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Emerging Payment and Delivery Models

Innovations in Oncology Management, Part 3

The unsustainable rise in healthcare costs, the growing lack of access to healthcare, and the increasing disparities in care have contributed to the recognition that our existing healthcare system must change to meet the nation’s future healthcare needs.

The current fee-for-service payment system has been criticized for depending too heavily on the volume of care delivered to patients rather than on the quality of care1 Currently, providers are predominantly rewarded based on the number of tests ordered, drugs prescribed, and procedures performed, rather than on the clinical appropriateness of treatment decisions, the quality of care provided, and patient outcomes. As a result, several high-value services are inadequately reimbursed (if they are reimbursed at all). For example, Medicare and most private insurers will not reimburse physicians for coordinating care by telephone or e-mail, but they will often pay for duplicate tests or complications as a result of drug–drug interactions that are caused by conflicting medications. In addition, reimbursement for patient education and self-management support services has been poor or nonexistent, even if the services permit earlier disease identification or help to avoid expensive hospitalizations1

In many cases, hospitals and healthcare providers lose revenue if they perform fewer procedures or lower-cost procedures1 Further­more, there are no financial incentives for physicians when their patients are doing well and do not require treatment. A growing recognition of this dynamic has led to today’s era of healthcare reform, which aims to profoundly affect the way that healthcare is delivered and financed1

In an effort to move healthcare reform forward, key pieces of legislation have been enacted in recent years, most notably the Patient Protection and Affordable Care Act (ACA), which took effect in 20102 Although some provisions of it have been controversial, the ACA has been a catalyst for developing new healthcare delivery and payment models that are designed to improve patient outcomes, decrease costs, and restructure reimbursement. Building on this framework for reform, many federal, state, and private programs have been developed to encourage providers to take increased responsibility for the cost and quality of care3

Accountable care organizations (ACOs) and patient-centered medical homes (PCMHs) are 2 of the new models that have been tested across the country3 The Centers for Medicare & Medicaid Services (CMS) continues to award grants to healthcare organizations, academic institutions, and others to develop innovative ideas that deliver better health, improve care, and lower costs for individuals who are enrolled in government healthcare programs, such as Medicare and Medicaid3,4

The reforms that are taking place as a result of the ACA are affecting the business and clinical practice of oncology at the local level and will continue to do so in the future. Progressive oncology providers and administrators should consider the potential impact of these reforms on their practice and prepare to respond accordingly5

Accountable Care Organizations

The concept of the ACO was first discussed in 2006, and the term became widely used when the ACA was signed into law in 20106 An ACO may be described as a formally organized entity comprising physicians, hospitals, and other relevant health service professionals who have voluntarily joined together and contracted with payer organizations to provide a broad set of healthcare services to their Medicare patients7

ACOs are designed to deliver seamless, high-quality care for Medicare beneficiaries, rather than the fragmented care that has been common in fee-for-service–based medicine8 Through this approach, the ACO program is designed to improve patient outcomes, promote accountability, coordinate care, encourage investment in infrastructure, and redesign care processes9

CMS offers 2 ACO models––the Pioneer ACO Model and the Shared Savings Program––that are tailored to serve 2 different types of organizations9 The Pioneer ACO Model is designed for healthcare organizations and providers who are already experienced in coordinating care for patients across care settings10 The Shared Savings Program was developed to facilitate coordination and cooperation among physician groups, hospitals, and other participating providers to improve the quality of care for Medicare beneficiaries. The Shared Savings Program rewards participating organizations that lower their growth in healthcare costs while meeting performance standards on the quality of care9

Although the government-sponsored ACO programs are limited to patients with Medicare coverage, private insurers have entered into similar arrangements with local hospitals and physician networks that are modeled after the CMS program. For example, Aetna, a large health insurer with approximately 24 million members, actively touts its proprietary Accountable Care Solutions program for Medicare and commercial members11,12

Since the passage of the ACA, ACOs have grown rapidly in popularity. As of April 2014, a total of 23 Pioneer ACOs and 343 Shared Savings ACOs, which serve approximately 4 million Medicare beneficiaries, have signed up to participate in the ACO program (Figure)13,14 Thus far, an estimated 428 provider groups have signed up to participate in the CMS-sponsored and private payer–sponsored accountable care programs, accounting for approximately 14% of the US population13

ACO indicates accountable care organization; CMS, Centers for Medicare & Medicaid Services. Source: The Advisory Board Company. Accessed November 10, 2014.

The ACO program continues to evolve. In October 2014, CMS launched the ACO Investment Model, which seeks to promote accountable care in rural areas by offering prepayment of shared savings in regions that have encountered challenges in making the upfront investment that is required for ACO participation15 At the same time, ACOs that joined the Shared Savings Program beginning in 2012 are being required to transition to arrangements with increased financial risk, with the expectation that increased risk will lead to greater Medicare savings15

Patient-Centered Medical Home

Spurred by the passage of the ACA, several states and healthcare organizations have implemented initiatives to transform their primary care delivery systems to improve the health of their patient populations and reduce costs. The PCMH, a leading care delivery model, seeks to promote quality by aligning incentives across all healthcare stakeholders16

The PCMH encompasses several core concepts. Foremost, it is patient centered; that is, focused on the delivery of relationship-based primary care that looks at the whole person17 It is also comprehensive: care is delivered by a treatment team comprising physicians, nurses, advanced practice nurses, physician assistants, pharmacists, nutritionists, social workers, educators, and care coordinators, depending on specific patient needs. In the PCMH model, patient care is coordinated within the medical home and across elements of a broader healthcare system. In addition, the PCMH is accessible and responsive to patients’ needs and preferences. Finally, the PCMH shows a commitment to continuous quality improvement by using evidence-based medicine and clinical decision support tools to guide shared decision-making, engage in performance measurement and improvement, and measure and respond to patient experiences and patient satisfaction17

The PCMH seeks to reduce the degree of fragmentation that is inherent in the fee-for-service delivery model. Electronic data systems, health information exchanges, and registries have all helped to facilitate the transformation toward coordinated, patient-centered care. Perhaps more importantly, however, recent evidence suggests that organizational change is the central impetus for quality improvement in the PCMH model18

As the US population ages and becomes more demographically diverse, the PCMH is well-suited to deliver high-quality, cost-

effective, efficient, and coordinated care to patients with chronic health conditions19 In addition, evidence suggests that the team-based approach that is central to the PCMH and similar models may also help to alleviate projected shortages of primary care physicians in the coming years20

In 2011, the National Committee for Quality Assurance (NCQA) initiated the Physician Practice Connections (PPC)-PCMH Recognition Program, which recognizes practices that successfully use systematic processes and information technology to enhance the quality of patient care21 The PPC-PCMH Recognition Program is based on meeting standards in a number of categories, including access and communication, care management, patient self-management and support, electronic prescribing, and performance reporting and improvement21

Applying the Patient-Centered Medical Home Model to the Oncology Community

The PCMH model is gradually being adopted by the medical oncology community.

In 2004, Consultants in Medical Oncology and Hematology (CMOH), a Pennsylvania-based community oncology practice, began to redesign its care processes and invest substantially in its information technology infrastructure22 As a result of these efforts, the practice created a broad spectrum of patient services that enhanced the level of care coordination and the collection and evaluation of clinical data. In addition, CMOH demonstrated that the application of the PCMH model to oncology was effective in minimizing the unnecessary use of resources by lowering emergency department visits, reducing hospital admissions, and reducing the length of stay for admitted patients. CMOH became the first oncology practice that was recognized by the NCQA as a level 3 PCMH22

Championed by the Community Oncology Alliance, the Oncology Medical Home (OMH) is an alternate model for providing coordinated, patient-centered oncology care23 In the OMH, the oncology practice serves as the medical home, with the goals of (1) providing accessible, efficient, and affordable care; (2) implementing evidence-based treatment plans that strive for quality outcomes; and (3) applying quality standards to ensure that patient care is continuously improved23 With an eye toward integrated care and stakeholder alignment, OMH brings together oncologists, payers, insurance administrators, cancer care advocates, patient advocates, nursing representatives, and pharmacists to steer the initiative toward its goals23

Another oncology-based PCMH model, COME HOME, was developed by the New Mexico Cancer Center (NMCC) under the leadership of its chief executive officer, Barbara McAneny, MD24 The COME HOME program of comprehensive community cancer care is founded upon the core principles of active condition management, team-based care that is delivered by patient-

focused interdisciplinary teams, enhanced access for patients, electronic data systems and decision support, and financial support for patients in need24 The NMCC was awarded a series of CMS Innovation grants in 2011 to establish a proof of concept for the COME HOME model. The program is projected to produce overall Medicare cost-savings of $4178 per patient per year during 3 years, for a total net savings of $13.76 million; the bulk of these projected savings are attributed to averted emergency department visits and hospitalizations24

Medicare Demonstration Projects

As the nation’s largest purchaser of healthcare services, Medicare continues to explore ways to control healthcare costs. The ACA provides funding for a number of new demonstration projects to test the impact of innovative approaches that are intended to improve quality and efficiency and reduce costs19

One novel payment mechanism that has received substantial attention is the concept of bundled payments, where providers receive a single payment for episode-based groups of related services rather than separate payments for each individual service19 CMS is promoting bundled payment pilots through the Bundled Payments for Care Improvement initiative, in which organizations enter into payment arrangements that include financial and performance accountability for episodes of care25 According to CMS, bundled payments can align incentives for providers (eg, hospitals, post–acute care providers, physicians), allowing them to work closely together across all specialties and settings. This approach is intended to encourage providers to deliver better coordinated and more efficient care and to eliminate ineffective and/or unnecessary treatment25

Value-based insurance is another payment-based approach that offers financial incentives to promote cost-effective healthcare services and consumer choices26 Value-based health insurance benefit designs typically cover preventive care, wellness visits, and medications to control blood pressure or diabetes at a low cost or at no cost. By removing financial barriers to medication adherence and by encouraging self-management of chronic illnesses, health plans seek to save money by reducing future expensive medical procedures and unforeseen hospitalizations. Conversely, health insurers may also create disincentives (eg, high patient cost-sharing) for drugs that are not deemed to be cost-effective or procedures that are viewed as unnecessary or repetitive26

Payer Adoption of New Care Delivery and Payment Models

Evidence suggests that payers generally support collaborative engagement with providers within the framework provided by the new care delivery and payment models27 As a first step, many payers have collaborated with network providers and/or third parties to develop clinical treatment pathways in oncology, with the goal of reducing clinical variation in care, improving care quality, promoting appropriate palliative care, and reducing costs, especially for end-of-life care27

Many payers recognize, however, that additional action is required to foster true payer–provider collaboration, and are therefore taking steps to change incentives and reimbursement structures in oncology to ensure that all parties are aligned with the goals of healthcare reform27

One survey of health plan medical and pharmacy directors confirmed that health plans are moving to implement ACOs and PCMHs27 In the survey, payers generally agreed that the ACO and PCMH models offer structures and processes that would facilitate the delivery of coordinated oncology care, which would improve the quality of care and reduce wasteful or duplicated care. As a result, nearly 60% of the surveyed payers planned to participate in ACOs and PCMHs in the near future. Of the payers who had formed a Medicare ACO, approximately two-thirds planned to expand it to include commercial plans27


New care delivery and payment models, such as ACOs and PCMHs, seek to reward physicians and hospitals that provide high-quality, high-value care––thereby better aligning providers’ financial incentives with patients’ health outcomes. Although these new models have the potential to encourage care coordination, improve the quality of care, and control costs, there are many challenges to implementing them; these challenges include obtaining provider buy-in, implementing new performance measurement and reporting systems, and establishing effective risk adjustment.

Despite the challenges, recent data indicate that these models are contributing to cost-savings. Recently, CMS issued quality and financial performance results that showed that Medicare ACOs have delivered more than $400 million in savings for the program. Furthermore, the data showed consistent improvement in quality measures, indicating a positive trend in patients’ experience and in the quality of care28 Given these encouraging data, it appears that the momentum to transform healthcare delivery and payment will continue in the future. These fundamental changes are likely to have a profound effect on the business and clinical practice of oncology.