fundamental underpinning of the value disconnect can be traced to oncologists’ decisions, particularly concerning chemotherapy. Payers not only believe that cancer care is too expensive but also that outcomes mostly do not justify the price. In addition, many payers believe that oncologists make decisions to increase revenue for their practices, such as choosing more expensive drugs, treating patients unlikely to benefit, and incurring toxicity that leads to unnecessary emergency department and inpatient utilization. As an oncologist, I take personal offense at this general indictment, but the fact remains that payers fail to understand why cancer care costs so much.

The OCM Will Lead to a Better Episode Model

Payer programs built to promote value by managing costs are in their infancy, with the most widely deployed programs involving clinical pathways. These programs promote value-based clinical decision making by rewarding value-driven choices. These can be vendor-driven or organically developed by the payer. They require content management, point-of-care presentation, and reporting, which are fundamentally constructed as utilization management tools—providers are rewarded for decisions that generate savings. Given an understanding of the payer belief that oncologists are responsible for rising costs, it is easy to see why value-based programs are attractive to payers. But these are an incomplete solution.

There are few other commercial pilots. Aetna, UnitedHealthcare, and Horizon Blue Cross Blue Shield have attempted more-comprehensive solutions, but these have impacted only a minority of practices. So the OCM, driven by a strong mandate from the Centers for Medicaid & Medicare Innovation to test alternative payment models, has made a big splash. Although the OCM has been labelled an episode payment model, it is much more like an Oncology Medical Home, with a management fee and shared savings. As with all government programs, the OCM has generated a lot of confusion around its analytics, has a lot of rules, and requires much reporting. Practices are very enthusiastic about the added management fee, but sophisticated administrators realize that these dollars are earmarked for practice upgrades. What Medicare expects is a major departure from business as usual. It is critical to remember that this is only an interim step in reimbursement reform. The learnings from the OCM will clearly place Medicare in a position to execute a true episode model.

So what does this mean for commercial payers? Does it address their concerns about rising costs? At first glance, the answer is no. There is no explicit requirement for value-driven chemotherapy prescribing; and the OCM certainly does not address the use of futile therapies. It does force practices to consider total cost of care, because shared savings will be calculated based on all costs attributed to a patient after treatment begins. But, most payers would balk at paying an upfront management fee based on a promise of performance; and the total-cost-of-care model is very difficult to manage from an analytic perspective, given the profound influence clinical complexity has on the care delivered. Much of the care in a total-cost model is not even directed by the oncologist. Finally, there are a handful of process-based quality measures. But these do not by anyone’s definition resonate as reliable representations of quality.

Still, it would be a huge mistake for payers to dismiss the value of the OCM, even if they are not active participants. The OCM requires practices to think differently about their Medicare patients. It mandates care delivery changes that are easy to like, such as navigator services. It requires practices to develop a far more sophisticated patient identification, tracking, reporting, and analytic suite. Ideally, all of this will lead to predictive modeling that personalizes care. And it will lead to an understanding of the optimal clinical trajectory of a patient, as well as a far more insightful understanding of the cost of care. These developments will prepare practices for the next wave of episode-based reimbursement. Commercial payers can ride the coattails of Medicare as practices evolve.

Getting past the debate about the merits and faults of the OCM inevitably leads to the conclusion that if practices succeed with this model, they will be well positioned for the volume-to-value transition. And, they will be looking for partners in the commercial payer world. Once processes of care have been implemented for Medicare patients, adding a smaller number of privately covered patients will be easy. Payers need to be prepared for this opportunity. They need to develop analytic capabilities, among other things, so they can understand their cancer data. They also need to abandon the adversarial relationship that has historically poisoned many relationships with oncologists. The path forward is increasingly clear, and it will benefit everyone.

Michael Kolodziej, MD, is the national medical director, managed care strategy at Flatiron Health. His focus is on supporting alternative payment programs on behalf of community oncology providers throughout the United States. Previously, Kolodziej served as national medical director for oncology strategies at Aetna, where he built the company’s first Oncology Medical Home project. He is board-certified in internal medicine, specializing in hematology and medical oncology, and has been published in more than 50 medical journal articles, abstracts, and book chapters.

Articles

It's clear that Medicare needs a proactive cancer strategy, hence the launch of the Oncology Care Model.

The Oncology Care Model: Roadmap or Distraction for Commercial Payers?

From New York Oncology Hematology and Albany Cancer Center (MK), Albany NY; Texas Oncology (JRH), Austin, TX; and US Oncology (MK, JRH), Houston, TX.

	Amid a continuing debate over healthcare spending in the United States, the oncology community is growing more introspective about the costs associated with increasingly sophisticated cancer therapeutics.

	In April, an American Society of Clinical Oncology (ASCO) task force identified five practices that oncology specialists can employ to make treatment more cost-effective (

 2012;30(14):1715-1724). The ASCO annual meeting in June featured 44 abstracts that tackled cost-effectiveness issues, twice as many as in 2005, according to a Reuters news service analysis.

	In this commentary, two physicians affiliated with US Oncology in Houston, Texas, analyze cost trends, regional differences, and potential alternatives. The article originally appeared in 

	The rising cost of healthcare is a topic of constant discussion and equally constant consternation. A lot of money is spent on healthcare in America, far more than in any other Western country, and over time, there has been tremendous inflation in this spending, particularly when indexed against the GDP.

 Oncology seems a particularly prominent passenger on this runaway train. Although oncology spending in both the commercial and Medicare sectors represents less than 10% of the total healthcare spend,

 several big-ticket items bring constant attention to this specialty. And why not, with immunotherapy costing $100,000 per course and oral targeted agents costing $5000 to $10,000 per month? These mind-boggling price tags seem out of reach for the average patient.

	A major reason for the concern over the cost of these agents is the perceived lack of value. The clinical trials that have led to the approval of these agents often employ endpoints, or outcomes, that address only part of the value assessment patients must make. High cost may interfere with living longer or better, regardless of disease-free survival or disease stability.

	The ability to rank “relative values” associated with our therapeutic choices should empower us to make wise decisions in healthcare. It allows us to maximize value. And to the extent that we can improve outcomes, it allows us to improve quality of care. Since the healthcare dollar has finite limits, objective, evidence-based treatment should help us do better with the dollars available.

	Sadly, ample evidence suggests we have far to go. The best marker of how far short we are falling is the regional variability in healthcare spend. Seniors in Minneapolis cost Medicare $3341 per year, whereas in Miami they cost Medicare $8881 per year, twice as much.

 These variations are even more exaggerated when care during the last six months of life is analyzed. The data from the 

 Utilization of all healthcare services, including hospital days, ICU days, and doctor visits, goes up. But what is most alarming is the variability from state to state and from region to region. For example, hospital days in the last six months range from seven in Utah and Oregon to almost 16 in DC and almost 12 in Florida. Office visits follow the same trends. Not unexpectedly, hospice enrollment follows an inverse relationship. Without question, socioeconomic factors explain some of the variability and there is no clear “quality standard” that allows definition of an appropriate benchmark. However, this much variability cannot be viewed as good.

	This type of variability certainly occurs in oncology care, even on a much smaller scale. Our studies looking at charges for lung cancer therapy within a single large practice show wide interphysician differences.

 Notably, spend was not correlated at all with better survival. Patients cared for by the most expensive doctors did just as well (or just as poorly) as those cared for by the most thrifty doctors. In oncology, the spend is spread among several services and even several sites of service. Although there are some publications based on Surveillance, Epidemiology, and End Results data in the Medicare population,

 there was very little in the published literature to guide us in identifying where opportunities lie. We therefore entered into a partnership with Milliman to study costs of cancer care in the commercial population.

	The study analyzed data from Medstat 2007, a claims database of commercial insurers, including several Blue Cross Blue Shield plans, covering 28 million lives. We focused on the top 10 cancer diagnoses, which represented 70,000 individuals. Cancer was relatively uncommon in this cohort, only 0.7% of all covered individuals, but cancer claims made up almost 10% of the cost. The 10 cancer diagnoses represented about 65% of all cancer diagnoses in this cohort, with breast cancer being the most common diagnosis. Among the cancer patients, about 25% received chemotherapy in a given year. The average cost per cancer patient receiving chemotherapy was about $110,000 per year, four times as much as the average cancer patient not receiving chemotherapy. Further, the cost for cancer patients receiving chemotherapy was dramatically higher, more than 20-fold greater, than the cost for patients with other chronic diseases like diabetes.

		Figure 1. Cost of Chemotherapy Patients

		Fourteen million commercially insured lives; 104,473 cancer patients. Chemotherapy patients exclude patients on hormonal therapy only.

		CLL indicates chronic lymphocytic leukemia; PPPM, per patient per month.

 Milliman Analysis of Medstat 2007; Milliman Health Cost Guidelines 2009.

		Reprinted with permission from Fitch K, Pyenson B. Cancer Patients Receiving Chemotherapy: Opportunities for Better Management. Milliman; March 30, 2010.

	So how is the money spent? The majority of the charges were for outpatient services (

). In analyzing the outpatient costs, only 25% of costs were for chemotherapy. The remainder of the costs included imaging, outpatient surgery, and other ambulatory services. We also found there were about two hospitalizations per year and two emergency department (ED) visits per year in chemotherapy-treated patients, half of which could be attributed to chemotherapy toxicity. Unfortunately, we found relatively low hospice utilization rates. And more concerning, we found a large cohort of patients who died in the hospital and received chemotherapy within 14 days of death.

	As with the published experience with the 

, we identified marked regional variations in care (

). The range in chemotherapy costs was almost a third higher in the high-utilizing regions, and not surprisingly, hospital admits and ED visits varied twofold and fourfold, respectively, from low- to high-utilizing regions. This data set identifies opportunities for cost control, especially in chemotherapy costs, hospital and ED costs, and end-of-life costs.

		Figure 2. Variation in Care for Patients

					378 (average cost per admit $22,000)

					929 (average cost per ED visit $800)

		Source: Milliman Analysis of Medstat 2007.

		Reprinted with permission from Fitch K, Pyenson B. 

Cancer Patients Receiving Chemotherapy: Opportunities for Better Management

	The US Oncology Network has, for the last six years, focused on the ability to control costs by adopting an evidence-based treatment platform, Level I Pathways. These evidence-based treatment guidelines are embedded in the iKnowMed EHR and offered as a decision support tool, with reports that allow implementation of a process improvement methodology. We have reported on the impact of these evidence-based pathways in our network in patients with lung cancer and colorectal cancer.

	Our first study, in non-small cell lung cancer patients, was a collaboration with Aetna.

 Over an 18-month period, we looked at cost of care in 1400 patients at eight sites in the US Oncology Network. Clinical data including stage of disease and line of therapy were documented. We studied chemotherapy costs as well as costs associated with acute care visits, E and M codes, laboratory, and supportive care drugs. Within our sites of service, 1100 of 1400 patients were treated according to guidelines, considered “on pathway,” and 300 of 1400 were treated “off pathway.” There was a substantial cost difference between the groups, with a 35% reduction in chemotherapy costs associated with being treated on pathway ($18,000 vs $27,700) (

). Importantly, survival of those treated on pathway was identical to those treated off pathway.

		Figure 3. 12-Month Cumulative Cost by Pathway Status

		Reprinted with permission from Neubauer et al. 

	We also analyzed the effect of pathways compliance in colon cancer.

 In this second study, we looked at costs associated with pathway status (on or off) in a national database with the assistance of Milliman. Since survival data were not available in this claims system, we analyzed survival with respect to pathways status within iKnowMed. We again found a substantial savings associated with being “on pathway,” about 35%. Interestingly, we found evidence that disease-free survival and overall survival with treatment on pathway were at least as good as in the off-pathway cohort. A preliminary review of inpatient charges and hospitalization rates within the on-pathway/off-pathway cohorts suggests reduced costs and utilization in the on-pathway group, providing further evidence of cost savings associated with adherence to these evidence-based treatment guidelines.

	This body of data makes a compelling case for value associated with a disciplined, cost-conscious, evidence-based approach to chemotherapy decision making. This value derives from clearly reduced costs but also improved outcomes. The value associated with this approach is physician developed and driven. And a similar physician-developed and driven approach may well be feasible to attack costs associated with hospitalizations and ED visits, and especially end-of-life care, where there is ample opportunity for improvement.

	There are clearly challenges to the broad adoption of this approach. First, there are innumerable evidence-based treatment guidelines. Most of these are at best cost neutral and at worst cost insensitive. It would be a mistake to assume an equal benefit across all of these guidelines. Second, this approach requires a genuine attempt at process improvement. Reporting and accountability are mandatory. Without physician buy-in, the process is doomed to failure. Finally, there is widespread dissatisfaction with the current oncology reimbursement methodology. A transition to a methodology that financially rewards high-level, quantifiable performance will greatly enhance likelihood of general acceptance. There will need to be trust between payers and providers to succeed in this system. Ultimately, the reward will be improved value and enhanced quality.

 Drs Kolodziej and Hoverman report employment with US Oncology, Houston, TX.	

Concept and design (MK, JRH); acquisition of data (MK); analysis and interpretation of data (MK, JRH); drafting of the manuscript (MK, JRH); critical revision of the manuscript for important intellectual content (MK, JRH); provision of study materials or patients (MK); and supervision (MK).

			Borger C, Smith S, Truffer C, et al. Health spending projections through 2015: changes on the horizon. 

			Tangka FK, Trogdon JG, Richardson LC, et al. Cancer treatment cost in the United States: has the burden shifted over time? 

			Auerbach D, White C. Geographic variation in health care spending. Congressional Budget Office website. 

			The Trustees of Dartmouth College. The Dartmouth Atlas of Health Care. 

			Hoverman JR, Robertson SM. Lung cancer: a cost and outcome study based on physician practice patterns. 

			Hassett MJ, Neville BA, Weeks JC. The relationship between cost, quality, and outcomes among women with breast cancer in SEER-Medicare. 

			Kolodziej M, Hoverman JR, Garey JS, et al. Benchmarks for value in cancer care: an analysis of a large commercial population. 

			Neubauer MA, Hoverman JR, Kolodziej M, et al. Cost-effectiveness of evidence-based treatment guidelines for the treatment of non-small-cell lung cancer in the community setting. 

			Hoverman JR, Cartwright TH, Patt DA, et al. Pathways, outcomes, and costs in colon cancer: retrospective evaluations in two distinct databases. 

Amid a continuing debate over healthcare spending in the United States, the oncology community is growing more introspective about the costs associated with increasingly sophisticated cancer therapeutics.

Michael Kolodziej, MD

Articles

The Oncology Care Model: Roadmap or Distraction for Commercial Payers?

Ranking Value in Cancer Care: Analysis of a "Pathways" Approach