In the past few decades, oncology care has achieved significant progress in the United States. Between 1975 and 2010, five-year survival rates increased almost 40%, a result of earlier diagnosis, improved drug therapies, better radiation treatment, and other innovations (Exhibit 1).1 As of January 2014, nearly 14.5 million Americans had a history of cancer, including those living with cancer and those previously diagnosed but with no current cancer evidence.2
Progress has come at a price, however: oncology care has become one of the key factors underlying the rise in the country’s healthcare spending. The American Society of Clinical Oncology has predicted that annual US oncology spending, which was $104 billion in 2006, will reach $174 billion by 2020.3
The escalating cost of oncology care has attracted the attention of providers, public and private payors, and the general public. Until fairly recently, oncology care was managed almost solely by providers, given that payors and other stakeholders had limited expertise. However, the rapid rise in costs has made collaboration, joint decision making, and transfer of knowledge between payors and providers essential.
In the past decade, a number of new approaches designed to improve the quality and safety of oncology care while controlling costs have been developed. These initiatives, which require closer collaboration between payors and providers, have been somewhat effective in controlling near-term costs. However, most of them were based on traditional managed care models and relied on prior authorization, step therapy, and formulary design to reduce the unnecessary utilization of high-cost oncology drugs, diagnostic testing, and procedures. As a result, they have made care delivery more cumbersome for all parties involved and have created friction between payors, providers, and patients. Furthermore, each of these initiatives has limitations that could impair its ability to achieve sustainable results.
In this article, we describe a more comprehensive and integrated oncology care management program that can be implemented in the US healthcare system. Our experience suggests that this program can deliver long-term benefits to both payors and providers. Even greater impact can be achieved if other stakeholders in the oncology value chain, especially patients and drug suppliers, are involved.
Why the rising costs?
The advances in medical treatment that have improved outcomes and prolonged patients’ lives have also extended the duration of treatment and raised costs. The average monthly price of oncology drugs has been rising for decades; between 2009 and 2014 alone, the average inflation-adjusted monthly price of new oncology drugs increased by 48% (Exhibit 2).4 Those drugs and drug administration now account for about 34% of total oncology expenditures.5 This increase primarily reflects the high price and growing use of biologic drugs.6 However, the cost of radiation therapy7 and other forms of treatment have also been growing rapidly.
Treatment costs are not the only factors underlying the increase in spending on oncology care. Other important factors include:
Increasing cancer incidence. According to the National Cancer Institute, the cancer incidence rate in the United States grew by more than 16% between 1975 and 2010,8 largely because of population aging and earlier diagnosis.
Significant variations in treatment patterns. Treatment approaches vary considerably for patients with the same type and stage of cancer—not only across the United States but also among practices and physicians in the same localities. Although some of this variation is inevitable given the specific needs of each patient, a large portion of it reflects overutilization and waste.9
Shift of treatment to higher-cost care settings. In the past few years, health systems have been acquiring independent oncology practices at an increasing rate because of the high growth in the need for oncology care, cost pressures from payors, and a more favorable cost structure for select facilities (e.g., the federal 340B program provides hospitals with access to drugs at significant discounts to treat indigent patients). However, care provided by hospitals is now often more expensive than care provided by physician practices,10 and studies suggest that the cost difference cannot be attributed to observable differences in patient characteristics or treatment types.11 As a result, the shift of cancer care to hospitals has contributed to the growth in overall oncology spending.
Newer approaches: Pros and cons
In recent years, payors and providers have started working together to develop more collaborative solutions for controlling costs without denying patients access to potentially life-saving drugs. Three approaches are being used most often:
Introduction of clinically based pathways to drive standardization of care. Pathways define the sequence and timing of cancer treatment, based on cancer type, stage, and other patient-specific factors. Although providers can deviate from pathways when they deem it appropriate, the presence of a standard of care has been proved effective in decreasing treatment variability and reducing the use of drugs likely to cause severe side effects.12 When pathways are used, payors typically reward providers based on their compliance with the pathways and performance on other process and outcome quality metrics.
The majority of existing pathways have limitations, though. They often focus on specific areas of oncology care (usually, on chemotherapy; less so on imaging and radiation therapy) without looking at patients holistically. Moreover, the large number and variety of pathways currently available creates operational complexities for both payors and providers by making it more difficult to consistently identify the optimal treatment path for a given patient. Furthermore, most current pathways are developed at the national level. Local physicians may not believe the pathways are appropriate for their patients, especially given that they had no input into their development.
Empowerment of providers through episode-based payment arrangements. More and more payors are experimenting with episode-of-care payment arrangements. CMS has also announced that it will expand its episode-based chemotherapy payment program.13
In episode-based arrangements, payors either: (a) give providers a flat sum to cover pre-defined services delivered during a specified duration of treatment for a given type of cancer; (b) reward providers for achieving an average cost per episode (paid out on a fee-for-service basis) that is lower than a benchmark level; or (c) reward providers for controlling the rate of growth in the cost per episode (measured retrospectively). The providers may also receive additional rewards based on clinical outcomes, and the achievement of care quality goals may be a prerequisite for participation in savings. Several recent pilots show that well designed and implemented episode-based oncology payment programs can significantly decrease the total cost of care without harming clinical quality, financially benefiting both providers and payors.14,15 Whether these pilots can be scaled up remains to be seen, however.
The effectiveness of episode-based payment depends on the specificity of the information given to providers to help them understand the sources of cost and outcome variations. Simply establishing a flat sum for payment without giving providers more detailed information on sources of variation may leave them without the tools to improve performance. Comparative, detailed information on cost drivers and outcomes is likely to achieve greater impact that can be scaled across different provider types (e.g., large academic medical centers vs. community hospitals vs. independent oncologists).
Support of provider-to-provider collaboration to increase care coordination. Accountable care organizations (ACOs), medical homes, and similar arrangements are designed to increase care coordination and potentially shift risk from payors to providers. The providers optimize care decisions for their patients by more closely coordinating care and are rewarded for their performance based on the total cost of care and quality metrics. The payors encourage and support interactions among the providers by giving them IT tools and facilitating peer-to-peer discussions on performance. Depending on the providers’ readiness and appetite for risk, reimbursement models may offer limited upside only or substantial gain sharing and downside risk.
At present, there are about 10 oncology-focused medical homes accredited by the National Committee for Quality Assurance16 and only a handful of oncology-focused ACOs. These arrangements have been shown to control the cost curve without harming outcomes, but they are not easily scalable. Collecting and transferring the data needed to accurately track performance and calculate reimbursement is often a manual, time-consuming process. Moreover, not all physicians are comfortable with taking on risk, and some payors are unwilling to help risk-averse practices identify and capture value-creation opportunities.
An integrated approach to improving quality and controlling costs
After helping multiple payors and providers across the United States develop approaches for dealing with rising oncology costs, we have come to believe that longterm impact can best be achieved through an integrated program that begins with close collaboration between payors and providers, and combines elements from all three of the approaches described above (Exhibit 3). The program then radiates outward to involve others in the value chain, especially patients and drug suppliers. Our experience suggests that this combination delivers larger—and more sustained—results than do any of the program elements on their own.
The collaboration between payors and providers should focus on coordination of care across disciplines (e.g., chemotherapy, oncology surgery, pathology, radiation therapy) because effective coordination is critical for improving outcomes and reducing variability among providers. Effective coordination across disciplines, in turn, requires local consensus on the best standards of care to ensure that those standards are consistently applied, as well as a robust framework for assessing, comparing, and incentivizing performance. The main components of this offering are therefore comprehensive care protocols to reduce variability in care delivery, increased transparency to drive optimal results, and alignment of incentives between payors and providers.
Comprehensive care protocols
Care protocols define standardized approaches for managing different types and stages of cancer, thereby reducing variability in treatment not justified by patient-specific needs. They are similar to, but more comprehensive than, the care pathways described above. Although care protocols are available for all the common cancer types, successful use of them depends on three factors:
Scope. Care protocols should include the whole spectrum of disciplines involved in cancer treatment. Recent studies suggest that the largest opportunity for reducing cancer-related costs lies in minimizing the number of avoidable inpatient stays due to side effects of cancer therapy, as well as avoidable use of intensive care units.17,18 Costs also tend to be concentrated in the last months of the patient’s life. Care protocols should therefore cover such topics as how to minimize the risk of side effects (e.g., hydration of a patient during chemo infusions), how to provide rehabilitative care, when and how to transition from curative treatment to supportive and palliative care, and how supportive/palliative care should be provided to patients with cancer. The care protocols should also allow for the use of personalized medicine (also sometimes referred to as precision medicine) when appropriate.
The more common types of solid tumors (e.g., breast, lung, colon, and prostate cancers) account for almost half of all new cancer cases19 and overall cancer spend;20 they are thus a reasonable starting point for standardization of care with care protocols. Once care protocols for these types of cancers are adopted, care standardization can be expanded to other cancer types (e.g., blood-borne malignancies). Then, efforts can be undertaken to ensure coordination among practices across various types and stages of cancer.
Provider ownership. Consensus among local oncologists is crucial for successful use of care protocols. Straight application of national pathways often delivers mixed results, largely because the pathways do not take local factors into consideration and buy-in from local providers has not been obtained. Allowing local physicians to tweak and enhance these pathways can significantly improve clinical outcomes and lower costs.21
Evolution over time. Care protocols should be flexible—they must allow for updates to accommodate the most recent cancer treatment developments and safety concerns. Thus, implementation of care protocols, and the oncology management program in general, must have a physician-led governing body that meets regularly to ensure that the protocols remain valid and relevant, or are changed when appropriate. Payors, especially those with significant local market share and/or strong alignment with providers, can help facilitate the development and regular updating of comprehensive care protocols by encouraging conversations among local providers. Payors can also influence the protocols’ development by giving providers access to appropriately blinded data about all aspects of treatment—data that most providers would otherwise not see.
- National Cancer Institute. SEER Cancer Statistics Review 1975-2011.
- American Cancer Society. Cancer Treatment & Survivorship Facts & Figures 2014-2015.
- The State of Cancer Care in America, 2014: A Report by the American Society of Clinical Oncology.
- Matthews AM. Insurers push to rein in spending on cancer care. Wall Street Journal. May 27, 2014.
- The 2014 Genentech Oncology Trend Report. Genentech; 2014.
- Ensuring Patient Access to Affordable Cancer Drugs: Workshop Summary. National Academies Press (US); Dec 23, 2014.
- Smith BD, et al: Adoption of intensity-modulated radiation therapy for breast cancer in the United States. Journal of the National Cancer Institute. 2011;103:798-809.
- Surveillance, Epidemiology, and End Results (SEER) Program. Cancer Statistics Review.
- Fitch K, Pyenson B. Cancer Patients Receiving Chemotherapy: Opportunities for Better Management. Milliman; 2010.
- According to the analysis, the average annual cost of chemotherapy covered by Medicare between 2006 and 2009 was $47,500 for privately owned practices; similar services performed in the outpatient hospital setting incurred an average cost of $54,000 (Finch K, Pyenson B. Site of Service Cost Differences for Medicare Patients Receiving Chemotherapy. Milliman; 2011).
- Fitch K, Iwasake K, Pyenson B. Comparing Episode of Cancer Care Costs in Different Settings: An Actuarial Analysis of Patients Receiving Chemotherapy. Milliman; 2013.
- LeClerc O, et al. Strategies in oncology: Spotlight on clinical pathways. Oncology Knowledge Bulletin. McKinsey & Company; 2012.
- On January 26, 2015, CMS announced new initiatives to promote: a) better care (by encouraging integrated care, population health, and patient engagement); b) smarter spending (by encouraging the use of bundled payment arrangements); and c) healthier people (by advancing electronic health records, interoperability, and transparency). (See www.cms.gov/Newsroom/ MediaReleaseDatabase/ Fact-sheets/2015-Fact-sheetsitems/ 2015-01-26.html.)
- Newcomer LN, et al. Changing physician incentives for affordable, quality cancer care: Results of an episode payment model. Journal of Oncology Practice. 2014; 10(5):322-6.
- Sobczak M. Alternate payment methodologies: Building and costing care bundles. Presentation at the 2014 Cancer Center Business Summit. November 7, 2014.
- Robeznieks A. At home with the specialist: Oncologists and other specialists launching patient-centered medical homes. Modern Healthcare. October 18, 2014.
- Newcomer LN, et al. Changing physician incentives for affordable, quality cancer care: Results of an episode payment model. Journal of Oncology Practice. 2014;10(5):322-6.
- Kolodziej M, et al. Benchmarks for value in cancer care: An analysis of a large commercial population. Journal of Oncology Practice. 2011; 7(5):301-6.
- American Cancer Society. Cancer Facts & Figures 2015.
- Mariotto AB, et al. Projections of the cost of cancer care in the United States: 2010–2020. Journal of the National Cancer Institute. 2011;103(2)117-28.
- Saraiya S. The use and implementation of standardized treatment pathways. American Journal of Managed Care: Evidence-based Oncology. 2015;21(3): SP85.