Cover Story

Time For An Overhaul: CMS Wants to Remodel Cancer Payment, Care

CMS’ Oncology Care Model program is bringing bundled payments to cancer care. With drug costs so high and hard to control, the 195 participating practices will have to figure out other ways to control costs if they want to beat financial benchmarks and earn bonuses.

Thomas Reinke
Contributing Editor

This summer, CMS launched what might be its most ambitious alternative payment model to date. The federal health care agency’s aspirations for its Oncology Care Model (OCM) are sky high: Transformation of cancer treatment through more comprehensive patient and care management while simultaneously controlling the cost of all services though bundled payments for chemotherapy episodes lasting six months.

The new oncology model encompasses virtually all cancers treated with chemotherapy and all stages of those cancers. This is not a knock on other specialties, but the complexities of selecting the best chemotherapy agents for cancer patients—balancing efficacy, toxicity and an individual patient’s response—exceed those of CMS’ other bundled payment programs for cardiac care and hip and knee replacement. On top of the clinical issues and guidelines, physicians are supposed to generate savings in a circumstance where the price and expenditures for cancer drugs are unpredictable and difficult if not impossible to manage.

And yet the number of practices that agreed to participate in OCM has exceeded expectations. About 100 practices were expected to sign up. Roughly 450 expressed interest by submitting letters of intent to participate. Ultimately, 195 practices ended up in the program. The participants run the gamut from small private practices to large national physician networks to academic medical centers and even physicians tied closely to hospitals. Cancer treatment has been an important service line and major source of revenue for hospitals, and they have been reluctant to make changes that venture from fee for service.

John Fox, MD

“I have to give CMS credit for the foresight to include private health plans” in the OCM program, says John Fox, MD, of Priority Health, one of the participants.

The OMC program also includes 16 private health insurers that are patterning their payment models after CMS. These payers will add support to practices—and some much-needed horsepower to the OMC model. “I have to give CMS credit for the foresight to include private health plans,” says John Fox, MD, associate vice president for medical affairs at Priority Health, a Michigan insurer.

Participating private insurers

  1. Aetna
  2. Blue Cross Blue Shield of Michigan/Blue Care Network
  3. Blue Cross and Blue Shield of New Mexico
  4. Blue Cross and Blue Shield of Oklahoma
  5. Blue Cross and Blue Shield of Texas
  6. BlueCross BlueShield of South Carolina
  7. Capital BlueCross, Inc., Harrisburg, Pa.
  8. Cigna Life & Health Insurance Company
  9. EmblemHealth, New York City
  10. Health Alliance Plan, Urbana, Ill.
  11. Highmark, Inc., Pittsburgh
  12. Priority Health, Grand Rapids, Mich.
  13. SummaCare, Akron, Ohio
  14. The University of Arizona Health Plans
  15. UPMC Health Plan, Pittsburgh
  16. VIVA Health, Birmingham, Ala.

Community-based oncology practices are disproportionately represented in the OCM and outnumber hospital-employed oncologists or practices that are part of integrated health systems, according to Lindsay Conway, managing director of research at the Advisory Board, the Washington, D.C., research, technology, and consulting company. That skew makes sense to Conway. “Community-based oncology practices have really been in the forefront in terms of designing and implementing new care models and considering new payment arrangements,” she says. Their revenues have dropped over the past 10 years because of changes in drug reimbursement, so they have made a virtue out of necessity by being inventive. “They have been pushed to innovate and think more creatively about the financial model because they need to stabilize it if they’re going to continue to exist,” says Conway.

Lindsay Conway

Community-based oncology practices have been forced to be innovative because their revenues have declined, says Lindsay Conway of the Advisory Board.

The drug reimbursement changes she refers to include steps by CMS to limit the profit margin on drugs that are designed to take away the financial incentive to prescribe more expensive medications. In March, CMS proposed reducing the allowed markup on Part B drugs from 6% to 2.5%. The reduction would be offset partly by a flat fee of $16.80 per drug, per day.

Many oncologists have also been attracted to OCM as an alternative to forthcoming reimbursement changes under MACRA. “OCM is better than Medicare’s alternative,” says Lalan Wilfong, MD, director of quality programs at Texas Oncology, one of twelve practices in the U.S. Oncology Network that is participating in the OCM. He is referring to the Merit-based Incentive Payment System (MIPS), the track of MACRA that most practices are expected to be in. Relative to MIPS, OCM has a clearly defined care model and payment terms that are set for five years. Many of the details of MIPS have not been finalized, and its physician payment model has clearly defined downside risks.

Squeezing nondrug costs

CMS has emphasized that the objective of OCM is to transform cancer care, with several requirements to boost individualized patient management, but cost savings are also a central requirement. To remain in the program, however, practices must achieve a cost savings by the third year of operations.

One of the big questions hovering over the program is just where will these savings come from. The spotlight has been trained on the high price of drugs, including cancer drugs, but OCM may shift some of the attention to other aspects of cancer treatment. The Medicare Payment Advisory Commission (MedPAC) calculated that the average Medicare expenditure for a 180-day chemotherapy episode for lung, breast, and colon cancer was nearly $41,000—and that was in 2010–2012, before the wave of expensive targeted therapies hit the market. About half— 46% ($18,900)—of the money was spent on Part B oncology drugs and their administration, according to MedPAC. The rest went for inpatient hospital services (20%, $8,200), payments to physicians and other suppliers (18%, $7,400), outpatient services (12%, $4,900), and home health and hospice services (4%, $1,600).

Earlier this year, the Community Oncology Alliance, the lobbying organization for community oncologists and an opponent of the proposed Part B payment reforms, released its own analysis of annual cancer care costs for Medicare and commercial patients. The alliance’s analysis, conducted by Milliman, showed that the per-person, per-year cost of a chemotherapy episode paid for by Medicare averaged $51,566 in 2014. For commercial payers, it was $90,656, or roughly 75% more than what Medicare spends. Milliman’s tally includes all the services during the course of the year, not just those for a six-month chemotherapy episode that MedPAC added up.

Commercial plans spend roughly 75% more per episode of cancer care than Medicare
Medicare Commercial
Service % of episode cost Amount % of episode cost Amount
Drugs 18% $9,280 20% $18,130
Inpatient hospital 24% $12,380 18% $16,320
Other outpatient 21% $10,825 28% $25,400
Cancer surgeries 11% $5,670 13% $11,800
Radiology 8% $4,125 10% $9,100
Subacute 8% $4,125 1% $900
Professional services 5% $2,580 4% $3,600
Radiation oncology 3% $1,550 4% $3,600
Emergency room 2% $1,030 1% $900
Total $51,566 Total $90,656
Source: Community Oncology Alliance

A breakdown on where the money goes can be found on page 14. It shows some large differences in Medicare and commercial insurer payment for drugs ($9,280 vs. $18,130), outpatient services ($10,825 vs. $25,400), and cancer surgery ($5,670 vs. $11,800).

In Texas, all in

Heath plans, PBMs, employers, even CMS—they have all had difficulty reining in drug prices, and experts question whether OCM will do better. OCM does not include a requirement for practices to specifically target drug costs. In fact, under OCM, Medicare’s current Part B drug payment arrangement remains in place for physician practices that buy and administer cancer medicines. Similarly, for physicians affiliated with hospitals, the current hospital outpatient prospective payment system (OPPS) arrangement remains in place. Squeezing savings out of other services will be difficult because under traditional Medicare, patients are free to go to any provider that accepts Medicare.

Lalan Wilfong, MD

Texas Oncology is optimistic that having more cost data at its disposal will enable it to manage cancer more efficiently, says Lalan Wilfong, MD, who oversees quality.

Yet Texas Oncology has gone all in on OCM. Its entire set of more than 420 physicians and 175 sites of care are participating. Wilfong, the director of quality programs, says that although he would like to see some modification, CMS is essentially on the right track with OCM and is developing a workable care and financial model in oncology.

OCM has many requirements that fit with the innovations his group is already pursuing, he says. For example, the group has 24/7 access to on-call clinicians at all of its locations. Wilfong says the group plans to enhance this access with a beefed-up effort at next-day follow-up, which will involve contacting patients who have called in to see how well their problem was handled. Texas Oncology is also developing its own urgent care capability for patients who need to be seen as soon as possible.

As far as controlling costs, Wilfong said the organization will continue to improve pathway programs with targeted analyses of published studies of treatments that may have new outcomes or safety data. It will also be keeping an eye on costs and cost-effectiveness research. Wilfong pointed to a head-to-head comparison between bevacizumab (Avastin) and cetuximab (Erbitux) as first-line therapy for colorectal cancer as an example of the kind of research that the group will use to put together a pathway. The cost for one eight-week cycle of treatment for cetuximab was almost three times higher than bevacizumab ($20,856 vs. $9,324), but at 24 months, the overall survival rate of the patients on the two drugs was nearly identical. Wilfong says Texas Oncology will also be expanding its analysis and monitoring of avoidable drug use.

The group is optimistic that having more cost data at its disposal will enable it to manage cancer more efficiently, say Wilfong. “Currently it is very difficult for physicians to manage total cost of care because we only have information on the services that we provide,” he says. “We do not get information about the other services patients receive. We will have up to 15,000 patients in the program, and the cost and claim data we will be getting from Medicare on that volume of patients will help us to develop new cost- and care- management processes.”

Medical homes a head start

Priority Health believes its medical home program gave practices a good running start that will pay off in OCM. Four years ago, the Michigan insurer, working with Spectrum Health, a not-for-profit health care system in the western part of the state, created an oncology medical home program that now has six practices. The program included some cost-control strategies that are ahead of what CMS is shooting for. For example, the payment arrangement for physician- administered drugs is set at acquisition cost.

The six medical home practices plus an additional practice are now in OCM. OCM fits well with the existing medical home program, in Fox’s view. For example, the medical homes have been working on unnecessary emergency room visits and hospital admissions. “We continue working with them to share the data we receive about ER visits and admissions on a timelier basis to facilitate their intervention or follow-up as a way to control costs,” Fox says.

Priority and the practices are also refining pathways and developing end-of-life programs that should help them meet OCM requirements and financial benchmarks, he says.

How OCM works

CMS’s Oncology Care Model is a five-year program that requires participating practices to implement six care management requirements, including 24/7 patient access to clinicians, expanded services provided by nurse navigators, and implementation of NCCN or ASCO guidelines. In exchange, practices will receive an enhanced payment of $160 per patient per month during an episode. The episodes are triggered by a Part B or D claim and last six months. If a Medicare beneficiary receives chemotherapy after those six months, it restarts the clock on another six-month-long episode.

The program will also measure performance using a variety of quality metrics. The intention is to prevent practices from inappropriately reducing services to curb expenditures so they come in under their financial benchmarks and, naturally, to improve patient outcomes.

On the financial side, practices are on the hook for managing the total cost of care for all services, including inpatient and outpatient hospital services and those from other specialists. Practices can choose to participate in either a one-sided or two-sided financial risk arrangement. Most are opting for the one-sided risk, whereby they receive a bonus if they are able to hold down the cost of an episode so it is below a financial benchmark but won’t be penalized if spending goes over the benchmark. The benchmark is calculated separately for each practice and is based on an analysis of what the practice has spent in the past over a three-year period. CMS will use a formula that gives more weight to the most recent year because it’s a better indicator of future expenditures. There are also provisions that make adjustments that take into account newly approved drugs.

OCM is a bundled payment program. That may suggest that practices are getting paid in lump sums. But the program doesn’t work that way. Instead, practices will file claims just as they always have. Their actual expenditures are then reconciled with their benchmarked expenditures to see if they are eligible for a performance payment.

Performance-based payment: OCM

  1. CMS will calculate benchmark episode expenditures for participating practices
  • Based on historical data
  • Risk-adjusted, adjusted for geographic variation
  • Trended to the applicable performance period
  1. A discount will be applied to the benchmark to determine a target price for OCM episodes
  • Example: Benchmark = $100 → Discount = 4% → Target price = $96
  1. If actual OCM episode Medicare expenditures are below target price, the practice could receive a performance-based payment
  • Example: Actual = $90 → Performance-based payment up to $6
  1. The amount of the performance-based payment may be reduced based on the participant’s achievement and improvement on a range of quality measures
The OCM quality measures
Measure Description Source
OCM-1 Risk-adjusted proportion of patients with all-cause hospital admissions Claims
OCM-2 Risk-adjusted proportion of patients with all-cause ED visits that did not result in a hospital admission Claims
OCM-3 Proportion of patients who died who were admitted to hospice for three days or more Claims
OCM-4 Pain assessment and management Practice
OCM-5 Preventive care and screening: Screening for clinical depression and follow-up plan Practice
OCM-6 Patient-reported experience of care Survey
OCM-7 Prostate cancer: Adjuvant hormonal therapy for high-risk beneficiaries Practice
OCM-8 Timeliness of adjuvant chemotherapy for colon cancer Practice
OCM-9 Timeliness of combination chemotherapy for hormone receptor–negative breast cancer Practice
OCM-10 Trastuzumab received by patients with AJCC stage I (T1c) to III Her2/neu positive breast cancer Practice
OCM-11 Hormonal therapy for stage IC-IIIC estrogen receptor/progesterone receptor–positive breast cancer Practice
OCM-12 Documentation of current medication Practice

Practices participating in OCM will be assessed on 12 quality measures. Initially, the measures will be a mix of pay-for-reporting and pay-for-performance. They will receive an Aggregate Quality Score (AQS) that equals the sum of the points they earn on the quality measures divided by the total number of points available. The AQS will be used to compute a performance multiplier, which along with expenditure targets, will be used to determine performance-based payments.

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