A leading US health insurer is piloting a way of paying for cancer care which separates oncologists’ income from their selection of drugs.

The pilot, being run by UnitedHealthcare with five medical oncology groups across the USA, reimburses oncologists upfront for an entire cancer treatment programme rather than through the current fee-for-service approach which, says the insurer, “rewards volume regardless of health outcomes.”

At present, oncologists generally purchase chemotherapy drugs at wholesale prices from manufacturers, administer them to patients in their offices and then bill the patients’ health insurance plan or payer for the drugs’ retail price, plus a charge for administering them.

This practice has led to charges of profiteering, given that the drugs’ retail prices are considerably higher than the wholesale prices at which oncologists obtain them.

Doctors taking part in the UnitedHealthcare pilot will instead receive “bundled” or “episode” payments based on the expected cost of a standard treatment regimen for breast, colon or lung cancer which they have predetermined. The fee is the same regardless of the drugs administered to patients - in effect, separating doctors’ incomes from drug sales, says the insurer. Patient visits are still reimbursed, and chemotherapy drugs are reimbursed at the manufacturer’s cost.

Medical groups taking part in the pilot choose a standard chemotherapy regimen for each of 19 clinical presentations and participate in performance reviews of their data with other groups to help identify best practices. Treatment regimens will be evaluated based on the number of emergency-room visits, incidence of complications, side effects and health outcomes.

UnitedHealthcare calculates the cancer care payment based on the amount of money the group would make on drug profits, using the difference between its current fee schedule and the drugs’ costs, and adds a case-management fee paid on the first day the patient receives care. 

The medical group is free to change drug regimens at any time, but the cancer care payment does not change.  The upfront fee covers the standard treatment period, typically six to 12 months, and in cases of cancer recurrence, the bundled payments will be renewed every four months during the course of the disease, allowing doctors to continue overseeing the patient’s care even if drug therapy is no longer effective.

UnitedHealthcare plays no role in determining which treatment plan the oncologists choose, but it says: “the intent of the pilot is to identify and reduce unnecessary drug administration that does not improve the patient’s health outcomes.”

“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 programme promotes better, more patient-centric, evidence-based care with no loss of revenue for the physician,” said Lee Newcomer, senior vice president, oncology at UnitedHealthcare. “Everyone wins - as oncologists share best practices from the programme about which treatment regimens are most effective, we expect to see consistently improved patient outcomes,” he added.

In 2000, there was a $532 million difference between what oncologists paid for cancer drugs and their billings to the government and private insurers, the Government Accountability Office (GAO) has reported, although it also noted doctors’ contention that they “need drug payments in excess of their actual costs to compensate for inadequate or nonexistent Medicare payments for administrating the drugs.”

Since 2003, Medicare has cut reimbursements to oncologists for cancer drug administration every year, and by 2009 they had fallen by a total of 68%, says advocacy group the Community Oncology Alliance (COA), which comments that the UnitedHealthcare pilot can be seen as a way of trying to limit the impact of technology on health spending. “As new chemotherapeutic agents come to market, their vendors tout them as the latest and greatest, even if their value in comparison with existing drugs is limited. Since doctors benefit by selling costlier drugs, and patients want to survive as long as possible, these new agents are an easy sell,” says the COA.

However, while the new drugs are “not such a great bargain” from the viewpoint of employers, consumers and taxpayers, “in today’s environment, it’s impossible for health plans to refuse to cover a Food and Drug Administration (FDA)-approved drug, and to impose steep co-pays on patients who may be facing a death sentence would invite public opprobrium,” notes the Alliance.

“So United’s approach makes a lot of sense because it encourages doctors to prescribe less costly drugs out of self-interest. This could be a model for efforts to restrain the use of other high-cost, low-value technologies,” it suggests.