When it comes to health care, the one matter on which bipartisan consensus exists is that costs are out of control. Just how to contain those costs is another matter. Many, including the Centers for Medicare & Medicaid Services, are looking to move away from the fee-for-service reimbursement model, which rewards care by volume rather than by quality. Currently, a number of demonstration projects are exploring bundled payments, including various takes on capitation.

UnitedHealthcare is piloting an episode-based payment system with six oncology practices, encouraging providers to identify the most effective treatment regimens and reimbursing them for "episodes" of care, defined as a treatment composed of a standard regimen over a determined period of time. The payment is made when a patient is identified.

"Right now the system is turned upside down," said Lee N. Newcomer, MD, UnitedHealthcare's Senior Vice President for Oncology, at the 36th Annual National Meeting of the Association of Community Cancer Centers (ACCC), held recently in Baltimore, Maryland. "You have to get most of your income today from drug profit margins, so you have to pay attention to what drugs you select-and markups can make a difference."

Managing Money vs Managing Care

And while it is still too early to evaluate the pilot, other demonstrations around the country have shown decreased costs and improved patient outcomes. But bundled payments of any sort make some patient advocates and providers nervous. Experiments with capitation during the 1990s prompted a major backlash against managed care, with critics blaming payers for managing money instead of managing care.

"The cheapest is not always best," said National Comprehensive Cancer Network (NCCN) Executive Vice President Patricia J. Goldsmith in a phone interview. She agrees that the incentive structure is broken, but is cautious nonetheless. "We now have a system where there's an incentive to get the most expensive medicine and deliver the largest dollar amount to the practice; let's not have the pendulum swing the other way and have the incentive be, 'let's get the cheapest medicine and deliver the largest dollar amount to the practice.'"

Dr. Newcomer said that data sharing across participating practices makes it impossible for providers to skimp on care.

"The results will be measured and compared to their peers'," he said. "People who withhold evidence-based care will be exposed."

Keeping Physician Incomes Constant

Under UnitedHealthcare's episode-based care pilot, stronger incentive exists for doctors to schedule an office visit than a hospitalization, because office visits are still paid for on a fee-for-service basis. Drugs are paid for at the average sale price and are no longer the cornerstone of reimbursement.

If payers decide to scale the model up, however, they will have to restructure how they make reimbursements. Since UnitedHealthcare's pilot only involves oncology providers, it is not subject to the logistic difficulty of distributing a single payment across many providers.

"I don't have any desire to reduce your incomes. I wanted to try and find a way to keep physician incomes constant," said Dr. Newcomer. "At the same time, I do have a very strong desire to reduce your revenue, because if we're seeking best practices, if we're looking for ways to reduce cost, I need you to use your pen a lot more efficiently and with more attention to cost than you have in the past."

Identifying Effective Regimens

Like comparative effectiveness research (CER), UnitedHealthcare's pilot requires providers to zero in on a set of effective treatment regimens.

"How could we find out-of those 14 adjuvant therapies that are recommended by NCCN for breast cancer-which two we really ought to be using?" asked Dr. Newcomer. "And I mean that in terms of best relapse rates, best complication rates, and lowest cost.... In a world where we have literally hundreds of choices, how do we get to the two or three best practices?"

An episode is defined according to condition. Stage III colon cancer, for example, would be set as a 6-month episode. Metastatic episodes would be 4 months, renewed until the patient died.

Providers decide on the standard regimen they will follow for each episode, but once set it must be followed. If a particular patient requires treatment that deviates from the established regimen, doctors are free to provide the necessary care. UnitedHealthcare would only become concerned if compliance dropped below 85%.

Once a year, each provider must meet with other groups taking part in the pilot and compare data. If doctors begin to "see an emergence of best practices," Dr. Newcomer said, he expects them "to be migrating over to that best practice."

Nationwide Trend

Bundled payment pilots have taken off around the country, including the Medicare Acute Care Episode (ACE) demonstration. President Obama's recent nomination of cost control advocate Dr. Donald Berwick indicates the Administration's commitment to change the reimbursement model. In a 2008 Boston Globe column, Dr. Berwick and Dr. Joseph Dorsey wrote, "The closest you can come to heresy in today's health-care policy debate is to suggest that managed care can help and that capitation is the best way to pay for it.... What a shame."

Health-care reform is now law, and payers are taking aim at cost. Fee-for-service may be on its way out.