Can Insurer, Oncology Practice Really Work Together?

Premera Blue Cross and a large Spokane oncology practice agree on treatment protocols and on the importance of cost control

As the cancer-treatment landscape changes — promising longer, healthier lives for patients but with the side effect of astronomical costs — most health plans and oncologists are locked in a stare-down to see who has the most power. But one large oncology practice and the dominant insurer in its market have found another way to do business together.

Premera Blue Cross, the largest health plan in Washington and Alaska, and Cancer Care Northwest (CCNW), the largest oncology practice in Spokane, are in the fourth year of a contract that pays oncologists for a new range of responsibilities, with the goal of improving patient outcomes while reducing overall costs.

Their arrangement is an early example of value-based purchasing, a hot topic in payer-provider relations, for oncology services. While many physicians resent discussion of costs, CCNW President Bruce Cutter, MD, is not among them.

“Providing quality care and being cost-effective are not mutually exclusive goals,” he says.

Nonetheless, developing a contract based on the value equation — outcomes divided by costs — is a culture change for providers and payers alike.

“This was an opportunity for our organizations to be able to further an idea that has, on paper and conceptually, considerable merit but that had never actually been done before,” he says.

Dave Johnson, MD, Premera’s regional medical director in Spokane, and Cutter believe they are testing a model that will become the standard relationship between payers and providers. Although the long-term financial ramifications of their arrangement is not yet fully understood, both parties are optimistic; indeed, both the oncology practice and the health plan are looking into other possible collaborations with other payers and providers, respectively, to enter into similar contracts.

The Spokane program is noteworthy because CCNW is part of US Oncology, a national network of oncologists that accounts for at least 15 percent of the cancer care delivered in the U.S.

Each US Oncology practice negotiates with local payers independently. However, some of the key tenets of the Premera-CCNW contract — including standardized treatment protocols and an investment in electronic medical record technology — are major initiatives that span all US Oncology practices.

“We believe commercial payers are very interested in collaborating with providers who are willing to participate in the process of defining quality and efficiency in oncology — and especially with those who are willing to have the quality of care provided to their patients measured,” says Chip Porter, the company’s vice president for managed care.

From Premera’s perspective, the oncology initiative expands on a longstanding pattern of collaboration with physicians.

What gets measured gets paid for

The centerpiece of the pay-for-performance relationship is clinical pathways — standardized treatment protocols for various disease states. The goal is to improve the quality of care by reducing treatment variation, thereby reducing the costs of treatment.

This is not a new concept in managed care, but how they were adopted is unusual.

Instead of the health plan notifying physicians what treatments will be paid for, the CCNW physicians notified the health plan what standardized protocols they had agreed to use.

“They built them, they voted on them, and they said, ‘We’re going to follow them,'” Johnson says.

CCNW oncologists initially developed pathways for four cancers — breast, lung, colorectal, and prostate — as part of a major initiative within US Oncology. Each pathway is driven by scientific evidence of its clinical effectiveness and the severity of side effects.

Other components of the P4P program

1. Clinical quality measures

Eight clinical measures, most of which are associated with breast cancer treatment, are used to indicate the quality of care being provided:

  • Option of breast conserving therapy
  • Sentinel lymph node sampling
  • Axillary dissections
  • Consultations for adjuvant or neo-adjuvant therapy
  • Bone scans
  • Tumor markers ordered
  • Patients using hospice at time of death
  • Referrals to Premera’s oncology case management program

Premera and CCNW jointly determined compliance targets, including intermediate thresholds for achieving the target. Bonuses from Premera are awarded annually, depending on improvement compared to a 2004 baseline.

2. Patient satisfaction

The partners collaborated on a wide-ranging patient satisfaction survey. Among the factors measured: courtesy, how long patients have to wait, level of care and concern shown to the patient, and degree of patient involvement in decision-making.

The oncology group is paid for improving its patient satisfaction score — or maintaining a high score.

3. A community collaboration on lung cancer treatment

Premera had noted what Johnson calls tremendous variation in cancer treatment that appeared to be associated with the perspective of the physician who made the diagnosis.

“Do the patients enter the health care system at the pulmonologist level? Thoracic surgery? Oncology? Depending on where they entered and how those physicians were trained, things were done differently,” he says.

CCNW convened the lung cancer treatment community to develop guidelines to limit the variation.

4. Palliative care

CCNW improved and expanded its existing palliative care program.

5. Information technology

At its own expense, the oncology practice implemented an electronic medical record and billing system.

Does it work?

The relationship between Premera and CCNW will be a success if it offers the same or better patient outcomes at a lower cost than the standard payer-provider contract.

“Our hypothesis is that by decreasing the variation, using evidence-based medicine, looking at efficacy, side effects, and cost, and then implementing it consistently, we will reduce the cost compared to where we are now,” Johnson says. “That 100 percent has not been proven yet.”

The partners are looking to accurately assess the return on investment that both the health plan and the oncology practice have made. In the meantime, the next best thing is an estimate that up to $1 million in annual medical costs for lung cancer treatments are being avoided, courtesy of CCNW’s clinical pathways.

That estimate came from comparing actual costs to the costs if the physicians in the practice had used the wide variety of treatment options available. Johnson says that methodology makes the $1 million savings purely hypothetical, but it serves to suggest the potential savings from standardized protocols.

Because it requires physicians to consider treatment costs, the Premera-CCNW contract may be controversial among some physicians. But most would be likely to agree with Cutter’s view of the current payer/provider dynamic.

“The traditional relationships between physicians and payers do not lead to a better system,” he says. “The traditional payment mechanisms, especially for chronic disease, do not lead to a furtherance of value.”

Oncologists v. health plans

Dave Johnson, MD, regional medical director for Premera Blue Cross in Spokane, never once hinted that Cancer Care Northwest oncologists overtreat patients simply to make more money, and Bruce Cutter, MD, CCNW’s president, did not invoke the stratospheric salaries of health plan executives. We interviewed them separately, so there wouldn’t have been immediate pressure to avoid saying something negative about the other guy.

This is no small matter. The Zitter Group, which tracks the dynamics between payers and providers for its twice-a-year Oncology Managed Care Index, finds a lack of trust between cancer specialists and payers. Oncologists believe that health plans are unduly focused on costs, underestimating the complexity of caring for cancer patients now that life-prolonging treatments are available. Meanwhile, insurance executives often accuse oncologists of practicing with one hand on the cash register.

“We’ve heard pretty clear comments from the insurance side that they really do not value or trust the oncologist,” says Tom Baker, MPA, a senior vice president at Zitter. “They believe these guys are out there to make money and that they’re not patient-focused.”

His survey of managed care executives suggests that many health plans intend to follow Medicare’s lead into a new payment strategy. By paying a small markup on the average price of a drug rather than a percentage of the so-called “average wholesale price,” health plan executives believe they can reduce oncology costs by at least 20 percent without hurting patients. Of course, that means physicians will see their revenues plummet which is, in fact, the point.

“If an oncologist calls and says, ‘Hey, I can’t make money doing this,’ the payer doesn’t care,” Baker says.

Doug Matter, RPh, director of managed care for ICORE Healthcare, also forecasts significant changes as contracts between oncologists and health plans come up for renewal. Within the next three years, he expects many — perhaps a majority — of contracts to require oncologists to use step therapy or clinical protocols such as those in Premera-CCNW’s Foundations of Quality if they want full payment.

“It still is a touchy area with oncologists because they have such power,” he says.

But as the Centers for Medicare & Medicaid Services continues to ratchet down physician payment, oncologists will become more vulnerable to commercial insurers’ demands. Prior authorization may go away, he suggests, replaced by the standardized protocols built on evidence of efficacy and cost-effectiveness. Physicians will be tasked to develop the protocols; insurers will cut the checks only if they are followed.

“Payment is the way the health plan is going to control the non-performing provider,” Matter says.

MANAGED CARE October 2007. ©MediMedia USA