Alternative Approaches to Paying for Cancer Care

OncologyONCOLOGY Vol 25 No 2
Volume 25
Issue 2

Oncology costs have become unaffordable for our healthcare system. Increasing at a rate of more than 15% per year, costs for treating cancer patients are far outpacing inflation and other healthcare costs.

By their very nature, electronic health records (EHRs) facilitate appropriate documentation and make it possible to read and understand submitted records in terms of their appropriate comprehensive nature. Other potential EHR benefits include the ability to enhance communication, measure and improve the quality of care, increase clinical trial participation, mine data, participate in e-prescribing, and improve billing processes.

Oncology costs have become unaffordable for our healthcare system. Increasing at a rate of more than 15% per year, costs for treating cancer patients are far outpacing inflation and other healthcare costs. In fact, cancer patients make up less than 1% of the commercially insured population, yet they account for over 10% of costs, with a significant portion of these costs involving patients receiving chemotherapy.[1] The combination of high-cost chemotherapy drugs and extreme variation in the use of these drugs, outpatient costs, and unexpected emergency room visits for complications or unmanaged side effects results in average annual costs of $111,000 per patient, approximately four times the costs incurred by cancer patients who do not receive chemotherapy.[1]

Recent economic pressures have forced everyone in the United States-individuals and businesses alike-to look closely at spending. Healthcare payers are no different, and as they look for obvious places to cut, skyrocketing cancer care costs make oncology an obvious area to consider. It’s clear that opportunities exist for improving quality and reducing costs for cancer patients, especially those on chemotherapy. But is there a solution that will benefit all parties involved-patients, payers, and physicians?

Finding the right approach to these complicated issues requires teamwork between payers and providers. This begins with an understanding of the key drivers of cancer care costs and of how oncologists are currently paid, followed by consideration of alternative approaches that can yield better results. Let'’s consider several situations:

Payers reimburse providers by fee-for-service payment with no recognition of those who adhere to clinical guidelines
As more treatment options for cancer patients have emerged, there has been greater variation in treatment utilization and costs for cancer patients. Certainly no one can argue against the benefits of more options, specifically those involving more targeted therapies. However, more options underscore the need for solid guidelines that suggest the most effective treatments for specific disease types, with consideration given to toxicity and, where efficacy and toxicity are equal, to cost.

Alternative approach. More insurers are instituting pay-for-performance programs, a positive trend that should continue. The best programs are being developed by providers and payers in tandem and are structured around compliance with evidence-based medicine (EBM). Even as personalized medicine becomes more prominent, prescribing treatments based on scientific data that demonstrate efficacy leads to better care, with more predictable outcomes and costs.

The principles of EBM encourage the creation of clinical pathways based on evidentiary data relating to new and existing cancer therapies. When pathways are developed on the basis of the most current scientific literature, a national standard of care is established that gives physicians confidence that their treatment recommendations are based on the most clinically sound, up-to-date information. The best evidence-based treatment algorithms also factor in consideration of cost when there is no difference in efficacy and toxicity. In fact, in many cases, evidence-based pathways can provide proof that a less expensive drug has the same benefit as one that is more expensive. Following evidence-based clinical guidelines can benefit everyone involved by reducing variation in care, improving quality, diminishing errors, and decreasing variability in costs. Use of such guidelines also benefits payers by aligning financial incentives with adherence.

Margins on specialty pharmaceuticals, not physician services, drive oncologists’ income
Declining reimbursements have strained practices' ability to cover the costs of providing care, let alone realize a reasonable profit. Oncologists have become increasingly dependent on margins on the purchase of pharmaceuticals to help cover the costs of mixing and administering therapies as well as other general patient care services.

Some payers have identified these margins as a place to trim costs and are pushing oncology practices to accept arrangements in which physicians would no longer buy, inventory, manage and bill for intravenous drugs. Known as Mandatory Vendor Imposition (MVI), these types of arrangements sometimes require patients to purchase their drugs from specialty pharmacies, store the drugs in their homes, and then transport the drugs to the clinic for administration. Other MVI arrangements require physicians to obtain drugs from a third party pharmacy and store these patient-specific drugs as separate inventory at their practice. MVI arrangements are very problematic, most notably for the extreme safety risks they pose to patients by removing existing clinical controls that ensure the safety and reliability of cancer drugs. These arrangements can also have detrimental effects on patients whose treatments are delayed because the drugs or quantities of drugs they require are different from those that are available when they arrive for treatment. While the intent of payers’ tests of MVI arrangements is to reduce costs, little proof exists to show that the savings gained by reducing payment to physicians outweigh the added costs of waste caused by unused dispensed drugs or drugs that are rendered unusable because of patient mishandling.

Alternative approach. Creating a scenario that jeopardizes patient safety and practice viability by removing oncologists' control over product authenticity, product integrity, and the accuracy of the labeling and dosing of the pharmaceuticals they administer to their patients is not the answer. However, a scenario in which oncologists rely on reimbursement largely based on drug utilization is not sustainable.

Instead, payers and physicians should work toward developing physician-centric, pay-for-performance initiatives that establish revenue opportunities above and beyond fee-for-service. In addition to rewarding the use of EBM, payers should incorporate incentives for physicians to use a comprehensive approach to patient care quality that includes providing ongoing disease management support to patients during chemotherapy.

Currently, there is little emphasis on disease management in cancer care-yet this type of comprehensive, timely support has demonstrated its ability to improve patient and financial outcomes in other chronic diseases, such as diabetes and congestive heart failure. Patients undergoing treatment for cancer, particularly those receiving chemotherapy, are susceptible to complications and side effects that occur between doctor visits and which, if not caught early and managed properly, can lead to unplanned and expensive trips to the emergency room or to in-patient hospital stays. Creating plans that offer incentives to physicians to support their patients receiving chemotherapy with personalized patient support and education throughout treatment can not only reduce practices' reliance on drug margins, but will also reduce costs for both patients and payers and will improve patients’ health status during treatment.

Roughly 32% of total Medicare spending goes to care for patients with chronic illnesses in their last two years of life, with many of these costs associated with repeated hospitalizations[2]
Dr. Atul Gawande's compelling article “Letting Go,” published in the April 2010 issue of The New Yorker, crystallizes the issues surrounding the obvious end of a patient's life. He points out that today's medical advances, which have saved so many patients from diseases once considered fatal, have created new issues surrounding issues of when to stop treatment and how to die. Many families who find themselves with a loved one with a terminal condition have not addressed these issues, and often physicians are not proactive enough about initiating frank end-of-life conversations as a patient’s condition evolves. This inconsistent engagement of physicians in care planning and end-of-life discussions can result in patients receiving more care than they wanted and in unnecessary expenses.

Alternative approach. Early, compassionate end-of-life discussions can empower patients and their families and can reduce costs for unwanted or non-beneficial treatment. When advance care planning begins early in the treatment process, it can help caregivers and family by helping them explore, understand, and document the patient's own preferences for care, thereby easing the burden on them of having to make difficult decisions down the road. These conversations can range from expectations of disease progression and documentation of treatment preferences to discussions of palliative care and hospice. This process helps patients specify the treatments they do and do not desire, and enables them to select a healthcare advocate or proxy to speak on their behalf if they are ever unable to speak for themselves.

Cutting costs is never easy
The process of cutting costs is never easy, and no one wants to impede the progress that has been made in the War on Cancer. But the reality is that the costs of treating this disease are spiraling out of control, placing a burden on patients as well as payers and providers. Payers and oncologists must unite to create a comprehensive cancer care solution that enhances the quality and consistency of patient care and that also reduces costs. Such a plan will challenge several current methods of operating and will likely revolve around incentives for oncologists to adopt evidence-based medicine, focus on better disease management, and be diligent in assisting patients with proactive end-of-life planning.



1. Fitch K, Iwasaki K, Pyenson B. Cancer patients receiving chemotherapy: opportunities for better management. New York: Milliman, Inc; March 30, 2010.

2. Wennberg JE, Fisher ES, Goodman DC, Skinner JS. Tracking the care of patients with severe chronic illness. In: Dartmouth Institute for Health Policy and Clinical Practice. The Dartmouth atlas of health care 2008. Available at:

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