Thanks to advances in medical innovation, survival rates for cancer patients have increased substantially in the past 30 years. However, such clinical improvements have come at a cost. Analysis from the National Institutes of Health indicates cancer spending increased 27% over 10 years, estimated to reach $158 billion in 2020.
Much of the rise is attributed to the surge in newer and more costly drug therapies. For example, the median annual list prices of new cancer drugs coming on the market doubled between 2013 and 2017. Meanwhile, payers and the 1.7 million patients who will be diagnosed with cancer this year are often left with difficult financial propositions.
It’s this combination of high prevalence and high treatment costs that’s driving a fundamental shift toward value-based reimbursement models in oncology. Both Medicare and commercial payers are seeking strategies that optimize care while reducing spending.
“Five years ago, there was a lot of resistance to value-based care, clinical pathways and making physicians responsible for outcomes,” says Andrew Hertler, MD, FACP, chief medical officer for New Century Health, an oncology specialty management company. “But over the last two years, there’s been a willingness to embrace these alternative payment models.”
Medicare is now three years into its Oncology Care Model (OCM), a pilot involving 175 practices and about a dozen commercial payers. OCM includes real-time monthly payments of $160 to reimburse providers for enhanced services, in addition to usual fee-for-service payments and retrospective quality bonuses. Currently, OCM providers have taken only upside risk, but CMS intends to transition providers to two-sided risk.
Rhonda Henschel, director of value-based commercial programs for McKesson, says CMS is leading the way in alternative payment, and commercial insurers are looking to gain insights from Medicare’s experience.
“Commercial payers want to be operating in value-based models, but there are barriers with legacy claim systems and their ability to execute the models,” Henschel says. “Claim systems are designed on fee-for-service. So it’s challenging for payers and providers to operate on a bundled case rate or episodic payment structure.”
She says payer and provider must come to the table to create a partnership, working out the logistics collaboratively because each participant will likely be at a different point of relative readiness for a value-based arrangement. “The key is to be deliberate with your strategy,” Henschel says.
Success hinges on oncologists being incentivized and enabled to deliver high-quality care alongside measurable cost savings. Experts say there are some emerging opportunities that stakeholders must examine in order to realize value in today’s oncology reimbursement models.
1. Optimize drug therapy
Treating cancer is much different now than in years past. In many cases, it’s become a chronic disease that can be managed with drug therapy over many years, and payment structures must reflect that, says Hertler, who is an oncologist. Innovative treatments include immunobiologics and agents that target cancer cells based on their genetic mutations.
“How do we create value-based care in a world in which we have the ability to keep cancer controlled, with patients living quite normal lives as long as they take very expensive drugs? The key is going to be using these new tools,” Hertler says.
For example, in lung cancer, there are several known genetic mutations. With genetic analysis, oncologists can choose the drug therapy most likely to be effective for the patient’s specific type of lung cancer, rather than using a trial-and-error approach. In the past, trial and error was the only treatment strategy, Hertler says, and it caused a lot of waste in the form of ineffective drug treatment.
He believes the upfront costs of genetic tests are offset by the value of choosing the right drug treatment from the outset. For example, a lung cancer liquid biopsy might cost $6,000, but he says it makes sense when drug therapies cost $20,000.