Providing Perspective on Pressing Economic Issues Facing Cancer Care—Now and in the Future

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CANCERSCAPE, the 2016 Annual Meeting of the Association of Community Cancer Centers (ACCC), provided a forum for about 300 attendees to gain insight into the complexities of oncology treatment, where “clinical advances, policy mandates, and value-based payment reform intersect.” Of particular interest to care providers, administrators, and financial officers were the growing use of biosimilars, value in cancer care, how Medicaid expansion may affect access to care, and taking their messages to members of Congress.

ACCC is an advocacy and education organization that addresses issues affecting community cancer programs, where about 80% of care is provided.

Medicare Payment Update

Following the site-neutrality legislation, reimbursements are now lower for newly acquired sites than they were a year ago.… Physicians will have less independence.
— Lindsay Conway, MSEd

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Lindsay Conway, MSEd, Managing Director, The Advisory Board Company, Washington, DC, said that major issues and payment rules this year include bundled payments, average sales price (ASP), and revalued codes. “They will affect your entire cancer service line,” she warned.

Drug reimbursement for medical oncology hospital outpatient departments remains at ASP plus 6%, and the drug-packaging threshold increased from $95 to $100. Reimbursement for drug administration decreased.

In radiation oncology, reimbursement is mixed: Payments for three-dimensional, conformal radiation therapy, intensity-modulated radiation therapy, image-guided radiation therapy, and proton therapy increased, but payment for stereotactic body radiation therapy decreased.

In other hospital outpatient prospective payment system rule changes, reporting the site of service data will be mandatory; lung cancer screening and advanced care planning (which now can be billed separately) will be reimbursed; and reimbursement for external-beam radiotherapy for bone metastases will begin in 2018.

Biosimilars are also at ASP plus 6% of the reference (original) product. Because of the complexity of manufacture, biologics are among the most expensive drugs on the market; for this reason, there is an effort to spur innovation and encourage competition by expediting biosimilars, the first of which (filgrastim-sndz [Zarxio]) was approved in March 2015 and will cost about 15% less than Neupogen. As of mid-2015, there are about 700 oncology-related biosimilars in the pipeline.

For physicians and freestanding clinics, medical oncology reimbursement is holding steady at ASP plus 6%, but drug administration payments are stagnant or decreasing.

In radiation oncology, the relative value unit saw a 2% decrease, but three-dimensional and conformal radiation therapy had moderate increases. Intensity-modulated radiation therapy and image-guided radiation therapy had moderate decreases.

Ms. Conway said that the overall 2016 Medicare Physicians Fee Schedule remained the same for hematology/oncology, radiology, and cardiology but decreased by 2% for radiation oncology. “The Patient Access and Medicare Protection Act, passed December 18, 2015, provides payment stability for some radiation therapy services by freezing reimbursement for 2017–2018 at 2016 rates.”

She also talked about physician practice acquisition. “From a hospital’s perspective, acquiring a physician practice expands the institution’s market reach, increases negotiating leverage with payers and suppliers, and has the potential to improve coordination of care. From the physician perspective, acquisition provides protection from economic uncertainty, and they can avail themselves of increased access to capital, information technology, and staffing,” explained Ms. Conway.

She continued: “There are negatives as well. Following the site-neutrality legislation, reimbursements are now lower for newly acquired sites than they were a year ago. Access to drug discounts may be diminished. Physicians will have less independence.”

Collaboration to Improve Care and Curb Costs

Oncology is in the crosshairs. About 10 years ago, the skyrocketing costs of oncology care began to be noticed and to come under scrutiny, and things haven’t improved since.
— Matthew A. Manning, MD

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Matthew A. Manning, MD, a radiation oncologist at Cone Health Cancer Center, Greensboro, North Carolina, talked about locating “hotspotters,” chronically ill, high-cost superutilizers of health-care services.

Health-care costs have risen by 91% between 2000 and 2011, said Dr. Manning, mostly due to the increase in the price of drugs, medical devices, and hospital care. “Oncology is in the crosshairs,” he added. “About 10 years ago, the skyrocketing costs of oncology care began to be noticed and to come under scrutiny, and things haven’t improved since.”

The main culprit is drugs. “Out of the nearly $374 billion that Americans spent on prescriptions in 2014, $32.6 billion (about 9%) went for oncology drugs, and another $11.1 billion was spent on treating the side effects of chemotherapy. And not one oncology drug is in the top 20 most widely prescribed,” revealed Dr. Manning.

Accountable care organizations, which try to deliver high-quality care while spending money wisely, might be able to ameliorate some of these problems, he proposed. “That is, if doctors and hospitals could benefit from saving money, they might start acting like insurance companies, that is, restructuring the delivery of care to reduce redundancy and use data and analytics to identify both intuitive and nonintuitive opportunities to improve care and lower costs.”

This means studying patient populations and identifying hotspotters who represent nearly 50% of all health-care expenditures. They also incur the highest costs (top 5%) and probably receive the worst care. They are spread fairly evenly across cancer types, with no one or two tumor types being predominant, but as one would expect, the higher the cancer stage, the more likely a patient is to occupy a hot spot. A total of 11% of hotspotters die within a year after they are identified as such, and 34% die in the subsequent year. Those who died were twice as likely to have had an emergency room visit.

It would be good to identify hotspotters in advance, for example cancer patients who have three or more comorbidities, especially congestive heart failure, said Dr. Manning. Therefore, oncologists should pick them out early in treatment by keeping track of emergency room visits, trips to other specialists, adverse events that require treatment, and comorbidities.

Hot spotting has become a concern in the wider field of health care and oncology in particular. “Tackling the ‘Hotspotter’ Patient Challenge,” an article by Scott B. Pingree, Director of Strategic Planning, Intermountain Healthcare, Salt Lake City, appeared in the Harvard Business Review in November 29, 2013.1 It began: “A fascinating business dynamic will unfold as health-care providers in the United States shift from a reimbursement system that has historically paid for procedures performed to one that rewards population health... This means that to a significant degree historic areas of revenue generation will become generators of losses. While it’s common for most businesses to fluctuate in their productivity, a shift of this scale represents a sea change for the health-care sector. The concept is especially applicable to high-cost patients. In the United States, the top 1% of high-cost patients consumes a disproportionate 28% of total health-care costs, and the top 5% consumes more than 50%.”1

Mr. Pingree echoed many of the same things as Dr. Manning and shared the following additional observations1:

  • Hotspotters visited the health-care system 41 times over a 5-year period, whereas an average patient did so 6 times.
  • A total of 1% of the patients used 24% of the total amount spent on patient care between 2008 and 2012. A total of 5% consumed 51% of total costs.
  • High-cost patients mean high rates of turnover. Fewer than 10% of the top 1% of high-cost patients remained in that category the following year, and less than 0.5% remained for 5 consecutive years.
  • The top 1% had a mortality rate of 26% over 5 years.
  • A total of 77% of high users of care have at least one chronic condition, 46% have two or more conditions, and 23% have three or more conditions.

Surprisingly, end-of-life care was not a significant cost factor. It accounted for 8% of the total cost of a patient’s care in the past 6 months of life and 12% in the past year.

Site-Neutral Payment

Congress has become interested in the way health-care providers are reimbursed for services to Medicare beneficiaries. Currently, payment rates for hospital outpatient services and physician practices differ; however, recently enacted “site-neutral payment” legislation (also referred to as “site neutrality”) will negate those differences in certain circunmstances. This step will likely result in significant financial consequences to the consolidation of community oncology services.

According to the Medicare Payment Advisory Commission, hospital outpatient revenue could decrease by $1.44 billion each year as a result of site-neutral payment. Hospitals that have acquired physician practices and have moved the acquired services to the hospital outpatient setting will be the most affected.

Health-care reimbursement has been haphazard for 60 years, and Medicare uses more than a dozen different payment methods.
— Ronald R. Barkley, MS, JD

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According to Ronald R. Barkley, MS, JD, President, Cancer Center Business Development Group, Bedford, New Hampshire, everyone will find something to either like or dislike about site-neutral payment. Physicians in private practive tend to support the notion that hospitals will no longer be paid more by Medicare for costly outpatient services that can just as readily be provided in a physician office setting. Hospital administrators, on the other hand, have justified their higher reimbursement rates because hospitals have to meet higher regulatory and accreditation standards, provide more comprehensive services, generate revenue to keep the emergency room open, and care for financially vulnerable and uninsured patients.

The road to site-neutral payment has been a bumpy one, said Mr. Barkley. “Health-care reimbursement methodologies have evolved in a rather haphazard manner for the past 60 years. For example, Medicare deploys more than a dozen different payment methods. The Centers for Medicare & Medicaid Services (CMS) does recognize that a hospital’s cost structure is higher than that of a physician’s office, but reimbursement for the site-of-service cost differential has resulted in aberrations. The Medicare Payment Advisory Commission recommended site-neutral payment as a cost reduction opportunity in its 2013 Report to Congress, and various groups have actively advocated for change since that time.”

On November 2, 2015, Congress passed budget legislation to address these differences in Medicare reimbursement—the Bipartican Budget Act of 2015. Under Section 603 of the Bipartican Budget Act, any hospital outpatient department opened after the statute’s enactment date (November 2, 2015) that is not located on the campus of the hospital (an off-campus location) will no longer be reimbursed by Medicare for services furnished under the hospital outpatient prospective payment system, but will instead be reimbursed according to “other applicable payment systems,” which systems were subsequently clarified to be either the Medicare Physician Fee Schedule or the Medicare Ambulatory Surgery Center Fee Schedule. Dedicated emergency departments are exempt from Section 603.

There are arguments for and against site-neutral payment, said Mr. Barkley. Those on the supportive side include the following: (1) Policies that support higher reimbursement for hospital outpatient departments encourage acquisition of office-based physician practices, which results in higher costs and closing of community-based care settings, further restricting patient access to lower-cost care; and (2) Many services have moved from physicians’ offices to outpatient settings, as physicians are increasingly employed by hospitals. This migration of services to the hospital outpatient setting results in higher spending and beneficiary cost sharing without significant improvement in patient care.

Those who oppose site-neutral payment cite the following: (1) hospital outpatient department and physician office services are not the same—hospitals provide more comprehensive services; (2) hospital facilities have higher operating costs and have to subsidize money-losing hospital services such as 24/7 emergency services; (3) hospital patients have higher levels of acuity, and it costs more to care for sicker (“higher-acuity”) patients; (4) hospitals have become providers of last resort to the uninsured and underinsured who are often turned away from physician offices; and (5) access to care might be compromised because hospitals will not be able to fund new outpatient location operations due to reduced Medicare reimbursement under site-neutral payment policy. ■

Disclosure: Ms. Conway, Mr. Barkley, and Dr. Manning reported no potential conflicts of interest.


1. Pingree SB: Tackling the ‘hotspotter’ patient challenge. Harvard Business Review. November 29, 2013. Available at Accessed March 23, 2016.