New Bundled Payment Model Nets 34% Reduction in Medical Costs

A pilot program initiated by UnitedHealthcare involving 5 oncology groups that focused on best treatment practices and health outcomes, rather than the number of drugs that oncologists prescribe, resulted in a 34% reduction in medical costs, according to results of a study published in the July issue of the Journal of Oncology Practice.

In the pilot, the current fee-for-service payment system for cancer was modified to provide feedback data and financial incentives that reward outcomes and cost efficiency. Oncologists were paid upfront for the full treatment program regardless of the drugs administered to the patient. This separated 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.

"The study, evaluating how physicians might be rewarded for improving clinical outcomes and reducing treatment costs rather than paying them based on the number of drugs administered to treat cancer, demonstrated a significant reduction in total costs for medical care without affecting the quality of care," Lee Newcomer, MD, senior vice president of oncology at UnitedHealthcare and one of the article's authors, said in a statement.

The primary objective was to decrease the total medical cost by using aligned financial incentives supported by actionable use and quality information. The secondary objective was to remove the link between drug selection and medical oncology income. Without this link, it was expected that chemotherapy drug cost trends would decrease. Paradoxically, the pilot resulted in 179% more chemotherapy drug cost trends than predicted when compared with the controls. Despite the additional $13 million for chemotherapy drugs, the total medical costs were reduced by $33 million.

“Our two-year study of over 800 cancer patients, including those in my cancer center, compared outcomes and cost, demonstrating no difference in quality, but in fact revealing a cost savings of 34 percent. I am certain this will be the first of many studies to prove payment reform improves quality of care, limits complications such as emergency room visits, and reduces costs. In short, payment reform will keep quality care accessible to all cancer patients,” said Bruce Gould, MD, one of the study’s authors and medical director at Northwest Georgia Oncology Centers.

The primary end point of the study was detection of a 10% change in the total medical costs for the aggregate group. Subset analyses confirmed statistically valid decreases in hospitalization and usage of therapeutic radiology, but it is not possible to make a statistically valid quantification of the savings. The study used two interventions—financial incentives and data sharing—to change behavior. It is not possible to determine the relative effect of each incentive, but this is an important question to answer in future studies, wrote the authors.

The full study is available here.