Star Tribune (Minneapolis)
October 21, 2010
Alarmed at the soaring costs of cancer treatment, UnitedHealthcare is trying a new payment method that aims to cut unnecessary and inappropriate care.
The biggest U.S. health insurer will ask doctors to come up with standard regimens for 19 conditions associated with breast, colon and lung cancer. It will then set lump payments, replacing the current practice of paying piecemeal, eliminating an incentive to overtreat.
Doctors are free to change drugs at any time, but payment stays the same. Five oncology groups around the country that have signed on for a pilot program have also agreed to take part in performance reviews to identify best practices.
“By paying medical oncologists for a patient’s total cycle of treatment, rather than the number of visits and the amount of chemotherapy drugs given, this program promotes better, more patient-centric, evidence-based care, with no loss of revenue to the physician,” said Lee Newcomer, M.D., senior vice president for oncology at UnitedHealthcare.
The move is likely to attract widespread interest and scrutiny. Federal and state health reform initiatives are also trying to figure out bundled payments for medical treatment, though nobody is quite sure how exactly those will work. For UnitedHealthcare, one big reason to tackle cancer payments first is the high cost of oncology drugs, particularly new biotech drugs on the market. If the new payment system shows results, the insurer plans to expand it nationally in 2013.
The way it works now is that oncologists evaluate cancer patients and recommend a treatment program that takes into account the type and severity of cancer. Treatment options include surgery, radiation, chemotherapy or a combination. Most chemotherapy drugs are administered intravenously in a doctor’s office. The oncologist buys the drug at the wholesale price, administers it to the patient and bills the insurer at retail price.
The cost of chemotherapy drugs has risen by 15 to 18% annually in the past decade, Newcomer said, adding that oncologists now make 60% of their income from selling drugs. Chemotherapy costs per episode—lasting several months—average $80,000. The cost can range from a few hundred dollars for certain metastatic breast cancers to $130,000 for some colon cancer treatments.
In addition to bundling payments, UnitedHealthcare wants to remove profits doctors make on drugs. Initially, it will calculate drug profits from the previous year and convert those to a “care management fee.” From then on, the insurer will continue to pay the wholesale cost of drugs, in addition to the set management fee. That way, going forward, the doctors get paid the same amount no matter what type of drug is used.
By allowing the five oncology groups to pick their preferred regimens for the 19 conditions, UnitedHealthcare will also be able to compare the effectiveness of different treatments down the road. Ever mindful not to provoke accusations of insurer interference in treatment choices, Newcomer said that while “best practices” will be shared with the oncology groups, the groups will ultimately decide their regimens.
Randall Thompson, executive director of Minnesota Oncology, said the UnitedHealthcare approach resembles payment reform conversations his group has had with Minnesota insurers. Minnesota Oncology, the biggest oncology practice in the state, is not part of the UnitedHealth pilot program. While doctors aren’t going to welcome what’s essentially a cap on their future drug profits, Thompson said, “I think they’ll see it as an unstoppable trend.”
For years, medical oncologists have relied on the drug profits—usually a percentage of the wholesale price—to bolster the smaller payments that come with providing patient care. With many brand-name drugs going generic, a doctor who switched to a cheaper generic drug risked losing a big chunk of drug profits.
“The incentive is to use non-generic drugs, which makes no sense,” Thompson said, adding that by taking away the drug profits but raising patient care payments, “everybody wins.”