This post was first published on OncLive.

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.

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.

The OCM Will Lead to a Better Episode Model

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.

Author(s)
National Medical Director, Managed Care Strategy
Mike Kolodziej serves as national medical director, managed care strategy, at Flatiron Health where he focuses on supporting innovative alternative payment programs on behalf of community oncology providers in a number of commercial markets across the country.
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