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How Alternative Payment Models Decrease Cancer Care Costs

Oncology alternative payment models should focus on clinical pathway adherence and patient-centered strategies to lower cancer care costs, a report contended.

By Jacqueline LaPointe

- As cancer care spending is expected to grow in the next four years, an oncology alternative payment model that incorporates clinical pathways and patient-centered approaches could reduce healthcare spending by 22 percent, or $9.1 million across over 1,300 cancer episodes, according to recent Deloitte report.

Alternative payment models can decrease cancer care costs by using clinical pathways and patient-centered strategies, Deloitte claims

Deloitte researchers examined how 18 providers and health plans implemented oncology-specific alternative payment models, how they were successful at reducing healthcare costs, and what elements of the alternative payment model contributed to lower costs.

Based on the results, researchers developed an alternative payment model strategy to effectively decrease cancer care costs while improving care quality.

“Pioneering health plans and provider groups are experimenting with value-based payment models in oncology to try to improve the cost-effectiveness of cancer care,” stated the report. “They are piloting these models in the commercial market—financial incentives for adhering to clinical pathways, patient-centered medical homes (PCMHs), bundled payments, and accountable care organizations (ACOs)—and it is uncertain which will achieve the dual goals of improving outcomes and controlling costs.”

Types of oncology alternative payment models

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In 2010, direct cancer costs reached $124.6 billion, but that figure is expected to increase to approximately $173 billion by 2020, according to a cited National Institutes of Health report.

In response to growing cancer care spending, providers and payers developed alternative payment models that target specific oncology cost drivers, including population factors, therapeutics innovations, outpatient utilization, inpatient admission, and prescription drug spending.

Researchers found that the oncology alternative payment models included financial incentives for clinical pathway adherence, patient-centered medical homes, bundled payments, and ACOs. The models increased provider accountability and financial risk levels as they moved from incentive-based structures to ACOs.

However, the most common alternative payment models involved patient-centered medical homes and bundled payments without downside risk, researchers stated.

Alternative payment models centered on the patient-centered medical home typically reimbursed providers some type of per-member-per-month fee for practice investments and care transformations. Providers were also paid based on how well they complied with evidence-based medicine and their scores on quality performance measures.

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Providers in oncology-specific bundled payment models, on the other hand, received a single payment for a defined episode of care for a set period. For example, United Health Care implemented a bundled payment model for breast, colon, and lung cancer. The bundled payment was based on the standard treatment regimen and covered a six to 12-month treatment period.

However, the oncology bundled payment models, along with most other alternative payment models, generally did not involve downside financial risk.

“[S]ome plans felt it was too early for practices to start to take on risk, but instead focused on helping provider groups analyze their own data, identify opportunities for savings, and implement strategies to transform care,” stated the report. “They view the progression towards risk-sharing as an evolution, and anticipate that providers may become interested in taking on risk as they start to see the upside potential.”

Successes of oncology alternative payment models

From financial incentives to ACOs, researchers reported that the alternative payment models demonstrated varied success with reducing cancer care costs.

READ MORE: Creating Alternative Payment Models to Support Health Centers

For example, financial incentives for clinical pathway adherence decreased prescription drug spending by five to 37 percent and lowered emergency department visits by six to 40 percent as well as admissions by seven to 36 percent.

Patient-centered medical homes were more successful at reducing emergency department utilization (48 to 68 percent), admissions (34 to 51 percent), and length of hospital stay (21 to 44 percent). The alternative payment model also improved end-of-life care by increasing length of time in hospice care by 34 percent.

Oncology bundled payment models also decreased costs by flattening out prescription drug spending after a 15 to 18 percent increase per year. Participants also decreased emergency department visits by 30 percent and inpatient days by 17 percent.

Specialty ACOs demonstrated success with lower admissions, length of stay, and radiation therapy utilization, but did not have the quantifiable data for researchers. The oncology-specific ACOs, however, did reduce prescription drug spending by five percent because of clinical pathway adherence.

Key ways providers and health plans lowered cancer care costs

Regardless of alternative payment model, providers and health plans agreed that cancer care costs decreased because their models used data analytics, clinical pathways, and patient-centered strategies.

Providers in the study emphasized the need to invest in custom EHR and data analytics tools to assess retrospective data and understand historical choices, outcomes, and costs trends. Using the data, providers can develop and track bundled payment programs as well as identify high-risk patients and intervene earlier to reduce costs.

However, respondents noted that traditional EHR systems may not capture patient and outcomes data needed for oncology models, so organizations should invest in specialized systems. Data sharing was also a major challenge because providers needed real-time data for timely interventions.

Researchers also found that clinical pathways helped providers to select the treatment options that would be the most effective and least costly based on each patient’s case.

“The majority of providers and plans interviewed are implementing clinical pathways for clinical decision-making support, with the aim of reducing variability in treatment and drug spending independent of participation in a specific payment model,” wrote researchers.

Both health plans and providers developed clinical pathways based on National Comprehensive Cancer Network guidelines and incorporated cost as a core element of the pathway.

Providers also highlighted how patient-centered strategies for oncology care, such as constant access to care, use of mid-level clinicians to direct patients to appropriate care settings, and shared decision-making, reduced costs.

By providing 24/7 availability to mid-level clinicians with medical record access, alternative payment model participants steered patients to lower cost care facilities rather than the emergency department. Some organizations also invested in oncology hospitalists or urgent care centers.

Developing a care plan earlier in the patient’s treatment was also key to avoiding unnecessary services and lowering costs.

“Interviewees described advanced care planning, or goals-of-care planning, as an opportunity to better align treatment plans with patient goals, focusing more on quality of life and potentially reducing unnecessary treatment at the end of life,” the report stated.

Based on provider and health plan feedback, Deloitte found that oncology alternative payment models should focus on implementing clinical pathways to reduce drug spending and patient-centered approaches to decrease emergency department visits.

“The projected savings calculated are based on a hypothetical payment model that offers financial incentives for adhering to a clinical pathway, resulting in a 30 percent reduction in drug spending; and a PCMH [patient-centered medical home] that results in a 60 percent reduction in ER utilization,” wrote researchers.

As providers and health plans experiment with different value-based reimbursement programs for oncology, CMS included the Oncology Care Model as an Advanced Alternative Payment Model under the upcoming Quality Payment Program.

Under the model, participants are reimbursed a bundled payment for providing cancer care, but only those in the downside financial risk track will be eligible for a five percent value-based incentive payment in the Quality Payment Program.

Dig Deeper:

Using an Alternative Payment Model to Reduce Hospitalizations

Understanding the Value-Based Reimbursement Model Landscape


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