Controlling Total Cost of Care in Oncology: Three Areas Where Health Plans Should Focus

November 20, 2019 Andrew Hertler, MD

What's in your health plan's toolkit for controlling oncology spending?

Too often, the answer is one-dimensional—utilization management programs focused on single-drug review.

Yet, the outcomes of cancer treatment depend on an entire drug regimen, and health plans pay for care across the patient journey. Preventable complications such as nausea, pain and infections can send patients to the emergency department (ED) and often lead to expensive hospital stays. Those facing terminal cancer may continue with aggressive regimens, even though this approach may lower their quality of life and even shorten survival.

Traditionally, preventing such unnecessary costs has been outside the reach of health plans. And while oncology practices do their best to manage the patient at every step, our current system doesn't reward them for it. Practices are incentivized to treat more patients, prescribe more drugs and select more expensive drugs. They're not rewarded for keeping patients out of the hospital or helping them live more comfortably in their final months.

There's another way. By changing how oncologists are reimbursed and giving practices the tools to better manage care across the continuum, plans can encourage a whole-person approach to cancer while reducing total cost of care.

Reward Providers for Seeking Value in Drug Regimens

Given that drugs are the largest category of spending on cancer care—accounting for about 50% of all costs for Medicare patients—a total cost of care approach starts with selecting value-based regimens. Clinical decision-support tools can consider key details about individual patients—such as genetic markers and whether the cancer has recurred—and recommend clinical pathways to achieve the best results with the lowest toxicity at the lowest cost. The savings to the plan can be significant, often thousands of dollars per month. And by minimizing toxicity, we can avoid complications that lead to hospital and ED admissions.

Yet, our traditional fee-for-service reimbursement model poses a barrier to greater pathway adoption. Cancer practices get 30% or more of their revenues from markups on the drugs they administer. When oncologists order less expensive pathways, it not only takes money out of their pockets. It also reduces the flow of funds to support valuable services that the practices can't get reimbursed for, such as dietitians and social workers. So, plans need to get creative, partner with providers, and find ways to reduce spending on drugs while making oncology practices whole. One effective strategy involves replacing the drug margin with a case rate—a set per-patient reimbursement that essentially keeps drug revenue to the practice steady while taking drug costs out of the equation. Additionally, oncologists can receive bonuses based on the savings they help achieve and the quality of care provided. These models realign incentives so the provider benefits for doing what is best for the patient and plan.

Support the Work Needed to Keep Patients Out of the Hospital

If you want to keep cancer patients out of the hospital, your best ally is the oncology practice. A patient with complications of chemotherapy who shows up in the ED has a roughly 60% chance of being admitted. As an oncologist who once ran a practice, I would see patients with the same complications, but they would be admitted nowhere near as often—about a third of the time. An oncologist knows the patient's case, understands their disease and can often treat the patient in their clinic (for example, with intravenous hydration and antiemetics for nausea and vomiting post chemotherapy) so that they can return home instead of visiting the ED and being admitted to the hospital. Given that hospitalizations for cancer complications cost $22,000 on average, avoiding ED visits is key.

The difficulty is that current fee-for-service reimbursement doesn't adequately support the additional resources needed for oncology practices to intervene in a timely way. Helping patients avoid the ED might require following up with high-risk patients 48 hours after treatment, expanding the clinic schedule to include weekends or evenings, or offering case management. They might need to set up nurse triage processes to direct patients to the most appropriate site of care when complications occur.

Funding for this work can come in the form of up-front monthly payments to providers, as well as a share of any savings they help the payer achieve. CMS's Oncology Care Model (OCM), for example, provides a monthly payment of $160 per cancer patient per month, called a Monthly Enhanced Oncology Services fee (MEOS payment). Payers can also install their own OCM-like programs, providing up-front payments and shared savings, but with a lower administrative burden than the government program. A few already have.

To realize savings, practices need to focus these additional resources on the patients who are most likely to visit the ED. While clinicians can sometimes anticipate which patients are at high risk, they're no match for big data approaches. Using predictive analytics and leveraging the patient-specific data that was used to select a medication regimen, software can learn the combination of factors that increase a patient's risk. At New Century Health, we've found that 60% of ED visits come from 15% of all patients, so we devote more resources to them.

Make Palliative Care Discussions Routine

When a patient's prognosis is extremely poor, palliative care can improve their quality of life and even extend it. It can also help save money—anywhere from $6,000 to $11,500 per patient—from reduced hospitalizations and lower drug costs.

However, the typical 15-minute appointment gives oncologists little time to have difficult discussions about palliative care. It's far easier to say, "Your cancer is worse, but I have another treatment" than talk about preparing for end of life. Perversely, they are also rewarded far more for ordering another drug than having a long, gut-wrenching discussion about discontinuing aggressive treatment.

"The typical 15-minute appointment gives oncologists little time to have difficult discussions about palliative care. It's far easier to say, 'Your cancer is worse, but I have another treatment' than talk about preparing for end of life." 

Once again, the combination of the right resources with alternative payment models can encourage better care. Screening tools that consider the patient's condition, such as cancer type, weight loss and whether their cancer has metastasized, can identify patients who should be considered for referrals to palliative care. Given the shortage of community palliative care resources, practices may form their own palliative care teams, consisting of physicians and social workers or case managers trained in the field. How are these resources funded? Plans that pay $100 for a regular follow-up visit for an oncology patient might triple that amount when it's a palliative care discussion. Up-front payments might also factor in the costs of palliative care programs, in anticipation that the investment will more than pay for itself and enhance patients' lives.

As important as oncologists are to a patient's outcomes and experiences, only about 10% of the total spend goes to them. However, the treatment decisions they make can affect almost all other costs along an individual's cancer journey. By partnering with providers, ensuring they have the tools needed to control those costs, and rewarding them for delivering high-value care every step of the way, we can reduce total spending while delivering a whole-person approach.

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.

Follow on Linkedin More Content by Andrew Hertler, MD
Previous Article
Four Ways to Drive High-Value Drug Utilization in Oncology
Four Ways to Drive High-Value Drug Utilization in Oncology

Oncology drug spending in the U.S. is on an unsustainable trajectory. Explore four paths to curb costs with...

Next Article
Oncology Care First: What Providers Need to Know About CMS’ Proposed Model for Value-Based Cancer Care
Oncology Care First: What Providers Need to Know About CMS’ Proposed Model for Value-Based Cancer Care

Learn how CMS aims to increase risk, cash flow and predictability for practices while reducing administrati...