Washington, DC—Change is coming to oncology coverage by the Centers for Medicare & Medicaid Services (CMS), which plans to incorporate risk management strategies over a traditional micromanagement style of provision, according to Bruce Pyenson, FSA, MAAA, Principal at Milliman, New York.
At the Fifth Annual Conference of the Association for Value-Based Cancer Care, Mr Pyenson contrasted the pros and cons of 2 payment models in oncology, the risk management strategies initiated by CMS in its innovative Oncology Care Model (OCM), and a micromanagement strategy, the capitated payment model pilot from UnitedHealthcare and M.D. Anderson used for specific types of head and neck cancer.
Calling this the “decade of provider risk,” Mr Pyenson predicted continued evolution toward integrated networks and bundled payments in healthcare, especially in oncology.
The CMS OCM shift to risk management is “very profound” and addresses population health. “Medicare, which is the world’s largest insurance company, has said it is going to have its payment system and its providers under some form of risk within a few years,” said Mr Pyenson.
Commercial insurance companies, the large provider systems, are currently under contracts for attributed lives, but are moving toward capitation. This mind-set differs from an “actuarial control cycle,” which is how insurance companies manage risks, Mr Pyenson said.
The new value in healthcare depends on financial models rather than on clinical outcomes. Financial data are easier to obtain, process, and audit, and directly address the financial concerns of payers (ie, potential savings from generics and biosimilars, spending associated with new products and new indications).
Clinical outcomes models, by contrast, require much more data and are more difficult to administer, Mr Pyenson said, and the data require audit and interpretation. Experience with real-world clinical outcomes may be different from clinical trial outcomes, which could prove controversial. Changes in provider reimbursement will either focus on risk management or on micromanagement.
“To the extent that we go with population health, in my view that means it’s not micromanagement—it’s risk,” Mr Pyenson said.
Using the analogy of Hurricane Katrina to explain predictive modeling of risk, he related that risk management manifests itself by preparing for the risk and managing the situation, and not managing risk by prediction.
To protect against catastrophe, financial results need to be monitored as they emerge, even in healthcare. “This is part of the business of operating an accountable care organization or any other kind of enterprise,” Mr Pyenson said.
He also acknowledged that this type of risk management may not be possible on a small practice basis. “As the healthcare system shifts toward risk, consolidation is inevitable,” Mr Pyenson said.
Two different payment models have emerged in oncology—the UnitedHealthcare/M.D. Anderson system has proposed 8 bundles for new patients with head and neck cancers, and the new CMS OCM is a global approach to risk management (Table 1).
Mr Pyenson noted the generosity of the new CMS OCM to oncology care as a “teaser” for it to enter into risk management, with an upside payment of $160 per patient monthly for 6 months.
“That comes up to about $60,000 per oncologist in the fees and the upside in shared savings. If a practice goes into this, and it doesn’t even do anything, there’s a pretty good chance, just by random fluctuation, that it will get a windfall payment.”
In addition, the OCM requirements for service and support are minimal. “They’re going to get some experience, and then CMS is going to roll it out in general in a few years,” Mr Pyenson said. “That is going to be their new model.”
He asked how Medicare can pull off the OCM. At-risk providers need a lot of patients under the same risk arrangement. Medicare has the volume; the hope is that commercial payers “shadow” Medicare.
Medicare must assume that oncologists have large opportunities (ie, “margin”) to reduce costs, Mr Pyenson said, much more than the potential savings of 2% or 5% that have been proposed. He pointed out that risk adjustment would not remove the fluctuations (Table 2).
“Risk adjustment is not the same thing as micromanagement,” Mr Pyenson noted. “It doesn’t take away the risk. It makes things fairer,” he said.
Stop-loss (outlier protection) will be essential (eg, cap spending at $75,000 per patient, because the average of 6 months of Medicare is $50,000), but then too much protection will reduce the potential savings. In the future, expect Medicare to adopt the OCM for all providers; there is discussion of using the acute care bundled payment method for all providers.
Medicare is analyzing feedback, Mr Pyenson said. Some of the questions include whether the program is stable, if trends will be used immediately, and whether benchmarks are being set correctly.
“That’s critically important for the oncology world, because whatever comes out is going to be the platform, or it is a good chance it is going to be the platform, for the Medicare standard for it starting the next 3 to 5 years from now,” Mr Pyenson said. “Getting that program right and set in an effective way is going to just be critical.”
The American Society of Clinical Oncology (ASCO)’s proposal, which is still in progress, relies on consolidated payments for oncology care. It is based on 3 elements, including (1) higher pay for oncologists, (2) accountability for costs oncologists can control, and (3) accountability for outcomes.
This approach attempts to minimize risk by applying different models for different kinds of oncology practices.
