Oncology Care Model Overcomes Specialty Bundled Payment Hurdles

June 16, 2017 - Episode-based payment models aim to shift financial accountability to providers for furnishing services for specific conditions or procedures. But develop specialty bundled payment models that target clinical areas, such as oncology, have proven to be a challenge to design.

To overcome specialty bundled payment obstacles, CMS developed the Oncology Care Model (OCM). Under the OCM, physician practices receive a bundled payment for providing chemotherapy services to cancer patients for six months.

While the model currently includes 190 practices and is expected to cover almost 200,000 episodes per year, CMS researchers detailed in a recent Journal of Oncology Practice report the challenges the federal agency faced with aligning specialty bundled payment design with cancer care delivery.

The authors pointed out that cancer care encompasses a range of disease, medical specialties, and healthcare services. Oncology providers also have more complex business models because chemotherapy services are furnished across care settings and under multiple Taxpayer Identification Numbers (TINs).

In contrast, other Medicare bundled payment models target hospital-based procedures and most providers associated with the care episode work for or are affiliated with the same organization.

READ MORE: Bundled Payment Models Here to Stay Despite CMS Program Delays

CMS attempted to address cancer care complexities with the OCM. Researchers explained the federal agency’s rationale for developing specialty bundled payment model designs for benchmarks, innovation incentives, episode definitions, and patient attribution.

Developing bundled payment benchmarks and target prices for cancer care

Medicare bundled payment models traditionally set care episode cost benchmarks using historical claims data for a hospital and adjust the price based on regional claims data for low-volume hospitals. However, the diversity of patients, diseases, treatments, and business practices made the traditional benchmark methodology inappropriate, the authors claimed.

CMS also could not calculate bundled payment benchmarks based on practice-specific data because most practices did not have sufficient historical episodes for the 2009 to 2013 analysis period.

Ultimately, the federal agency settled on a regression-based approach to create practice-specific benchmark episode prices. The methodology draws in national, regional, and practice-level data.

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The bundled payment model uses standardized episode-level expenditures for chemotherapy episodes performed nationally between 2009 and 2013, creating a historical price baseline. CMS then adjusts the costs based on patient and disease characteristics using Medicare enrollment and claims data.

To incorporate a practice-specific element, the federal agency decided to weigh practice-level adjustments to the benchmark at 50 percent to move projected expenditures to the national average. The 50 percent weight also provides flexibility for practice spending variations.

“In particular, the adjustment factor methodology is more adaptable to changing practice dynamics, such as practice mergers,” the authors explained. “Specifically, including practice-specific covariates in the regression would require rerunning the entire risk-adjustment model to account for a practice merger or acquisition, which would result in altered target prices not just for the practices that merged but for all other practices. The adjustment factor methodology overcomes this by using the adjustment factor to account for changes in practice structure rather than the regression model.”

Benchmarks also include a forward trend factor adjustment to account for national episode cost changes and a novel therapies adjustment to ensure providers appropriately use new cancer treatments.

Once CMS determines benchmark episode prices, the federal agency develops individualized target prices by adjusting for financial risk levels. Practices in the one-sided financial risk track receive a 4 percent discount and those taking on two-sided risk receive a 2.75 percent discount.

READ MORE: Understanding the Value-Based Reimbursement Model Landscape

The federal agency met some trepidation among stakeholders pertaining to its benchmark methodology.

“Some external stakeholders have maintained that this method penalizes current highly efficient practices and argued instead for regional or national benchmark episode prices,” wrote the authors. “However, benchmark episode prices, limited to regional or national data, would financially reward already efficient practices that made limited improvements while making it difficult for less-efficient practices to improve enough to achieve the episode savings necessary for a PBP [performance-based payments].”

CMS researchers noted that the bundled payment benchmarks do not account for cancer-specific clinical factors because Medicare claims limitations. The claims capture disease type data, but do not collect information on anatomical cancer stage, histology, biomarkers, or molecular mutations, which impact treatment costs.

Therefore, OCM benchmark episode prices reflect aggregate OCM episode spending if practices see large volumes of beneficiaries. Although this approach may work against small practices.

“However, because of statistical variation in smaller patient populations, smaller practices may be more likely to experience substantial fluctuation in episode spending because of random variation than larger practices and could be adversely affected by the initial benchmarking risk-adjustment methodology if they see more high-cost beneficiaries than statistically expected (or positively affected if they see fewer high-cost beneficiaries than expected),” they stated.

Small practices may face challenges, but the CMS representatives pointed out that they will still receive Medicare fee-for-service and Monthly Enhanced Oncology Services payments.

Additionally, CMS established bundled payment provisions to account for novel cancer therapies.

“[W]e decided that providing a further price adjustment to the risk-adjusted episode target price beyond the forward trend factors—to account for the higher cost of certain new drugs—would be appropriate so practices treating patients who need these treatments would not shoulder the entire cost of new technologies,” the authors stated.

For the first two years after a new drug’s approval, the federal agency will determine the proportion of spending on new cancer drugs for FDA-approved indications among participating and non-participating practices. If spending is greater in OCM practices, CMS will positively adjust the participant’s benchmark episode prices.

Defining oncology-specific episodes and assigning provider accountability

CMS also faced some obstacles with defining OCM care episodes and attributing provider accountability.

First, a care episode must either encompass a defined clinical episode or a timeframe that can be identified through claims data, CMS researchers explained. With that in mind, CMS decided to use a six-month chemotherapy episode that begins with outpatient non-topical chemotherapy services.

“This six-month episode length is based on analysis of CMS claims data that showed that expenditures for Medicare beneficiaries treated with chemotherapy for cancer peaked in the first two months after chemotherapy initiation before stabilizing after four to six months,” the authors wrote. “These observations suggested that six-month episodes were most likely to capture discrete treatment courses across a range of cancer types.”

CMS started the bundled payment episode with chemotherapy because other potential episode indicators, such as diagnostic surgery, introduced greater cost variability into the model. They also did not include opportunities to improve care quality because medical oncologists were not the primary providers until after the surgery.

In addition, CMS did not want to separate primary accountability between surgeons and oncologists by starting episode before chemotherapy treatment.

Second, complex oncology business models complicated provider attribution decisions. At some oncology practices, providers may bill under different TINs at separate locations, such as an outreach clinic, while still working at the same practice. Other employees at the same practice may also bill under a different TIN if they are employed by a hospital.

Other oncology practices are hospital-owned, whereas some practices agree to provide chemotherapy treatment in hospital outpatient departments.

The federal agency struggled to appropriately assign beneficiaries to the model using the varying oncology business models.

“CMS observed that complex billing arrangements might create the potential for PGPs [physician group practices] to shift high-cost beneficiaries to affiliated nonparticipating TINs,” the authors stated. “As previously stated, to reduce this possibility, CMS decided that any participating PGP is required to include in its OCM participation all practitioners who furnish chemotherapy services and all locations at which such services are furnished.”

Participating practices also cannot regularly use excluded healthcare sites for treatment.

As the OCM matures, CMS aims to assess how bundled payment models apply to specialty care and include more cancer care providers in an alternative payment.

“Through OCM and the innovative work of its participating PGPs, CMS will determine whether an episode-based payment model for oncology episodes of care can deliver better patient care and spend health care dollars more wisely,” the report concluded. “The model is an exciting step forward for oncology care in the United States.”