The amount of money spent on oncology in the US is staggering. And that number will only continue to rise. So what can the health care industry do to improve the cost-effectiveness of cancer care? Our new report takes a closer look at the evolution of oncology payment models, the drivers of oncology spending, and how value-based payment models could affect new treatments.

Key findings
Pioneering health plans and provider groups are experimenting with value-based payment models in oncology to try to improve the cost-effectiveness of cancer care. They are piloting these models in the commercial market—financial incentives for adhering to clinical pathways, patient-centered medical homes (PCMHs), bundled payments, and accountable care organizations—and it is uncertain which will achieve the dual goals of improving outcomes and controlling costs. We interviewed health plans and providers participating in emerging payment models to review early results (financial and clinical), understand which approaches are working, and discuss considerations for these models’ future evolution. Key findings from our qualitative research and analysis of oncology claims are:

• PCMHs and bundled payments without downside risk are the most common types of payment models being implemented among those we interviewed.
• Regardless of payment model, early health plan and provider collaborations have identified successful strategies to reduce unexplained variations in care and control costs. Common elements of these strategies include:
  • Technology and analytics to help practices and plans better understand existing patient populations and drivers of variability
  • Clinical pathways to help direct physicians to the most cost-effective treatment approaches
  • Patient-centric approaches such as 24/7 patient access, use of mid-level clinicians to direct patients to the most appropriate care setting, and shared-decision making
• Several of the early pilots have lowered costs by reducing variability in drug spending and using fewer emergency room and inpatient admissions.
• Applying these results to our analysis of commercial plan claims data shows that implementing these strategies can reduce spending by 22 percent across 1,385 episodes studied. Episodes include all costs over a six-month period, starting at the first dose of chemotherapy. This savings estimate could be considered conservative; the analysis evaluated stage 1 breast cancer patients where the variability in using high-cost services tends to be lower than patients with more advanced disease.
• While successful in reducing costs, most pilots to date have described performance on key quality measures, such as survival, recurrence, and complications, as staying the same; a few have seen improvement.

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