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United Health Looking to Change the Way Cancer Physicians Are Paid

Source: WSJ

Posted on 20 Oct 2010

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UnitedHealth Group Inc. is altering the way cancer specialists are paid in an attempt to curbing health-care costs.

The program attempts to address potential overuse of expensive cancer drugs by eliminating any incentive for doctors to choose a drug based on profit. As a result, oncologists will be reimbursed at cost for whatever drugs they prescribe and receive a separate payment covering their services.

Typically, doctors are paid by insurance companies for seeing patients and performing procedures or administering drugs and tests. Critics have said this "fee-for-service approach" gives doctors an incentive to provide more—but not necessarily better—care, which can drive up drug usage and other costs.

To start addressing the problem, the new federal health law calls for Medicare pilot programs that pay doctors based on the quality rather than the quantity of their services.

Private efforts are also cropping up in the wake of the law. Cigna Corp., for example, is testing a payment scheme that shares savings with doctors if costs come in under targets.

UnitedHealth says cancer care poses a particularly thorny problem. Spending on cancer treatment is rising at 15% to 18% a year, a rate that is almost double that of health-care costs generally, the insurer says, citing industry-wide trends. And it says that cancer drugs account for 35% to 40% of its spending on cancer treatment.

Many cancer drugs are infused by doctors in their offices, and historically doctors have purchased the drugs and billed insurers for their cost, plus a profit margin of around 15%, says Lee Newcomer, UnitedHealth's vice president of oncology. "They've become drug dealers."

UnitedHealth estimates that drugs account for 65% of an oncologist's income. In particular, the insurer says, there is concern that toward the end of a cancer patient's life, doctors continue giving drugs as a way to keep being paid for the patient's care. The evidence is anecdotal, Dr. Newcomer notes, but a goal of the pilot program is to reduce any overuse in metastatic cancer patients while still paying doctors to care for patients.

UnitedHealth's new payment program, being tested at five clinics, requires doctors to decide in advance what treatments they would like to use for three types of cancer: breast, colon and lung.

The drugs can include anything from standard chemotherapy with generic drugs to costlier branded treatments, such as Herceptin or Avastin. The insurer will pay the doctors for each drug they actually end up using, but without the traditional markup, and data on the doctors' choices will be shared among the clinics to identify what works best.

To make the doctors whole, the insurer will give them a set fee that includes the profit they would have made from the drugs they selected, plus costs for managing patient care. If doctors use drugs outside of their original treatment plan, the plan will cover the drug but won't adjust the separate payment.

For example, UnitedHealth tallied up one clinic's drug profits for treating a patient with a type of breast cancer that responds to Herceptin. The practice would have made $15,344 in profits for one year of treatments involving Herceptin plus two other drugs.

To devise the new bundled payment, UnitedHealth added to that number a case-management fee and a hospital-care fee, for a payment of $15,575 to manage the patient's care regardless of the drugs the doctors chose.

The acquisition costs for the drugs—about $70,000 to $80,000— ?were covered separately.

Eric Winer, the chief scientific adviser to Susan G. Komen for the Cure, a research and educational organization, says he applauds efforts to pay doctors for the time they spend caring for patients instead of for administering drugs as long as those efforts don't create incentives to limit drug use. "The [UnitedHealth] program is banking on the assumption that if we uncouple paying for drugs with paying for care that doctors will do what they do best, which is doctor. It remains to be proven if that will really be the case."

Changing how payments are determined can be controversial. In the 1990s, a model called "capitation" became popular. It set fixed payments for a group of patients in the hope that providers would be able to manage care more efficiently within a set budget. But the approach fell out of favor as patients incurred higher costs than the payment covered. It was also criticized for providing an incentive for doctors to cut back on care so they could save money and pocket the difference.

The UnitedHealth program could run up against similar criticism. "We want patients to get the right treatment for them, and we are worried that [UnitedHealth's approach] could incentivize physicians to undertreat," says Kent Lieginger, senior vice president of managed care at Roche Holding AG's Genentech, a biotech company that makes cancer medicines.

UnitedHealth's Dr. Newcomer responds that the insurer won't penalize doctors for deviating from the initial treatment regimen and will pay all drug costs regardless of which medicines are used.

Doctors in the program say the new system could work, but some of them question how easily it can be scaled up nationally or can be extended to other cancers. "It's something quite novel," says Marcus Neubauer, a medical oncologist at Kansas City Cancer Center who is participating in the pilot.

Doctors who aren't in the program question whether UnitedHealth's payments would cover all of the costs of running a practice. Therese Mulvey, physician-in-chief at Southcoast Center for Cancer Care in New Bedford, Mass., says that technology, imaging and supportive services all stretch clinics and that those costs often aren't covered even by the historically fat drug margins.

"Payments need to be driven by the full cost of care," she says, "not just by the profit margins of the drugs."