Value-Based Physician Payment in Oncology: Public and Private Insurer Initiatives

Abstract

Policy Points:

1. Public and private insurers are implementing payment mechanisms to improve coordination and reduce the cost of drug, hospital, and ancillary services for cancer patients. Some target unnecessary hospitalization, while others create incentives for prescribing lower‐cost chemotherapies and biologics.

2. Physician payment methods in oncology require a balance between incentives for cost control and incentives for patient access to expensive specialty drugs.

3. None of the initiatives adopt bundled methods out of concern for shifting excessive financial risk onto physicians in the context of rapid pharmaceutical innovation.

Context: High‐value oncology requires physicians to monitor and coordinate all aspects of care, educate and engage their patients, and adopt cost‐effective drug treatments. However, oncology practices in the United States traditionally have been reimbursed based on the number of office visits performed and through cost‐plus margins from prescription of expensive drugs. Public and private payers now are experimenting with methods of payment that include monthly care management fees, annual bonuses, and incentives for conservative choice among alternative drug regimens.

Methods: This paper uses case study methods to examine oncology payment initiatives at Medicare, Anthem, Aetna, and UnitedHealthcare, the nation's largest public and private health insurance plans.

Findings: The 4 insurers supplement traditional fee‐for‐service payment with payment methods designed to promote coordination of care and conservative use of health care resources. Medicare, Aetna, and UnitedHealthcare reward oncology practices that reduce per‐patient spending, targeting unnecessary patient visits to emergency departments and hospitals. Anthem offers monthly payments to practices that adhere to lower‐cost drug treatment pathways; Aetna increases the percentage markup on low‐cost generic chemotherapies but not on high‐cost biologics; and UnitedHealthcare removes the linkage between physician payment and spending on office‐infused drugs. As a condition for receiving the new payments, each of the initiatives requires participating practices to report and, in some cases, improve performance on quality metrics. None of the initiatives bundles payment for oncology drugs together with payment for other oncology services, out of concern for shifting financial risk onto physicians and creating access barriers for patients.

Conclusions: The emerging “value‐based” methods of oncology payment supplement fee‐for‐service and cost‐based reimbursements with per‐month and per‐episode payments, but none of the payers bundle spending on cancer drugs with payments for other services. Payers recognize that bundled payment could create access barriers for patients and undermine innovation in effective but expensive new pharmaceuticals.

Keywords: clinical pathways; episode-of-care payment; oncology medical home; value-based payment.