Study: Lower Cancer Care Costs With Episode Payment Model

Oncologists were able to reduce overall costs without lowering quality of care.

A 3-year pilot program that rewarded oncologists for improving outcomes and efficiency-rather than administering drugs-significantly reduced overall costs without lowering quality of care, researchers reported.

During the study ending in 2012, five large oncology groups working with UnitedHealthcare were given upfront one-time payments for patients’ care, regardless of the type or number of drugs administered during treatment. At the end of the pilot, overall costs dropped by 34% to $64.8 million compared with the estimated cost under a fee-for-service system, despite an unexpected 179% jump in drug costs. The results were published in the July 8 Journal of Oncology Practice.

For the study, participating practices provided clinical data to the payer on a total of 810 patients with lung, breast, and colon cancers in order to create 19 clinical episode payment categories with predefined chemotherapy regimens. The groups also helped develop more than 60 related quality and cost measures that were used to compare data across groups and measure outcomes.

By reimbursing oncologists for episodes of care and paying for drugs based on the average sales price, the study aimed to eliminate the link between drug selection and physician income. Practices could increase their episode payments only by lowering overall cost or improving patient survival; they had no financial incentive to select expensive drugs but were still protected from loss by being reimbursed for their costs of acquisition.

Researchers had expected the strategy to produce lower drug costs but instead drug costs rose by $13 million.

“The increased chemotherapy drug cost was not expected,” study authors wrote. “The episode payment program contains several incentives for decreased chemotherapy costs.” For example, the episode payment for metastatic patients continued every 4 months even if a patient had been switched to palliative care and was no longer receiving chemotherapy.

Instead, practices’ engagement in quality and outcome measurement, along with data sharing among practices, appeared to drive cost savings. 

For example, one group learned that follow-up appointments to its clinic were being scheduled several weeks after discharge, leading to frequent readmissions for the same problem. After they began seeing patients within 48 hours of discharge, their hospitalization rates soon dropped.

“Collaboration was an essential element to the success of the pilot,” the authors wrote. “The data for the project were available to all participants. Variation was explicitly discussed as an opportunity for improvement and not a failure of health care delivery. Problem solving involved the participation of physicians, the medical group business executive, nursing staff, and payer staff.”

The results challenge the notion that spending less on care will lead to worse outcomes for patients, the authors said.

“This approach allowed each medical group to seek the solutions that worked best for their environment,” they concluded. “This study proves the essential concept that the cost of care for future generations can be reduced without sacrificing quality.”