New Oncology Care Payment Model Sets Quality Criteria, Adjusts for Risk

The Center for Medicare & Medicaid Innovation (CMMI)’s Oncology Care Model (OCM), the first federal attempt at creating a disease-specific bundled payment model, will profoundly affect payers and providers in terms of care quality goals and access to care, said Dan Mendelson, MPP, President, Avalere Health, Washington, DC, at the Sixth Annual Conference of the Association for Value-Based Cancer Care.

The OCM is an innovative, episode-based payment model that is focused on providing higher-quality, coordinated oncology care. The model is focused on paying providers based on quality rather than quantity of care, said Mr Mendelson.

One goal of the OCM is to align financial incentives to improve the quality of cancer care while reducing costs. Another goal is to foster partnerships between oncologists, related providers, and commercial health plans.

Of the 48 private payers that submitted letters of intent to participate in the OCM, 17 were selected.

“It’s a lot of the standard plans, big plans, and plans that, frankly, are operating in other markets as well,” Mr Mendelson said. “You have an interest and consistency on the part of all of those organizations across their lines of business.”

Participating health plans include Aetna, several state Blue Cross Blue Shield plans, Cigna, and Highmark, among others.

Payment for Enhanced Services

OCM payers will align their models with Medicare fee-for-service by:

  • Providing payments for enhanced services and for performance
  • Including patients who receive chemotherapy as a focus of the model
  • Sharing data with participating practices
  • Aligning on a core quality measure set.

Nearly 200 physician practices were selected to participate in the OCM, which is nearly double the projected number, said Mr Mendelson. The practices “tend to clutter in places where there’s already some level of integrated care, places where health plans are active, places where you have a more forward-thinking health plan that’s engaged,” he said.

One of the criteria for participating in the OCM is that practices have to provide patients access to care 24 hours a day, 7 days a week. Other criteria include the use of a certified electronic health record system, patient navigation services, continuous quality improvement features, and the use of nationally recognized clinical guidelines.

Providers have already been heavily investing in information technology improvement, said Mr Mendelson. “In many cases, [health plans] have data that far outstrip the data that the pharmaceutical companies have on the same topic area,” he said.

Episode-Based Payments

Under the OCM, episode-based payments comprise 2 payment types (Table). The first type is a per-beneficiary per-month payment, and the second type is a performance-based payment. “If you are reducing rehospitalizations or helping with any of the other quality metrics that are layered into this protocol, you can get bonus payments,” said Mr Mendelson.


The benchmark per-beneficiary per-month payment is calculated on a practice-specific basis using baseline data. “The interesting thing here is that if you have really high costs in the baseline period, it’s going to be easier for you to get a good rate under OCM,” said Mr Mendelson.

The CMMI will use retrospective reconciliation to calculate the performance-based payments, and apply a risk-adjustment methodology. How the risk-adjustment methodology is going to apply to cancer is yet to be determined.

“We are heavily into analyzing this approach to risk adjustment. Risk adjustment is critically important for this and every other model,” Mr Mendelson said. “One of the reasons the exchanges are experiencing so much difficulty right now is because the risk-adjustment methods are inadequate to compensate the plans for the risk that they’re incurring.”

Target prices are practice-specific and are based on a combination of historical Medicare spending for patients who were managed by the practice during the baseline period and episode cost trends for non-OCM participants. Retrospective reconciliation will be used to calculate the performance-based payments.

Quality measures will affect the calculation of the performance-based payment. Participants are eligible to receive up to the full difference between the target price and Medicare’s expenditures for the episode. The participant’s performance is transformed into weighted scores to calculate a practice-specific performance multiplier. The performance multiplier may reduce, but not increase, the performance-based payment. A 10% payment will likely leverage performance, he said.

“A nice example of this is Medicare Advantage, where you have now about 7.5% of program payments running through the Star Rating system,” he said.

Risk Options Under the OCM

The OCM does not require practices to accept risk, but if participants accept the 2-sided risk model in year 3 of the program, they have to pay back any Medicare expenditures that exceed the target price (Figure). Participants who accept the 2-sided risk model will receive a lower discount percentage, resulting in higher target prices and the potential to earn higher performance-based payments compared with the 1-sided risk model.


The OCM targets physician practices that furnish outpatient chemotherapy. The OCM focuses on higher-volume cancer types (ie, breast, colon, prostate, lung, ovarian, pancreatic, and leukemia and lymphoma), which cover at least 90% of Medicare fee-for-service beneficiaries who receive chemotherapy.

“Practices that have a specialty focus on these cancers are going to be better suited for these models, because they will have larger patient groups,” said Mr Mendelson. “Although OCM is open to practices of all sizes, it tends to be the larger practices that will have the interest and the engagement in this.”

Practices are required to report quarterly whether care is consistent with the National Comprehensive Cancer Network guidelines. The risk-adjustment approach adjusts for the cost of novel therapies and combination therapies to treat patients with complex cases, such as those with multiple cancers.

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