Innovative Payment Models Needed to Sustain Quality Cancer Care  

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Lee N. Newcomer, MD, MHA

Nationally regarded health-care expert Lee N. Newcomer, MD, MHA, began his presentation at this year’s ASCO Quality Care Symposium with a rhetorical question. “Why are we talking about money when we’re gathered in San Diego for 2 days to discuss some wonderful ways to impact the quality of cancer care?” His answer: Unless we create innovative payment models that measure value, our escalating health-care costs will debilitate our ability to deliver quality oncology care.1

Why We Have to Do Something

Dr. Newcomer punctuated his opening statement with fairly ominous projections. “In 2013, the average household income in the United States was about $52,000. If you draw a separate line calculating health-care costs [ie, the money a consumer would pay out-of-pocket plus the health-care premium for a family insurance plan] and trend the two, by the year 2016 it will take 50% of the average U.S. household’s income to cover its health care. Track up for another 12 to 15 years; it will take every single penny a household makes to provide health care in the United States. Of course, that is not possible,” said Dr. Newcomer, adding, “If we don’t do something, no one in this meeting will be exempt from having considerably less money available to care for their patients than we have today.”

Dr. Newcomer continued, “We’ll need to learn how to eliminate all the things we do that don’t add value to the care we deliver. In short, that means delivering the best possible outcome with the least amount of resources. In effect, health care is facing an impending crisis akin to the bubble or the mortgage collapse that threw us into recession. It’s coming, if we don’t change our culture.”

Where’s the Money Going?

Dr. Newcomer, Senior Vice President of Oncology, Genetics and Women’s Health at UnitedHealthcare, used his payer experience to describe how oncology dollars are spent. “For cancer care at UnitedHealthcare, we spend about 24% of our budget on drugs, which are inflated at about 15% per year. Hospitals get more than half of the dollar, at about 54%. And physician fees make up the other 22%, the only sector of spending that is actually at negative inflation,” he said.

He pointed to three current payment models designed to bring cost-reducing value into cancer care: pay for performance, bundling or episode payments, and capitation. “The concept of pay for performance is the most popular new payment model. Simply put, an outcome goal is set and a bonus is paid to the hospitals or groups that participate. In oncology, that measure has been tied to adherence to guidelines,” he said.

Dr. Newcomer briefly described episode payments, in which a fixed amount of money is given for a discrete medical episode. If the provider completes the course of treatment for less than the projected amount, he gets to keep the difference as a bonus.

Capitation, rarely used in the United States, is where an organization takes full responsibility for the costs of its patient population and physicians are paid a fixed sum at regular intervals. This is essentially how health care has been covered in Canada’s universal health-care system, although some provinces are moving away from capitated budgets to episode payments.

Potential Barriers

As with any innovation, developing and implementing a new payment model is fraught with challenges. “The first barrier is what I call the N problem. In other words, how do you get enough patients to measure the difference in outcomes between the established method and the new model? And that problem is based on the size of a medical group and the size of the payer,” said Dr. Newcomer.

“Moreover, the average study takes 2 to 3 years to complete, and 3 years is a very long time before you get an indication of how you’re doing. Then there’s the question of comparing the results, which can get very confusing,” he said. He used a study from UnitedHealthcare to illustrate his point. “A large group practice in a metro area instituted a pathways program, and we wanted to compare their outcomes to a cohort of breast, lung, and colorectal cancer patients we have in United’s database. When they put in their pathway, their costs declined and the control groups’ actually rose. It looked like a win for pathways,” said Dr. Newcomer.

However, he explained, what looked like a win was based solely on a numeric average. “When we did the multivariate analysis—actually matching for stage and type of cancer—all the benefits went away. There was no cost-saving difference prepathways and no difference postguidelines. The point is that you need to use the same kind of rigor in a financial analysis that you use in a clinical trial,” said Dr. Newcomer. He used several more case studies looking at pathways, all of which faced the same barriers, such as long accrual time and funding.

Are We Measuring the Wrong Thing?

“When you add up all the barriers to developing a new payment model, you come to realize that this is really hard stuff, it’s not easy to accomplish,” said Dr. Newcomer, adding, “Which is leading me to thinking a little differently than I would have a few years ago. I’m starting to wonder if we’re measuring the wrong thing as a payer.”

He continued, “Instead of measuring physicians, perhaps we should be measuring chemotherapy regimens. In a large organization like UnitedHealthcare, in a couple of years we could literally have thousands of patients on each regimen for breast, colon, and lung cancer. That gives us the data to do good comparative effectiveness studies,” said Dr. Newcomer. He stressed that this method of measurement gives us the best, most cost-effective way to lower costs and eliminate underperforming regimens.

What Do We Do Now?

“We can’t stop testing just because it’s hard. Clearly, based on the cost trend lines I opened this discussion with, we have a lot of work to do. We simply cannot afford to stay on the current course, and the better we get at doing the right clinical things for less money, the better the entire system will be,” said Dr. Newcomer.

His parting message: “I don’t envision a future in which there will be more money in the health-care system. So we have to use the same rigor for financial measurement as we do in clinical trials. It’s not as simple as comparing last year’s cost with this year’s cost, and we’ll subtract the difference. In short, we’ll have to do the case mix adjustments and the statistical analysis to make sure that we know the results we’re looking at are real.” ■

Disclosure: Dr. Newcomer is Senior Vice President of Oncology, Genetics and Women’s Health at UnitedHealthcare.


1. Newcomer L: Innovative payment models and measurement. 2013 Quality Care Symposium. Presented November 1, 2013.