Cancer Care Costs Everyone Too Much. Here's How We Fix It.

August 13, 2019 Andrew Hertler, MD

This article was originally published on KevinMD 

Today’s fee-for-service oncology business model misaligns incentives by rewarding practices for keeping margins and service volumes high—even when it’s wasteful—rather than for optimizing patient outcomes.

While discussions of drug pricing dominate the cost control conversation, we as practitioners have been abdicating responsibility and missing the opportunity to address cancer’s financial toxicity. We can do better. The practice-level assumption of financial risk for patient care—or, the linkage of payment to defined clinical pathways and outcomes—can improve our patients’ outcomes while decreasing waste and cost.

Three Misalignments Driving Up Costs

When the patient isn’t paying for some or all of the service, and the physician knows this and this knowledge influences treatment approaches, we perpetuate the “double jeopardy” that has helped drive U.S. health expenditures to $3.5 trillion as of 2017. Cancer care represents 12% of all costs to the Medicare population, with costs rising 8-10% annually.1 

Medical oncology reimbursement is particularly misaligned in three (fixable!) ways:

  1. Waste is rewarded. Oncology practices rely on drug cost spreads for 30% of their revenues. Perversely, more expensive drugs provide greater profitability. A patient who may benefit equally from Drug A over Drug B may receive Drug A because it costs more, since the practice earns more for prescribing it.
  2. Valuable care is uncompensated. Oncology practices provide significant value through care they can’t bill for, including oncologists’ phone calls with patients and staff-delivered services like dietary management, financial counseling, social work services, nurse triage and education. Collaboration and holistic approaches are shortchanged.
  3. Red tape can discourage care innovation. By dictating “how” care is delivered, heavily regulated documentation requirements and quality reporting measures can discourage innovation. The end goal for all parties is a high-quality outcome, and having less of a microscope on how care is delivered could encourage new processes that improve patient health.

Redefining Cancer Care Pathways Can Improve Costs and Outcomes

Despite the grim situation, three areas present substantial opportunity for savings. If each is incorporated into defined “value-based clinical care pathways,” where adherence to the pathway results in financial bonuses to physicians and practices, we can eliminate some of the backward incentives driving up care costs, and instead incentivize better care outcomes.

The first of these is emergency department (ED) and inpatient (IP) utilization. As many as 56% of Medicare patients receiving chemotherapy visit the ED each year; 63% of these visits result in hospitalization. An estimated 50% of these ED visits could have been avoided with improved outpatient oncology care, according to The Advisory Board and the Journal of Clinical Oncology. Implementing open access urgent care visits in oncology clinics, standardized nurse triage pathways and extended clinic hours have been shown to decrease ED visits, thereby decreasing IP admissions. In my own clinic, introducing open access clinic visits where a patient could see an oncology physician assistant decreased inpatient admissions by 40%.

A second opportunity lies in better palliative care. The early introduction of palliative care in patients with metastatic non-small cell lung cancer (in addition to chemotherapy) was shown to lead to improved quality of life, less aggressive end-of-life care, and higher median survival. Instituting outpatient palliative care services has also been estimated to provide savings of $6,000 to $11,500 per patient.

A third savings opportunity lies in improving chemotherapy utilization, which in a Medicare population makes up over half the total cost of care. In most situations, oncologists have multiple chemotherapy choices that offer similar efficacy and toxicity, but differ in cost. Standardizing these choices via clinical pathways (guiding oncologists to the highest-value option and avoiding therapies with minimal clinical benefit) allowed my current company, New Century Health, to consistently save 10% or more in chemotherapy costs.

Making Responsibility for Cancer Costs Attractive to Oncology Providers

Oncologists are embracing evidence-based medicine and an emphasis on high-quality care, as indicated by the uptake of clinical pathways and participation in ASCO’s Quality Oncology Practice Initiative. However, given the high cost of anti-cancer medications and the potential for catastrophic cases, practices with a relatively small number of patients (e.g., 500 to 1,000) may jeopardize their viability by assuming financial responsibility for their patients.

There are financial protections for taking on this capitated risk. For example, reinsurance or risk corridors, “pooling” risk, and/or engaging risk-sharing partners can help practices limit financial exposure.

It’s been hypothesized that one contributing factor to managed care’s failure with capitated providers in the 1990s was patient perception of undertreatment. To address this issue, it will be essential to link oncologists’ assumption of financial risk with transparent quality measure reporting, the result of which impacts the capitation rates Medicare and other payers set. Treating patients on clinical pathways designed transparently to provide the highest efficacy and least toxicity can offer patients assurance.

Additionally, measurable outcomes must be publicly reportable. Many of these are readily available in oncology—including survival, ability to return to work, ED/inpatient use and chemotherapy administration at the end of life—when it’s more likely to be detrimental rather than beneficial to the patient.

Clearly, the status quo of rapidly escalating cancer care costs for patients isn’t acceptable and if unchecked will ultimately limit their access to care. For some, it’s already swapping a cancer death sentence for a financial life sentence. The rising costs associated with rapid (and amazing) clinical innovation are also unsustainable: no practice can remain financially stable when “buy-and-bill” chemotherapy forces them to front millions in treatment costs and then hope to be reimbursed. By adopting more responsibility for the financial cost of cancer care through linking payments to clinical pathways that incentivize value, oncology practices can take costs into their own hands by rewarding outcomes rather than expenses.

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1 Heart Disease and Stroke Statistics—2018 Update: A Report From the American Heart Association. Circulation Originally published January 25, 2017; Milliman’s 2016 Study: Cost Drivers of Cancer Care: A Retrospective Analysis of Medicare and Commercially Insured Population Claims Data, 2004-2014; Represents Medicare FFS medical expense; Source: CMS.gov/Medicare

About the Author

Andrew Hertler, MD

As the chief medical officer of New Century Health, Dr. Andrew Hertler is responsible for the advancement of the company's clinical quality and value-based strategy, utilization management policies and clinical thought leadership initiatives. A practicing board-certified oncologist for 30 years, he is a nationally recognized leader in oncology clinical practice. Dr. Hertler has volunteered on a number of American Society of Clinical Oncology (ASCO) committees, including the Clinical Practice, Quality of Care and Payment Reform Committees, as well as the Quality Oncology Practice Initiative Certification Program Oversight Council.

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