Insurer tries new way of paying doctors to treat cancer

Kaiser Health NewsOctober 20, 2010 

WASHINGTON — One of the nation's largest health insurers said Wednesday that it was testing a new way to pay for some cancer treatments, aiming to identify the best medicines and to limit doctors' profits from dispensing in-office chemotherapy drugs.

The action by UnitedHealthcare comes as insurers, employers and the government look to streamline costs by paying doctors and hospitals lump sums for an entire course of care, rather than fees for each service provided.

Payment for chemotherapy has been particularly controversial, because some doctors, including oncologists, buy drugs at wholesale prices, dispense them by injection or infusion to patients in their offices, then charge insurers higher, retail prices.

A government report found that Medicare, for example, reimbursed doctors at least $532 million more in 2000 than the doctors had paid to purchase the medicines. In 2005, Medicare changed the way it pays for in-office drugs, ratcheting down payments to average sales prices plus 6 percent. A few private insurers followed suit.

UnitedHealthcare takes a different approach. Its program, under way with five oncology practices in five states, pays physicians lump sums for each patient's course of chemotherapy for breast, lung or colon cancer. The payment is based on regimens the doctors draw up themselves, plus case management fees.

It's the first large foray into payment "bundling" for chemotherapy by a private insurer, although other insurers are testing the approach for hip and knee replacements, and Medicare will launch a program next year that combines drugs with dialysis services. The new health overhaul law also calls for such payments.

The insurer aims to "separate oncologists' income from their drug selection" and to "start searching for the best practices and move to them," said Dr. Lee Newcomer, UnitedHealthcare's senior vice president for oncology.

The lump sum is based on what the insurer was paying the doctors under the old rules, so none is expected to lose money this year: "We're drawing a line in the sand, keeping you at 2010 incomes," Newcomer said. That sounds good to doctors, who say Medicare is squeezing them, and to some private insurers that have adopted the same model as Medicare.

Oncologists say the Medicare model cuts into revenue they need to provide services that otherwise aren't paid for, such as counseling patients. Some doctors respond by selecting more expensive drugs to boost revenues, sending some patients to hospitals for chemotherapy or closing their practices altogether.

Even though the UnitedHealthcare model essentially freezes payments, it may be a better approach, said Dr. Bruce Gould, the medical director of Northwest Georgia Oncology Centers in Marietta, Ga., one of the five participating practices.

"If I can maintain 2010 income for the rest of my career, I would be happy with that," Gould said. "Our incomes are being squeezed because everyone is looking at our spread on our drug margins and saying these oncologists are making money on these margins, yet no one is taking into account" the additional, unreimbursed services the doctors provide.

UnitedHealthcare also is running the program at practices with 18 to 35 oncologists in Dayton, Ohio, Fort Worth, Texas, Kansas City, Mo., and Memphis, Tenn. If it's successful, it will expand to other practices and possibly other conditions, such as rheumatoid arthritis, for which expensive drugs are dispensed in doctors' offices.

Doctors in the practices can add new drugs to their regimens if they choose, and UnitedHealthcare will reimburse them based on the sales price, with no profit built in. The payments cover only drugs that are given by injection or infusion in a doctor's office. Oral drugs, which are a smaller, but growing, part of cancer treatment, generally are purchased by patients at pharmacies.

Annually, the insurer says, it will compare how well patients in the five practices do in terms of the number of emergency room visits they make, the side effects they experience and which treatment regimens are best at fighting their types of cancer.

Those regimens are drawn up based on experience and clinical trial results, and they may be adjusted based on annual reviews.

They "are not inferior treatments, but are the best-of-care treatments," said Ray Page, the president and director of research at the Center for Cancer and Blood Disorders in Fort Worth, another participating practice. No doctor is expected to stick with the regimen 100 percent of the time, allowing for flexibility based on a patient's needs, desires and condition.

Patients are unlikely to notice the effects of the payment changes: UnitedHealthcare says its co-payments for cancer care won't change.

The new payment model alters doctors' financial incentives in deciding which drugs to use. For example, if doctors switch patients to oral treatments — for which they aren't reimbursed — they won't lose money.

Similarly, if patients decide they've had enough treatment, doctors won't lose money.

The American Society of Clinical Oncology said it would watch the program carefully. Initially it considers it a "pretty clever idea" and something long worth exploring, "separating payment for what we do for patients, such as case management, exams, interacting with the patient ... from the actual drugs," CEO Allen Lichter said.

For one thing, the program will remove the mistaken perception that doctors choose the more expensive drug — regardless of its efficacy — to make more money, he said. It also should allow UnitedHealthcare and others to test whether the payment method results in doctors changing the drugs they select for their patients.

The American Cancer Society Cancer Action Network said that if the program were done right, it could improve patient care.

"In the long term, this is the direction the system needs to go," said Stephen Finan, the senior director for policy. "We need to pay providers ... so their incentives focus on the best interests of the patient."

(Kaiser Health News is an editorially independent news service and is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that's not affiliated with Kaiser Permanente.)

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