Value-Based Payment for Oncology Services

Value-Based Payment for Oncology Services

Value-Based Payment for Oncology Services 150 150 Avalon Health Economics LLC

Cancer care is a large part of overall health care expenditures. Of the approximately 18% of U.S. gross domestic product spent on healthcare, more than 5% is attributed to cancer treatments.[1] Considering the premature mortality associated with cancer, the humanistic and economic toll is enormous. Consequently, in recent years there has been increasing attention devoted to the “value” of cancer treatments, especially drugs—the ones that give us the best outcomes for the lowest costs.

The value of an oncology drug derives not merely from its molecular structure, but from the manner in which it is used. High-value medical oncology requires that chemotherapies and biologics be administered to the right patient, at the right time, at the right dose, and in combination with the right supportive medications. Pharmaceutical regimes should be coordinated with radiation, surgery, and other therapeutic options, the patient should be monitored for beneficial and adverse impacts, and treatment should periodically be reviewed and adjusted to reduce toxicity, unplanned use of ancillary services, and emergency use of the hospital. The patient should be encouraged to share with the physician in decisions concerning aspects of care that involve tradeoffs between longevity, quality of life, and other outcomes. For patients with metastatic disease, active chemotherapy should be terminated when it no longer offers meaningful benefits and the patient should be transferred to palliative, hospice, and other conservative forms of end-of-life care. High-value medical oncology goes far ‘beyond the pill.’

Public discussions of oncology value often focus on the price and efficacy of newly launched molecules, raising difficult questions of how much society should financially reward past research as a funding source for future research. However, innovation in the manner by which drugs are used is of importance equal to innovation in identifying cellular targets, mechanisms of action, and modes of administration. Rather than being the domain of biotechnology startups and established pharmaceutical firms, innovation in methods of use occurs at the level of the physician and the hospital, encouraged or discouraged by the manner in which these providers are paid by insurers.

Traditional methods of physician and hospital payment give an often-incoherent mix of incentives to provide too much and too little treatment. Doing everything doesn’t always mean better care, but the pendulum swinging too far the other way is not beneficial either. Mechanisms need to be put in place to make sure cancer patients receive appropriate, high level care, and value-based care is not used as an excuse to give less expensive, inappropriate care. Fee-for-service (FFS) rewards physicians for increasing the number of office visits rather than for conservative use of resources. But in the next several years, FFS will phased out, mostly due to CMS’s proposed new Medicare payment systems. Insurer payment for office-infused biologics can be structured as a ‘buy and bill’ reimbursement that offers greater financial margins to oncology practices that prescribe the most expensive drugs. Hospitals may be paid on a prospective basis, with this year’s budget based on previous years’ experience, which places them at financial risk if a costly new treatment becomes the standard of care. None of these payment mechanisms reward treatments that generate improved patient outcomes.

In recent years there has been a fair amount of public and media outcry over opportunistic drug pricing on the part of manufacturers. The energy focused on these types of arguments is misplaced and would be much more productively spent looking for “value for money;” that is, looking for the therapeutic areas and applications where there might be very good reasons for paying more to achieve better outcomes. While high in conceptual appeal, there are at least a couple of important impediments to implementing value-based payment. First, drug manufactures need to produce high-value drugs, and drugs that patients actually want. Second, clinicians need to agree to use high-value drugs, and follow evidence-based clinical practice guidelines.[2] Insofar as clinical practice guidelines are continually reevaluated and updated and followed closely by clinicians, this will reward manufacturers that develop high-value treatments by assuring higher and more concentrated utilization.

-James Robinson, PhD, Cara M. Scheibling, and John E. Schneider, PhD

1. Scalo, J.F. and K.L. Rascati, Trends and issues in oncology costs. Expert Rev Pharmacoecon Outcomes Res, 2014. 14(1): p. 35-44.
2. Bernstein, S.J., Accountable care organizations and the practice of oncology. J Oncol Pract, 2013. 9(3): p. 122-4.