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Bundled Payments Come to Cancer Care

Joe Cantlupe, for HealthLeaders Media, March 11, 2013

Success key No. 1: Evaluating drug costs
When a new breast cancer drug, pertuzumab, was approved by the FDA, physicians in UnitedHealthcare's bundling program added the medicine to their regimens based on promising results from clinical trails; the cost for the new regimen was approximately $180,000 for a course of therapy covering an 18-month period for each patient. The medication was, indeed, costly, but the physicians agreed it would set the stage for better outcomes. In addition, UnitedHealthcare pays for the cost of the drug, so physicians are not at risk for the expense. However, physicians do not make more money for using the more expensive medication, as they would in a fee-for-service payment model.

UnitedHealthcare calculated the drug margin for each selected regimen by subtracting the average sales price—the price determined by Medicare—from the group's usual reimbursement for the drug using the existing fee schedule. To determine the episode payment, UnitedHealthcare asked physician groups to identify the chemotherapy program that it thought would be best practice for the oncology programs, Newcomer says. The discussions were not always smooth. Not every member of the group used the same regimen, and they had to come to a consensus for the program."

When new evidence requires changing an episode's chemotherapy to a more expensive drug, the drug cost is reimbursed by UnitedHealthcare to the physician and the episode payment is not increased. "They don't get paid any more money now that they are using the drug," Newcomer says. "In the old system, the physicians would have made a lot more money, but that doesn't happen in this program. Everyone knows the drug profit model is going away and this model offers a unique way to increase physician payments."

The five medical groups involved in the UnitedHealthcare program used docetaxel and cyclophosphamide chemotherapy for early-stage breast cancer, yet costs of treatment varied by 100% among the groups, Newcomer says.  The cost for drugs in the regimen would range from $9,000 to $22,000, he adds.

When new evidence requires changing an episode's chemotherapy regimen to a more expensive drug, the physician's episode payment is not increased.

Coordination and quality of care are just as important to evaluate as the drug costs, Newcomer says. Over the past several years, physicians and UnitedHealthcare's oncology group discussed how to assess the value for each scenario using more than 60 measures, such as survival, complication rates, and total cost.

The current bundling system differs drastically from what Newcomer described as the "buy-and-bill" scenario, in which oncologists earned the difference between what they paid for chemotherapy drugs and the amount they billed insurers.

Before the bundling program was implemented, there was discouragement "of lower-cost generic medications, even if the clinical results are similar," Newcomer says.  "All of us are struggling to change behaviors to get better outcomes."

Success key No. 2: Physician involvement
A key for success in the episode of care model relies on physician involvement and providing quality care. Everyone agrees this one will be tricky.

Medical groups may change their regimens at any time, but the episode payment will not be adjusted for new drug selections. Each physician identifies eligible patients during the initial consultation, and his or her office registers the patient with UnitedHealthcare under its program.

"We're taking on some of the ownership of the cost of care for those patients," says Gould of the Northwest Georgia Oncology Centers. "We're transitioning from fee-for-service to one in which we are paid for global care of the patient," Gould adds. The Northwest Georgia Oncology Center is part of the UnitedHealthcare episode of care pilot project.

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1 comments on "Bundled Payments Come to Cancer Care"


J. Kuriyan (3/11/2013 at 11:40 AM)
United is actually teaching a very valuable lesson to providers: Healthcare costs and reimbursements are "zero sum" transactions. For too long drug companies with the complicity of powerful provider trade organizations have perpetrated the contrary myth that drug costs are just 10% of total medical costs and urge mass usage of drugs like statins- even when benefits are minimal for most people. "Why take a chance? Insurance will pay," is their usual compelling argument. Kaiser has fought this valiantly for many years. For those providers who insist on using brand name drugs when generics are just as effective, Kaiser points out the success of outcome of the more cost conscious doctors - shaming the others into considering costs as well. Next, if United can persuade the feds to allow them to import expensive drugs from India for their Medicare enrollees, we will see a huge surge in United's Advantage and Part D programs!