Does Health-care Quality Translate to Value?

A Payer’s Perspective on the ‘Episode of Care’ Payment Model


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The current system of oncology drug revenue dependence was created 40 years ago. No one thought it would be a problem, but it is, and it’s vital that we address ways to fix it.

— Lee N. Newcomer, MD, MHA

On March 23rd, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, enacting sweeping change in our health-care system. An underlying theme of the legislation is the realignment of our payment system so that it places value over volume of services. At ASCO’s first Quality Care Symposium, held recently in San Diego, Lee N. Newcomer, MD, MHA, Senior Vice President, UnitedHealthcare, discussed a payment methodology that addresses that priority and that might represent one possible future for oncology practice.

Dr. Newcomer began his presentation with a graph showing that unless qualitative cost measures are implemented in health care, by 2018 it will take half of a family’s income to pay for insurance premiums and out-of-pocket expenses. “Naturally, we can’t let that happen, so it’s incumbent on people like those of us here in San Diego to do something about it. To that end, I’m going to talk about a solution we attempted at UnitedHealthcare called the ‘episode payment’ project,” said Dr. Newcomer.

Setting up a New System

“Our objective was to find a way in which physicians are rewarded for identifying and implementing best practices in an environment where evidence-based care was consistently used,” said Dr. Newcomer. He added that the balancing act would be to end the oncologist’s dependence on drug selection for practice survival while retaining present income levels. “The current system of oncology drug revenue dependence was created 40 years ago. No one thought it would be a problem, but it is, and it’s vital that we address ways to fix it,” he commented.

“To reach that goal, we needed a performance measurement system with data. So, we asked physicians who entered the program to give us a single sheet of clinical information, including histology, stage, relevant genetics, and current status, which meant, for instance, that they needed to differentiate between an adjuvant patient and one who is relapsed with metastatic disease,” said Dr. Newcomer.

He explained that the single-page format, combined with claims data, provided a comprehensive view of care by which they could create a fairly crude but effective longitudinal health record. “This allowed us to put patients in the right buckets and follow everything that happed to them in their cancer care experience. This information was collected in claims data, so we could harvest the outcomes and feed that back to the physicians,” said Dr. Newcomer.

The Program

The first step in the program was to create episode categories. “We looked at patients with breast, lung, or colon cancer and divided them into 24 different clinical scenarios. We had general agreement on the treatment strategies, but a lot of disagreement on the specifics,” said Dr. Newcomer.

“Next, we found five large volunteer practice groups, all with strong clinical and business leaders. We asked the groups to pick the medical regimen they thought was best for each of the 24 clinical scenarios, with the understanding that once the group comes to consensus, every UnitedHealthcare patient in the episode program would be treated with the selected regimen unless they had a medical contraindication,” commented Dr. Newcomer.

He pointed out that the most important aspect of the program was for each of the five groups to be consistent with their treatment selections for the 24 clinical categories. “When you do things the same way, there is less complexity and error rates fall, which leads to scientific methods that systematically improve care. We could now track how well the therapies worked for these patients and compare the results among the five groups. The group leaders had to agree to meet annually to discuss and compare outcomes. The goal was to get consensus on what constituted a best practice,” said Dr. Newcomer.

Incentivize Value, Not Margin

“We took all of the margin that the groups used to make on selected drugs and called it a ‘patient care fee,’ which was paid in total—a bundled payment—on the first visit. So we gave the doctors a substantial upfront check. Going forward, as the drug regimens changed, we paid the practice for the cost of the drug, but the patient care fee didn’t change unless we saw an improvement in the outcomes data, or the total cost of treating these patients was lowered, in which case we shared a third of that savings with the group,” said Dr. Newcomer. They looked at total cost of care, survival, time to progression for the first regimen in metastatic disease, and hospital admissions for uncontrolled pain.

After the data were collected, bar graphs were created to illustrate the results of each of the 24 clinical episodes, and the various measures were analyzed against the national group average to determine patterns of care. As an example, Dr. Newcomer looked at the average total cost per episode in the breast adjuvant setting.

“Each of the five groups committed to treatment with TC [docetaxel/cyclophosphamide], and the first thing that struck us was the tremendous variation in drug costs. Digging deeper, we found that only half of the patients actually received TC; the other half received a more costly regimen. So, here are medical groups committed to consistency, but they couldn’t get half their patients on the regimens they selected. The lesson is that at an operational level, this kind of behavior change is very hard to accomplish, but our project showed that it’s worth the effort,” stressed Dr. Newcomer.

We Have to Do Something

“We have a sense of urgency because we have to figure out how to reduce our escalating costs and still deliver value. And our hope was that this program would begin putting in place quality measurements and the incentives to follow them,” said Dr. Newcomer. He noted that although the episode payment program exposed some of the hurdles that will need to be overcome, quality measurement in oncology is possible and minimal clinical data are required to begin a program.

“Payer-provider collaboration is a win/win situation because we both learn from the discussions about value. There are a lot of bumps in the road ahead, especially if practices are dealing with smaller payers who don’t have the resources and data capture ability of UnitedHealthcare. However, I came out of this program feeling very optimistic, because I believe we’ve learned that improvement can be measured and costs can be reduced without sacrificing value,” concluded Dr. Newcomer. ■

Disclosure: Dr. Newcomer reported no potential conflicts of interest.



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