Bundled Payments With Drug Costs Penalize Oncology Practices

Roxanne Nelson, BSN, RN

April 24, 2018

Bundled payments were introduced as a means of reining in the high cost of cancer care for Medicare recipients, but a new study suggests that instead of being beneficial, the new approach could be penalizing some oncology practices.

Medicare reimbursement can vary considerably with this model, depending on the mix of patients that a practice provides treatment for, rather than on the quality of care, according to the new analysis.

The inclusion of drug prices in a bundled payment can create substantial variation in the revenues that practices collect. Adding drug costs into the bundle is not feasible or appropriate, say the study's authors, because practices are not able to control the patient mix that comes through their doors for treatment.

Practices that treat a substantial proportion of patients who have complex conditions will experience revenues that are below those from the traditional fee-for-service (FFS) model. Conversely, practices that treat patients with less complex disease, using a simpler treatment regimen, will have revenue well above that expected from FFS.

The article was published online April 12 in the Journal of Oncology Practice.

Lead author Jeffery C. Ward, MD, a medical oncologist at the Swedish Cancer Institute, Edmonds, Washington, believes that the take-home message from their article is this: "When you include drugs in a bundle, the cost of the drugs and the variability of who walks through the door turns it from an exercise in efficiency of care into a crapshoot."

He pointed out that the term "complex" is typically used to describe patients with a set of medical problems, for example, a patient with lung cancer who also has diabetes, chronic obstructive pulmonary disease, congestive heart failure, and atrial fibrillation.

"But in this case, we are talking about a patient with a cancer with molecular characteristics that segregate it into a treatment that is particularly expensive compared to its peers," Ward told Medscape Medical News. For example, a patient with metastatic colon cancer with microsatellite instability (MSI) "will get pembrolizumab in contrast to the cancer without MSI that will not get this very expensive drug at all.

"It is the drug, dictated by the whims of the cancer, and not the expertise of the practitioner that will determine success or failure when the bundle includes the drugs," he explained. "The only way to reliably make financial success in bundled reimbursement schemes depend on the efficiency of high-quality care delivery is to remove the drug costs from the bundle."

There is increasing interest in new payment models that align financial incentives for providers with high-value care. Insurers and third-party payers are looking for ways to minimize the burden of the cost of healthcare. "Increasingly, they are looking to bundled reimbursement models to be a tool that will incentivize providers to partner with them in this effort," Ward explained. The Oncology Care Model (OCM) that is being piloted by the Center for Medicare & Medicaid Innovation is the most visible of such models in oncology.

"OCM is struggling to get to two-sided risk for a number of reasons, but a shared savings model that depends on a drugs-containing bundle, tied to historical drug costs for the practice, is the biggest reason for its failure to get there," said Ward. "Bundles are going to happen. Drugs in a bundle doesn't have to happen."

Drugs in a bundle doesn't have to happen. Dr Jeffrey Ward

Small Practices Most at Risk

Milliman, Inc, an independent actuarial firm, was retained by the American Society of Clinical Oncology to evaluate the extent to which bundling drug costs into a theoretical payment bundle affects the probabilistic risk that practices face.

An economic model was created that focused on two cancer types: advanced stage III colon cancer, and metastatic non–small cell lung cancer (NSCLC). The model used multiple scenarios to capture the types of patients that would typically be seen in practices and used Monte Carlo simulation to assess the impact of bundled payments on practice revenue. The authors then used first quarter 2016 Medicare reimbursement rates to calculate the average FFS reimbursement for these scenarios.

For colon cancer, results indicated that about half of practices, regardless of their size, would incur a loss using the bundled payment model, owing entirely to the particular characteristics of their patients. Small practices were more likely than medium or large ones to experience a loss of greater than 10%: 44% for small, 29% for medium, and 13% for large practices.

Additionally, 15% of small practices experienced a loss of more than 20%; for 3% of these small practices, the loss was more than 30%.

For lung cancer, practices of any size were at equal risk of gaining or losing revenue, according to the simulation. But, as with colon cancer, small practices were more likely than larger practices to experience a loss of greater than 10%: 21% for small, 8% for medium, and 2% for large practices. The magnitude of potential loss for practices in the NSCLC scenario was greater than that for colon cancer, owing to the higher cost of lung cancer therapy. As an example, the bundled payment for colon cancer in an urban setting was $15,307, compared to $51,729 in NSCLC.

The risk of experiencing a significant loss was lower with NSCLC than with colon cancer because of the wide variability in treatment costs. None of the practices were at risk for losses greater than 30%. Only 3% of small practices faced the risk of a loss of greater than 20%. Small practices were more able to make up a loss in revenue from one patient through gains in revenue from other patients.

The Better Incentive

"We propose that though oncologists should not be held accountable for the cost of drugs — something they can't control — they should be responsible for giving the right drug to the right patient at the right time," said Ward. "This can be accomplished by requiring practices to integrate value-based pathways into their practice, something that OCM is already doing, and then hold practices accountable for a measured compliance with pathways as an alternative to putting drugs in the bundle," Ward said.

"If I succeed in pathway compliance, I will be practicing quality oncology most of the time," he added. "If I succeed in a drug bundle, I either got lucky, or I stinted the care of my patient. What do you think is the better incentive?"

Commenting on the article, Stuart Goldberg, MD, chief scientific officer at Cota, Inc, a data and analytics company, who is also associate clinical professor of medicine at Rutgers New Jersey Medical School, Newark, noted that the bundle payment model that does not correct or compensate for differences in patient risks might discourage practices from providing care for complicated cases.

"Bundles work well in orthopedic procedures, which are fairly similar, but in complex diseases, such as cancer, stratification is mandatory," he said. "We would never expect the same treatment for an early-stage young patient with breast cancer vs an older patient with metastatic disease."

But it is also important to note that payment is only part of a bundle arrangement, Goldberg emphasized. "These programs only succeed if everyone is monitoring quality and outcomes," he said. "A bundle program requires lots of transparency and data."

He pointed out that the current billing codes (ICD-10) for cancer are too general. For example, the ICD-10 does not stratify breast cancer according to to disease stage. His team recently developed a precise classification scheme that facilitates stratification and enables bundle payments. "This is currently in use at a large healthcare network in New Jersey, and a pilot project passed Medicare PTAC [Physician-Focused Payment Model Technical Advisory Committee] for consideration by the HHS [US Department of Health and Human Services] secretary," Goldberg said. "Our company acts as the independent referee in bundled deals between the payor and provider. That way, the patient never suffers."

Dr Ward has received honoraria from AZOncology and serves in a consulting or advisory role with New Century Health. Several coauthors have also disclosed relevant financial relationships.

J Oncol Pract. Published online April 12, 2018. Abstract


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