National Comprehensive Cancer Network

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Managed Care Organizations to Focus on Value in Oncology

By Liz Danielson, MHA, Director, Payor Relations

In order to better understand the concerns of managed care organizations and how they are addressing cancer costs and quality, NCCN interviewed medical executives, primarily physicians, from ten managed care organizations (MCO) earlier this year.  The insights gained from these interviews have been incorporated into a report, Managed Care & Medical Oncology: The Focus is on Value,which will be published in JNCCN — Journal of the National Comprehensive Cancer Network: Oncology, Pharmacy & Policy in the Fall of 2010.

Value in cancer care can be defined as cost divided by benefit.  In that sense, MCOs are not solely focused on the amount spent in absolute terms, but rather what they, their customers, and their members receive for the money they spend on benefits.

Cancer was typically ranked among the top five clinical priorities due to cost.  Although cancer is not the most frequently-diagnosed condition, it represents a disproportionate share of costs, typically about 12 percent of total medical expenses for all conditions and rising rapidly.  MCOs are especially concerned about the rising costs of drugs and biologics as well as costs deriving from new diagnostic approaches, such as PET, and the expanded uses of such technologies.  During an NCCN interview, one physician described oncology as “one of the essential conditions to manage.”

However, cost is not the only concern.  Understanding what represents appropriate, evidence-based care and finding ways to reduce inappropriate variability in care are also top priorities.  The focus on value means that MCOs are looking hard at both cost and quality.  This represents dual concern for what is good for consumers and what is good for the bottom line.  One managed care executive described a “triple aim” philosophy that seeks to find an ideal balance of positive patient experiences, optimal outcomes and reduction in cost.  For this executive, “variability means there is opportunity for improvement.”

Medical expenses related to cancer care for a non-elderly population with commercial insurance continue to rise, with current expenditures in the area of $312.00 per member per year (PMPY).  Although this may not sound like a large expenditure, it represents paid claims across all plan members, while those with cancer in active treatment represent only about 4/10th of one percent of all members.  The rate of increase in cancer medical expenses for one large MCO is about 20 percent - a rate that far exceeds the 9 percent overall rate of increase for the market basket of medical costs.  As one executive stated, “The trend is alarming.”

Based on the NCCN interviews, cost saving strategies are primarily aimed at physicians and hospitals with aggressive contracting continuing to be the cornerstone of cost containment.  Consideration of new reimbursement models, such as episode-based payments intended to reduce financial incentives to use more costly drugs, are in the early stages and are likely to receive more attention in the next few years.  Influencing the behavior of plan participants is a secondary focus.  A third strategy involves coverage policies related to certain kinds of cancer drugs.

Although aggressive contracting with physicians and hospitals remains a baseline strategy for controlling costs, collaborative engagement efforts are increasingly being employed to engender physician buy-in.  The strategy most often mentioned is collaborative development of clinical pathways programs, tracking physician practice against guidelines or pathways and reporting back to physicians on how they compare to their peers.  Pay for Performance (P4P) initiatives in cancer remain uncommon, although some respondents consider pathways programs to be a P4P model.

Finally, NCCN asked respondents about strategies they currently use or expect to implement within the next two years to address cancer costs and quality.  The most frequently-mentioned strategies were:

• Increased use of guidelines or pathways programs
• Equalizing financial incentives for choosing a treatment
• Focus on evidence-based care, with more frequent peer-to-peer calls if needed
• More emphasis on advance care planning and making informed end of life choices.  This includes providing better education and counseling in order to increase hospice enrollment and   
   earlier hospice enrollment.

• Using case management programs to address gaps in care and knowledge
• Educating and empowering patients to participate in collaborative decision-making with their physicians

• More aggressive contracting, especially average sales price (ASP) pricing for drugs
• Ensuring appropriate use of diagnostic radiology services
• Increased use of specialty pharmacy programs to ensure appropriate use of drugs and patient compliance with the drug regimen

• Quality of care initiatives
• Evaluating the potential for episode reimbursement model

Ultimately, how MCOs will address oncology care in the future is uncertain in light of rapid changes in cancer care, a fragile economy, and pending health care reform.