Promise of Personalized Care Hinges on Reimbursement Reform

Charles Bankhead

April 2014, Vol 5, No 3 - Economics of Cancer Care


The promise of big data–driven personalized healthcare mandates reform of the oncology reimbursement system, suggested Jeffery C. Ward, MD, Medical Oncologist, Swedish Cancer Institute, Edmonds, WA, in a recent commentary (Ward JC. J Oncol Pract. 2014;10:83-86).

Oncologists must take the lead in moving past “medicine’s dark secret” of fee-for-service reimbursement into a system that more accurately captures the full spectrum of service provided to patients, such as bundled payments, he noted.

“The real threat to bringing big data and personalized cancer care to the communities where the vast majority of oncology patients are treated is an antiquated reimbursement system that only pays for care when it involves physician touches and infusion of drugs,” Dr Ward wrote.

“It is not just FFS [fee-for-service] medicine that is the problem but a particular ilk of FFS that only pays for some services, failing to reimburse at all for other essential services provided in oncology offices and clinics.”

Before big data can transform the healthcare sector of the economy, the industry has to make fundamental changes that ensure stakeholders capture the full value, “and that begins with how we pay for it,” wrote Dr Ward.

The emerging era of personalized medicine has its genesis in advances related to genetics, molecular biology, and other aspects of basic science and clinical medicine. However, the informatics revolution (big data) is the driving force, providing the capability to accumulate, assemble, and analyze the massive amount of information that makes personalized care possible.

Transforming Oncology Practice
“Personalized medicine and big data hold the promise to transform oncology practice more, and more rapidly, than anything that has happened in the first 50 years of the history of our specialty,” Dr Ward noted in his article.

The amount of medical information doubles every 5 years, but the vast majority of digital medical data was developed in the past 2 years. Moreover, 80% of the data remains raw and unstructured. Bringing order to all of that information and making it useful and usable requires advanced computing capability, as represented by IBM’s Watson, which has demonstrated great potential for processing information in real time to facilitate clinical decision-making.

Big data has the potential to transform clinical practice and clinical research. Computer analysis will never replace a well-designed clinical trial, but will augment and improve the trial process.

“Common characteristics that bind a few responders to a particular therapeutic from a sea of otherwise indifferent information, and then effortlessly seek out patients with similar characteristics will allow for rapid and efficient validation trials,” said Dr Ward. “Only when that happens can personalized medicine deliver on its promise.”

Payment Reform and Big Data in Oncology
To quote from an article on P4 (predictive, personalized, preventive, participatory) cancer medicine, “each patient will be surrounded by a ‘virtual cloud’ of billions of data points that will uniquely define their past medical history and current health status,” (Hood L, et al. Nat Rev Clin Oncol. 2011;8:184-187). From the vast amount of data will come individualized algorithms that address a patient’s current clinical needs and provide for the patient’s future wellness.

To realize all that big data has to offer healthcare, reimbursement must be designed to complement personalized medicine, which will “incentivize processes designed to improve value and measure and reward efficacy, quality, and efficiency of care,” Dr Ward continued. As an example, he cited ongoing work by the American Society of Clinical Oncology’s Clinical Practice Committee.

Still evolving, the Clinical Practice Committee model bases core payments on monthly episodes of care. The episodes are defined by multiple factors, including “the patient’s continuum of disease, new patient payments, treatment month payments, transition-of-care payments, and surveillance or nontreatment month payments,” Dr Ward noted.

“Any specific category of treatment may be expanded on the basis of acuity and/or complexity of the patient’s disease and the care given,” he said of the Clinical Practice Committee project. “Valuation of each core payment can be developed in a budget-neutral way to current reimbursement and increases and then tied to a medical inflation index.”

The payment system would provide for all the activities that go into various stages of the patient care process, from planning and initiation of treatment to follow-up and well care. Such bundled payments would account for a multitude of ancillary services, such as nurse educators, group sessions, and social work.

As currently conceived, treatment-month payments would have a built-in scale that could be adjusted in accordance with the complexity of the disease and treatment regimen. Transition payments would be incorporated to account for the extra time and service necessitated by a change in treatment plan.

“Fortunately, the electronic medical record and big data should make it much simpler to define the real work requirements and value of distinct bundles than the American Medical Association’s much-vilified Relative Value Scale Update Committee,” Dr Ward added.

The core bundled payments would increase or decrease as a result of the adoption of value-based pathways and quality-improvement activities. Eventually, process measurements would be replaced by outcomes. Inducements would be added over time, culminating in the development of a performance-based system.

Cancer Drug Pricing and Reimbursement
Dr Ward acknowledged that incorporation of cancer drugs into the reimbursement system will be problematic, given that drugs often constitute the most costly item in the care of a patient with cancer. Fundamental changes to the current “buy-and-bill” system of administration will be required.

“When a margin proportionate to the cost of the drug is the provider’s reward for giving chemotherapy, it becomes quintessential FFS,” said Dr Ward. “The incentives to not only give more chemotherapy but to preferentially use high-margin drugs, usually more expensive drugs and parenteral therapies, can only partially be overcome by strict value-based pathway adherence or enforcement.”

“The era of personalized medicine will require that ASP [average sales price]-based pricing be replaced and that a margin on drugs be taken out of the reimbursement equation,” Dr Ward added.

Oncologists must take the lead in developing the reimbursement system of the future. By failing to “answer the call,” oncologists risk allowing other parties—such as insurers and drug companies—to decide how oncology should be valued and reimbursed, Dr Ward concluded.