UnitedHealthcare’s Episode-Based Payment Model Program Cuts Cost

August 2015 Vol 8, Special Issue: Payers' Perspectives in Oncology
Caroline Helwick

An episode-based payment model cut the cost of breast cancer treatment by 34%, ac­cording to Lee N. Newcomer, MD, MHA, Senior Vice President of Oncology, Genetics and Women’s Health, UnitedHealthcare.

UnitedHealthcare will be expanding its episode-based program to approximately 12 practices in 2015, based on the good results seen in the pilot project, which was initiated in 2009.

As Dr Newcomer explained, “Physicians are getting better at following pathways and eliminating unnecessary or duplicate care.” The next issue, he said, was how to change the system in a way that “rewards good performance but doesn’t make the physicians ‘do things to get paid.’”

The episode-based program aims to reward physicians for “actual results, not the work that was done” to eliminate the dependency on chemotherapy “sales and income” and to provide a learning system that offers data (feedback) to physician groups, Dr Newcomer explained.

To date, the program has focused on breast, colon, and lung cancers, and its key components include:

  • Selecting preferred chemotherapy regimens for 19 episodes (payment conditions) in breast, lung, and colon cancers
  • Calculating drug profits from those margins
  • Drawing a “line in the sand”
  • Paying fees for service: drugs are paid at average sales price, and episode payments are unchanged with drug changes
  • Measuring performance annually
  • Changing episode payments only when the total cost is lowered or outcomes are improved.

Elaborating on these points, Dr Newcomer said that each medical group was asked to settle on a best treatment strategy within the 19 conditions. UnitedHealthcare then looked at the group’s existing fee schedule, calculated what their payments would have been (ie, drug profits from those regimens), and made this amount their episode-of-care payment.

“We said, ‘We will pay this to you the first day you see a patient, but then it’s frozen. We won’t increase this until we get enough patients to measure results. Then, if you get better outcomes, we will share this [the gains] with you. If not, your payment stays the same,” Dr Newcomer explained.

Emerging drugs can be incorporated; however, the episode payment will not increase until better results are demonstrated. Physicians bill the payer as they always have, “but we take drugs and prices down to ASP [average sales price], because we have paid the profits the first day,” Dr Newcomer pointed out.

UnitedHealthcare developed 64 outcome measures, and met with physicians annually for performance reviews. The payer takes responsibility for collecting the data on the patients, which eliminates an administrative burden for the oncology practice.

Using stage II HER2-negative, estrogen receptor/progesterone receptor–positive breast cancer as an example, Dr Newcomer noted that the reference sample, or “target” (based on fee-for-service claims data), had a total cost of $65,000. This cost includes chemotherapy drugs (ASP), chemotherapy drug margins, hospitalizations, physician care, ancillary care, and other things related to caring for this patient subset. The program participants are measured against this benchmark.

Participating oncology groups, so far, have shown a good amount of variability in their average total costs of care per episode. Of note, although all the programs committed to using the same chemotherapy regimen for the patient with stage II disease described above, one group’s chemotherapy cost was only $9000, whereas another group topped $23,000.

“Either their patients were a lot more obese, or we had a problem. There was a 2-fold difference in cost for the same regimen and fee schedule,” Dr Newcomer noted.

A review revealed that only 50% of the patients in the higher-cost practice were receiving the protocol regimen; the other 50% were treated off protocol. “Controls were not in place,” Dr Newcomer said. “These were the kind of discussions we had as we worked through this.”

Ultimately, compared with the fee-for-service database for the same time period, the episode-based program delivered equivalent patient care for 34% less cost. Much of these cost-savings “went back into the next set of episode fees, for better performance,” Dr Newcomer said. “Because they came through on performance, some gains were shared.”

UnitedHealthcare will add 6 additional groups in 2015 to the episode-based program, quadrupling the number of patients in the project.

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Last modified: September 14, 2015
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