Malcolm Rivera
The rising costs of cancer care have prompted the healthcare industry to explore new payment models, including bundled payments. This approach aims to reduce costs and improve patient outcomes by incentivizing providers to share savings and enhance collaboration across healthcare settings. The Oncology Care Model (OCM) is an example of a bundled payment program that encourages high-value, patient-centered care. Under OCM, payments are made for multiple services during an episode of care, covering chemotherapy, radiation therapy, and other treatments for various cancer types. These bundled payments can be structured prospectively or retrospectively, with providers benefiting from improved outcomes and cost management. While bundled payments offer potential benefits, challenges arise in determining fair pricing and adapting to complex payment structures.
| Characteristics | Values |
|---|---|
| Purpose | To reduce the costs of cancer care and improve the quality of care |
| Payment Model | Oncology Care Model (OCM) |
| Payment Structure | Benchmark prices for 21 cancer bundles for six-month episodes of care |
| Benchmark Price Calculation | Based on a blend of practice-specific and national historical expenditures |
| Inclusion | All Medicare Part A and B expenditures, as well as Part D costs for beneficiaries with that coverage |
| Adjustments | Forward trend factor (TF) and novel therapy adjustment (NTA) |
| Payment Calculation | Retrospective or prospective |
| Retrospective Payment | Individual providers receive payments for each service, but the total amount is compared against a target price for included services |
| Prospective Payment | A designated provider (e.g., hospital) receives a single, lump-sum payment for eligible services delivered by providers tied to an episode of care |
| Incentive | Providers who achieve better outcomes, such as reducing avoidable hospital admissions, may receive additional payments |
| Pilot Studies | Successful pilots for head and neck cancer bundles have been conducted |
| Insurance Companies | UnitedHealthcare, Florida Blue |
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What You'll Learn
- Cancer care is costly, leaving patients with debt and insurance companies with high costs
- Bundled payments can reduce costs and improve quality of care
- Providers are incentivised to share savings and improve patient outcomes
- Retrospective and prospective bundled payments are calculated differently
- Bundled payments promote collaboration and care coordination across cancer types
Cancer care is costly, leaving patients with debt and insurance companies with high costs
Cancer care is notoriously expensive, and the costs are only increasing. In 2018, American cancer patients paid approximately $5.6 billion in out-of-pocket cancer treatment costs, and this figure is expected to rise in the coming years. The high cost of cancer care leaves patients with debt and insurance companies with high costs. Cancer patients often face financial hardship due to the high cost of treatments, with many being forced to choose between paying their bills and accessing life-saving medicines. Even with financial assistance from family members and insurance, cancer treatments in the United States may still be unaffordable for some patients.
The reasons for the high cost of cancer care are multifaceted. One significant factor is the expense of cancer drugs. Drug companies incur substantial research and development costs, which they recoup through high product prices. Additionally, most cancers are incurable, leading to the sequential or combined use of multiple approved agents, creating a virtual monopoly. The regulatory studies and clinical trials required to gain approval for these drugs are also costly. The reimbursement model for cancer treatments, such as the fee-for-service model, can further drive up costs. This model provides financial incentives for physicians to administer chemotherapy and choose more expensive drugs when cheaper alternatives are available.
To address the issue of rising cancer care costs, various initiatives and models have been proposed and implemented. One approach is the Oncology Care Model (OCM), a bundled payment model developed by the Center for Medicare and Medicaid Innovation (CMMI). OCM aims to encourage high-value, patient-centered care while improving the quality of oncology services. Under this model, providers receive bundled payments for multiple services under an "episode of care" for a patient. This approach incentivizes providers to share in any savings and improve patient outcomes, potentially increasing their payments.
Bundled payment models, such as OCM, offer a potential solution to the high costs of cancer care by shifting the focus from fee-for-service to value-based care. By bundling payments for multiple services, providers are encouraged to work together to minimize variations in care and improve efficiency. This approach has been successfully piloted for head and neck cancers, and its implementation is being explored for higher-volume cancers. While bundled payment models show promise, they also come with their own set of complexities and challenges, particularly in determining the bundled payment price to ensure fairness and accuracy.
While cancer care costs continue to rise, initiatives like bundled payment models offer a potential pathway to more affordable and accessible cancer treatments. By incentivizing collaboration and efficiency, these models aim to reduce the financial burden on patients and insurance companies alike. However, it is essential to acknowledge that the complexity of cancer care costs extends beyond any single solution, and a multifaceted approach is necessary to address this pressing issue.
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Bundled payments can reduce costs and improve quality of care
The high cost of cancer care has led to the adoption of bundled payments as a way to reduce costs and improve the quality of care. Cancer care is one of the costliest forms of healthcare, with medical costs for cancer anticipated to reach $158 billion in 2020, a 27% increase over 2010. Patients who have battled cancer are often left with huge debts, even if they have insurance, due to the high cost of treatment and follow-up care. The wasteful use of cancer drugs also costs the insurance industry at least $3 billion annually.
Bundled payments are seen as a way to align incentives and improve the quality of care. Under a bundled payment model, providers receive a single payment for an episode of care, which includes multiple services and supplies. This encourages providers to think holistically about how they deliver care and improve the patient experience. It also promotes better collaboration and care coordination across providers and healthcare settings, such as hospitals and post-acute care services. For instance, the Oncology Care Model (OCM) is an episode-based bundled payment model with benchmark prices for 21 cancer bundles for six-month episodes of care.
The implementation of bundled payments can lead to improved patient outcomes and lower costs. Providers who participate in bundled payment arrangements often make changes to enhance care delivery, such as hiring care navigators to help patients understand their treatment plans and improve communication between patients and their care teams. Additionally, bundling can help providers introduce efficiencies and achieve better outcomes at a lower cost. For example, a pilot program for head and neck cancer successfully implemented bundled payments, demonstrating the feasibility of this payment method for higher-volume cancers.
Bundled payments can also reduce variations in the cost of cancer care across different regions. The significant variations in cancer care costs in different parts of the country, without a noticeable difference in outcomes, suggest that high-value oncology care can be achieved through appropriate payment structures. By creating distinct adjustments for each cancer type, organizations like CMMI can improve the predictive accuracy at the disease bundle level, ensuring fair pricing for patients.
Overall, bundled payments have the potential to reduce costs and improve the quality of cancer care by encouraging collaboration, improving care coordination, and incentivizing providers to introduce efficiencies and achieve better outcomes.
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Providers are incentivised to share savings and improve patient outcomes
The adoption of bundled payments in cancer care is driven by the goal of reducing costs and improving patient outcomes. This payment model incentivises providers to share savings and enhance patient care, marking a shift from traditional fee-for-service (FFS) payments. In the FFS model, providers are paid for each individual service, such as a blood test, doctor's visit, or hospital stay. However, with bundled payments, providers receive a single payment for multiple services under an "episode of care" for a patient. This episode of care can vary in duration, such as 30-day, 90-day, or six-month periods.
Bundled payments encourage providers to collaborate and coordinate care across different settings, including hospitals, post-acute care services, skilled nursing facilities, and home health. This holistic approach allows providers to identify efficiencies and introduce improvements to achieve better outcomes for patients at a lower cost. For example, hiring care navigators who assist patients in understanding their care plans and coordinating communication between different healthcare providers can lead to smoother patient experiences and reduced risk of complications.
Additionally, providers are incentivised to share savings under bundled savings programs. If the total payments for an episode of care are lower than the target price, providers may receive an additional payment, incentivising them to optimise their practices and reduce unnecessary costs. This shared savings approach not only reduces overall healthcare costs but also provides an opportunity for physicians to earn more for their work in delivering high-quality patient care.
The Oncology Care Model (OCM) is a notable example of a bundled payment model in oncology. Developed by the Center for Medicare and Medicaid Innovation (CMMI), it aims to encourage high-value, patient-centred care. The OCM establishes benchmark prices for 21 cancer bundles, which are adjusted based on forward trend factors and novel therapy adjustments to reflect the evolving costs of oncology care. Practices that decrease their expenditures beyond specified CMS discounts are eligible for performance-based payments, further incentivising cost reduction and improved patient outcomes.
While bundled payments offer incentives for providers, they also come with certain challenges. Determining a bundled payment price requires considering the average cost across all patients in the bundle, which can result in variations in individual patient costs. Additionally, the complexity of cancer care, with its varying treatment options and drug costs, can make it difficult to identify statistical differences and accurately assess the impact of the bundling program on a smaller scale. Nevertheless, with the potential for cost savings and improved patient outcomes, bundled payments in cancer care present a promising approach to addressing the high costs associated with cancer treatment and enhancing the overall patient experience.
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Retrospective and prospective bundled payments are calculated differently
The implementation of healthcare bundled payment models offers providers and payers two main strategies: retrospective or prospective bundles. The Oncology Care Model (OCM) is an episode-based bundled payment model developed by the Center for Medicare and Medicaid Innovation (CMMI) to encourage high-value, patient-centered care while improving quality.
A retrospective healthcare bundled payment model requires the fee to be calculated ahead of time and then reconciled against fee-for-service medical claims to determine shared savings after the episode of care ends. Retrospective payments are the norm for bundles, as they are standard in the healthcare industry. Retrospective payment is also the most common approach currently in use, easing the regulatory and administrative burdens in the early stages. Retrospective bundled payments are also beneficial for providers as patient behaviours and potential treatment side effects are difficult to predict. Retrospective payments for bundles are also easier to understand, administer, and execute, which is why they comprise the majority of bundled payment financing arrangements.
On the other hand, a prospective healthcare bundled payment model involves creating a budget when the episode of care criteria are reached. Prospective bundles pay a fixed price for services covered in the bundle, and the provider keeps any savings if the costs are below the fixed amount. Prospective payments may become more common as claims processing and coding systems become more nuanced, and as risk scoring for patient populations becomes more predictive.
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Bundled payments promote collaboration and care coordination across cancer types
The high costs of cancer care and the huge debts patients are often left with, even if insured, have led to the adoption of bundled payments to curb healthcare costs and improve the quality of care. The Oncology Care Model (OCM) is an episode-based bundled payment model developed by the Center for Medicare and Medicaid Innovation (CMMI) with the goal of encouraging high-value, patient-centred care while improving the quality of care provided.
Under the bundled savings program, providers are incentivised to share in any savings, and physicians can be paid more for improved patient outcomes. This model promotes collaboration and care coordination across providers and healthcare settings, such as hospitals and post-acute care services, which can ultimately improve patient outcomes and lower costs. For example, care navigators can be hired to help patients and their caregivers understand what to expect and assist them in following instructions from providers. They can also support seamless communication between the patient and their entire care team, and help with filling prescriptions, scheduling appointments, or transitioning patients from hospital to home.
Bundled payments encourage providers to think holistically about how they deliver care for a condition, allowing them to consider how the different elements of care interact with one another. This can help providers discover ways to introduce efficiencies to achieve better outcomes for their patients at a lower cost. For instance, under the bundling initiatives, payments are made for multiple services under what is termed an episode of care for a patient. This means that physicians receive an upfront payment for the episode that is equal to the drug margins they used to receive from their previous fee schedule.
The determination of a bundled payment price reflects an average of the patients in the bundle, and so some patients will have higher costs and others lower. This means that it is the price across all the patients included in the bundle (and the model) that must be assessed. CMMI could create distinct TFs, NTAs, and Part D adjustments for each cancer type to improve the predictive accuracy at the disease bundle level. However, this would add complexity to an already complex payment system, which may cause unforeseen issues that require further adjustment.
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Frequently asked questions
A cancer bundle is a group of services and supplies that are provided to a patient over a set period, known as an "episode of care".
A cancer bundle includes all services and supplies that are required for a patient's treatment, such as care coordination, 24/7 access to a clinician, treatment consistent with recognised guidelines, and the 13 elements of the Institute of Medicine Care Plan for oncology patients.
Cancer bundles are paid for in a single, lump-sum payment, which differs from the traditional fee-for-service (FFS) model where each service is paid for individually.
Cancer treatment bundles are used to encourage providers to think holistically about patient care, improve quality, and reduce costs. Bundling can also promote better collaboration and care coordination.
