How to Rein in Oncology Costs and Save Physician-Owned Practices
I was honored to contribute a chapter on the cancer care delivery system and how to improve it for the book A New Deal for Cancer: Lessons From a 50 Year War, edited by Abbe R. Gluck and Charles Fuchs, MD, MPH (Public Affairs, 2021). The book chronicles what has been accomplished in the 50 years since President Richard Nixon signed the National Cancer Act of 1971 and what remains to be done to improve care for patients with cancer. Here is a summary of a few of the suggestions I made in the book on how to address health-care costs and preserve the lower-cost option of care provided by physician-owned, community-based practices and discuss the impact of health-care consolidations of hospitals and academic cancer centers on health-care costs.
Barbara L. McAneny, MD, FASCO, MACP
Determining How We Got Here
Although the National Cancer Act accelerated advances in clinical oncology, which have allowed us to cure or control the cancers of patients fortunate enough to have access to our care, the ability to get the care to patients in need has deteriorated, especially over the past decade. Millions of Americans without adequate health insurance or the resources to pay for care on their own fall right through our social safety net and often experience worse outcomes and long-term financial distress.
Studies have shown that bankruptcy is triggered by a health-care event two-thirds of the time and that two-thirds of those patients have insurance. For patients with cancer, the financial consequences are so great, they are 2.65 times more likely to declare bankruptcy than people without cancer.1
Despite these alarming facts, the costs of health care continue to rise out of control. At the current rate, national expenditures on products and health-care services are projected to climb at an average annual rate of 5.4% from 2019 to 2028 and to reach $6.2 trillion by 2028.2 Research has shown that the national cancer-attributable cost alone for medical services and prescription drugs is expected to increase from $183 billion in 2015 to $246 billion by 2030,3 which is unsustainable. In fact, the trust fund for Medicare Part A, which the Center for Medicare and Medicaid Services (CMS) uses to pay for inpatient hospital stays, is predicted to run dry in 2026.4 If we don’t get cancer care—and all health-care—costs under control, we will see more financial bankruptcies, and inequities in care for low-income and minority patients will continue to rise.
Studies have shown that bankruptcy is triggered by a health-care event two-thirds of the time and that two-thirds of those patients have insurance.— Barbara L. McAneny, MD, FASCO, MACP
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Part of the rapid rise in health-care costs stems from human nature. When there is a lot of money to be made in an economic sector, people are drawn to that opportunity. Does anyone believe that private equity groups are acquiring hospitals and oncology practices because they wish to see more poor people have access to care? We cannot ignore the growing body of literature showing that consolidation in any section of the health-care market does nothing more than increase negotiating ability and prices.
The effects of this crisis are exacerbated by the acquisition of lower-cost community oncology practices by hospitals or mergers, partly due to outdated Medicare reimbursement models that favor large hospitals and academic cancer centers,5 as well as 340B drug pricing, and the increasing administrative burden. The CMS Physician Fee Schedule has increased just 7% from 2001 to 2019,5 whereas Medicare hospital updates totaled more than 50% during that same period; in addition, the cost of running a medical practice increased 34%, as measured by the Medicare Economic Index.5 After adjusted for inflation in practice costs, Medicare physician pay declined by 20% from 2001 to 2019.5
The result is insurers and patients with cancer overpay for services rendered in hospital settings. This inadvertently subsidizes the acquisition of independent oncology practices, limits the sites of care, and causes costs to rise.
Although the cry for a Medicare for All health-care system reflects the growing dissatisfaction with the current situation, putting more sick people into a system that is currently facing insolvency is not a viable solution.
Examining Cost-Saving Program Failures
To decrease health-care costs, the CMS is using the Center for Medicare and Medicaid Innovation (CMMI) to enact programs hoping to save money, but the effort has actually increased cancer costs. The CMMI’s main tenet is that if you put physicians at financial risk, savings will result, but that premise has not been realized.
Although the Community Oncology Medical Home (COME HOME) model, which I helped develop with a nearly $20 million dollar grant from the CMS/CMMI in 2012, was successful in saving $660 per patient without putting physicians at financial risk, it is never mentioned in summaries of CMMI projects. There has been minimal, if any, success from other risk-based ventures, including the Oncology Care Model (OCM), which did not generate the savings needed despite evolving from COME HOME.
The models of care that have done well with risk include some accountable care organizations, but the savings mostly went to other accountable care organizations, information technology systems, and other infrastructure changes—and minimally to physicians. Recent studies have shown that much of the success in achieving targets has been the result of raising target prices by adding as many diagnosis codes as possible. In addition, the accountable care organizations have proved to be potent catalysts for the acquisition of independent physician practices. Many accountable care organizations made money for tech firms that produce population health tools and maximize target prices, but they have not made reductions in the overall health-care budget.
Reforming the Health-Care Payment System
Clearly, it is time to free ourselves from these past ideas and come up with new solutions. The goal of a health-care payment system should be to pay fairly and adequately for the services needed to keep people healthy or to restore people to the best health they can achieve. Each segment of the health-care ecosystem suggests cuts to other parts of the system but never offers to decrease its own revenue.
We need to understand what the delivery of optimal care costs in the leanest systems we can find. We need to direct patients to the most appropriate site of service for the care they need. Because hospitals bill under the Hospital Outpatient Prospective Payment System, they are paid higher fees and a facility fee, even for outpatient services, such as chemotherapy infusion, and are paid double for the exact same service performed in a physician office under the Physician Fee Schedule. Hospitals justify this higher cost by the need to cover expenses incurred in an emergency department and to take care of indigent patients. However, there are other ways to cover those costs, including using money from local, state, and federal taxes.
Does anyone believe that private equity groups are acquiring hospitals and oncology practices because they wish to see more poor people have access to care?— Barbara L. McAneny, MD, FASCO, MACP
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Revamping the medical billing system is another challenge. If you have ever read the Explanation of Benefits statement from your health insurer, it is clear there is no transparency in medical billing. No one actually knows what the cost is of delivering a specific service and what the markup is on that service. We know what the hospital chargemaster says the cost of the service is, and what our contract says we are to be paid, but unlike other industries, we have not done the time-and-motion studies needed to understand true costs, inclusive of all overhead expenses.
The fastest growing segment of the health-care workforce is in administration, so we need to streamline overhead costs to the leanest possible extent. Minimizing administrative costs is a possible source of great savings without negatively impacting patient care.
To accomplish this goal, I proposed to the CMS/CMMI a project called Making Accountable Sustainable Oncology Networks (MASON). MASON uses data science to determine the true cost of care from claims data and the clinical data from the leanest of oncology practices. Optimal care is defined by academically derived pathways. The National Cancer Care Alliance (NCCA) is a network of practices that have volunteered to participate in this program and to be paid accurately for services rendered.
Once we have a data-driven answer to the question of cost, then we can adjust payments to reflect fair prices. For example, the NCCA did a time-and-motion study on the costs of chemotherapy infusion. The price paid was set in 2005 with the onset of average sales price as payment for chemotherapy and has not significantly changed despite the increased costs of providing a USP 800 certified pharmacy, electronic medical records, or closed-system infusions. Oncology practices use the drug margin to pay for the infusion code shortfall, whether they know it or not.
MASON requires that drugs are to be paid at the average sales price or acquisition cost. Infusion costs would be covered by an adequate infusion fee, doctors would be paid for the actual work they do (as suggested by ASCO’s Patient-Centered Oncology Payment model [https://practice.asco.org/billing-coding-reporting/macra-quality-payment-program/alternative-payment-models]), and payments for care management would cover the functions that the OCM’s Monthly Enhanced Oncology Services payments were intended to cover. Payments are direct without cost shifting.
The Physician Facing Payment Technical Advisory Committee recommended MASON unanimously on all 10 criteria. Unfortunately, the CMMI chose not to fund MASON as the successor to OCM.
Understanding the Consequences of the Effect of Drug Prices on Practices
It seems that the CMS assumes oncologists select chemotherapy based on the dollars added on to the average selling price of the drug. Although there are a handful of clinically equivalent drugs where practices can select which drug provides an actual margin, for the vast majority, the add-on to average selling price does not cover the shortfall in infusion costs and other services. The NCCA collected data on drug pricing when the Obama administration suggested moving to a minimal add-on and a flat fee for chemotherapy. We found the Medicare Physician Fee Schedule for drug administration is not the windfall profit CMS assumes and the costs of that care are also not covered.
Independent practices are dependent on the drug margin from commercial payers, without which they would have a difficult time staying solvent. It should be noted that the markup fees for these practices are significantly lower than the hospital markup. If independent practices were all acquired by large hospitals and switched from the Physician Fee Schedule to the Hospital Outpatient Prospective Payment System, the cost of care would immediately skyrocket. Without a low-cost benchmark and with the consolidation of the market that acquisition would create, there would be no brakes on the rise in costs, especially in those markets where the hospitals and the health plans are owned by the same entity. In markets where no independent practices are an option, physician compensation and autonomy decrease, and patient care is diminished.
Choosing the Health-Care System That’s Best for All
The COVID-19 pandemic has brought to light another unintended consequence of consolidation. Hospitals were designed for acute care, but they have now grafted on the management of chronic diseases into their outpatient departments to provide another revenue stream. Almost 90% of what we spend in health care in this country goes to the management of chronic diseases such as diabetes, heart disease, cancer, and mental health conditions.6 Management of chronic disease is best performed near a patient’s home, with the understanding of that patient’s situation, community, resources, and values. An acute care hospital 50 miles from a patient’s home is not the ideal setting to manage chronic disease, even without a pandemic.
When the acute care part of hospital systems was overwhelmed with COVID in 2020, they closed the chronic disease clinics and outpatient services as well. In comparison, independent oncology practices like mine have stayed open throughout the pandemic and kept treating patients with cancer.
Our current health-care system is designed to get exactly the results we now have: highly profitable parts of the industry consolidate and increase in power and wealth every year and are now merging with each other. If we want a system that maximizes wealth and executive power in the C-suite of various parts of our industry, we should stay the course. If we want a system that actually delivers health care to every person who needs it—at a reduced cost—we have to consider making some fundamental changes, such as those I have outlined here and in the book.
I welcome your thoughts on the matter.
Dr. McAneny is Founder and Chief Executive Officer of the New Mexico Cancer Center in Albuquerque and Gallup and Immediate Past-President of the American Medical Association.
DISCLOSURE: Dr. McAneny reported no conflicts of interest.
1. Ramsey S, Blough D, Kirchhoff A, et al: Washington cancer patients found to be at greater risk for bankruptcy than people without a cancer diagnosis. Health Aff (Millwood) 32:1143-1152, 2013.
2. CMS: National Health Expenditure Projections 2019–2028: Forecast Summary. Available at www.cms.gov/files/document/nhe-projections-2019-2028-forecast-summary.pdf. Accessed January 13, 2022.
3. Mariotto AB, Enewold L, Zhao J, et al: Medical care costs associated with cancer survivorship in the United States. Cancer Epidemiol Biomarkers Prev 29:1304-1312, 2020.
4. Stewart J: Medicare Part A funds to run out in 2026. Kiplinger, August 31, 2021. Available at https://www.kiplinger.com/retirement/medicare/603388/medicare-part-a-funds-to-run-out-in-2026. Accessed January 13, 2022.
5. AMA: Medicare Updates Compared to Inflation (2001–2021). Available at www.ama-assn.org/system/files/medicare-pay-chart-2021.pdf. Accessed January 13, 2022.
6. Centers for Disease Control and Prevention: Health and Economic Costs of Chronic Diseases. Available at www.cdc.gov/chronicdisease/about/costs/index.htm. Accessed January 13, 2022.