Improving patient outcomes through changes to oncology payments

Health Care Current | November 22, 2016

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

My Take

Improving patient outcomes through changes to oncology payments

By Greg Reh, principal and life sciences sector leader, Deloitte Consulting LLP

I doubt that there is anyone who can say that cancer hasn’t impacted them in some way – whether through a personal situation, that of a family member or a loved one, or an acquaintance. An estimated 39 percent of Americans will be diagnosed with cancer at some point in their lives.1 This is an astonishing number, and becomes even more concerning with the projection that the incidence of cancer is expected to increase by 70 percent over the next 20 years on a global level.2

The increase in spending on cancer care can be attributed to a number of factors, including an aging population, increases in insurance coverage, earlier diagnoses and longer survival rates. We have also made advances in surgeries, radiation therapies, and anticancer medications – including advanced immunotherapies and targeted therapeutics. But these advancements have come with rising treatment costs. Direct cancer costs were approximately $124.6 billion in 2010, and are projected to grow to $158-173 billion by 2020.3

Today, many health plans, health systems, and oncology groups have begun experimenting with various payment models to try and control costs as well as reduce unexplained variation in care and improve patient outcomes.

To understand what different organizations are doing, what approaches are working, and considerations for the evolution of these models, the Deloitte Center for Health Solutions recently interviewed 18 individuals from health plans, providers, and clinical pathway developers that are participating, supporting, or evaluating oncology payment models.

We looked at four value-based payment models being tested – financial incentives for adhering to clinical pathways, patient-centered medical homes (PCMHs), bundled payments, and specialty accountable care organizations (ACOs). While many of these initiatives are still pilots, they are likely to expand as a result of the implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA offers incentive payments for providers participating in advanced alternative payment models (APMs), including the US Center for Medicare and Medicaid Services’ (CMS) Oncology Care Model, a hybrid PCMH and bundled payment model.

Regardless of model being tested, all of those interviewed were carefully evaluating compliance with evidence-based pathways to identify opportunities for savings on drug spending. These clinical pathways direct prescribers to the most effective, safe, and all else being equal – least costly – drug treatment. In addition, some of the bundled payment models reimburse providers based on the total cost of all services across an episode, including drugs administered in the office. As a result, oncologists are being challenged to think differently about their prescribing habits for cancer treatment. This raises two questions for biopharma companies.

Will new value-based payment models pose challenges for adoption of new therapies?
Right now, the answer is unclear. The implementation of evidence-based pathways as part of APMs could, in some instances, increase the use of new treatments. On the other hand, payment models that emphasize financial goals could deter physicians from prescribing more costly therapies. Quality measures that are tied to financial payment might influence how prescribers choose treatments. As payment models evolve, quality measures that reflect the value innovation can bring, and focus on things that matter most to patients, should be incorporated.

Several of the providers interviewed were experimenting with bundled payment models, but others were strongly opposed to bundled payments for oncology. These interviewees expressed concern about the underlying complexities of standardizing a bundle for a disease where there could be variation based on patient and disease characteristics, particularly when patient volumes for any particular bundle are low. Furthermore, they were worried about the unpredictability of drug costs, especially given the recent pace of innovative new drugs becoming available. One provider was concerned that a bundled payment model could force his organization to make a decision about using a new treatment based on financial constraints. To address these concerns, current pilots are experimenting with approaches to allow for the use of new treatments, such as carve-outs, stop-loss provisions, and adjusting bundle prices on a contemporaneous basis.

What can life sciences companies do to prepare?
The implementation of value-based payment models may require re-evaluation of many aspects of the business. Life sciences companies should consider:

  • Engaging pathway developers in discussions regarding drugs in the pipeline and new indications being pursued. Pathway developers can provide useful input on development strategy based on their knowledge of customers’ evidence requirements. Proactive engagement will enable pathway developers to better prepare for updates and help their customers anticipate budgetary impacts. 
  • Investing in generating real-world evidence to support an expanding body of knowledge. Focusing on what treatments work, for which populations, and in which settings may help providers identify opportunities to reduce total cost of care. 
  • Connecting drug price to value. Describe drugs’ value in terms that extend beyond improved efficacy and toxicity. Absent of a consensus definition of “value,” plans and providers interviewed are seeking information about how a drug would impact the total cost of care among their patient populations, for indications treated, and in combination therapy. 
  • Tying drug payments to outcomes. Survival, toxicity, and hospitalization are measures that can be reliably and consistently measured. Consider leveraging new technology solutions to overcome the data collection challenges associated with administering outcomes-based contracts. 
  • Integrating the patient perspective across the business. Incorporating patient-centered measures, such as patient experience, quality of life, improvements in functional status, and evidence-based behavioral interventions is gaining importance in quality measure discussions and could be transformative for patient access to innovation. This may require life sciences companies to collaborate with community and patient advocacy groups.

In the long run, the entire industry needs to join together in order to effectively combat cancer. Rising costs are an issue, but the bigger issue is that cancer continues to be a pervasive disease that takes too many lives every year. Tying payments and delivery to value and outcomes is not only a cost-saving measure – it is likely to be a life-saving one as well.

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1 “Cancer Statistics, National Cancer Institute”, March 14, 2016., accessed July 07, 2016.
2 World Health Organization, Cancer – Key Facts, February 2015, accessed July 12, 2016.
3 “Cancer costs projected to reach at least $158 billion in 2020”, National Institutes of Health. January 12, 2011., accessed July 07, 2016.

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Implementation & Adoption

President-elect Trump posts updated health care platform on transition site

In the days after the election of Donald Trump, the President-elect established a transition site to publish updates on policy positions and key cabinet nominations. Included on this site is President-elect Trump’s key health policy positions, which do not appear to differ from the policy positions he took while campaigning (see the November 10, 2016 Special Edition Health Care Current). The key policy positions, include:

  • Advancing health care research and development
  • Modernizing Medicare to prepare for the aging of the Baby Boomer population
  • Giving states flexibility to administer Medicaid, enabling them to experiment with innovative methods for health care delivery


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New American Medical Association policy for physicians leading team-based care models

Last week, the American Medical Association (AMA) announced it has adopted new ethical guidelines for physicians who are leading or participating in team-based, patient-centered care models. The AMA says that physician leadership is critical to the success of these models and can help prevent or alleviate team conflicts, staff turnover, and limited resources. Successful physician leaders support the care team members and the patients and families who participate, AMA says.

CDC releases guidance on antibiotic stewardship for outpatient settings

The US Centers for Disease Control and Prevention (CDC) published a framework for enhancing antibiotic stewardship in outpatient clinics and facilities. The guide follows previously released guidance for hospitals and nursing homes.

The guide says clinicians and facilities should:

Inappropriate antibiotic prescribing is both unnecessary prescribing and prescribing the wrong drug. Prescribing the optimal dose and duration of treatment is critical for treatments to be effective and to reduce potential adverse drug effects. Effective antibiotic stewardship can protect patients and improve clinical outcomes for outpatient settings.

Background: Antibiotic resistance is a great public health concern. At least 2 million people in the US become infected with antibiotic-resistant bacteria, and at least 23,000 people die each year as a direct result. Now, a large public-private partnership effort is working to combat antimicrobial resistance by focusing on the development of new products. The partnership aims to promote innovation and provide hundreds of millions of dollars over five years to increase the number of antibiotics in the drug-development pipeline. The Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, has the potential to reduce the business risk of developing innovative new drugs, with the goal of spurring private sector investment (see more in the September 20, 2016 Health Care Current).

(Source: CDC, “Core Elements of Outpatient Antibiotic Stewardship,” November 11, 2016)

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Most Medicare beneficiaries protected from significant Part B premium increases

The average monthly premium for 70 percent of Medicare Part B enrollees will be $109.00 in 2017, and the remaining 30 percent will pay $134.00, according to CMS. The $109 is a slight increase over the average monthly premium of $104.90 for the past four years. All Medicare Part B beneficiaries will have an annual deductible of $183 in 2017, up from $166 this year.

Premium increases under Medicare Part B are protected under the “hold harmless” provision, which was designed to protect about 70 percent of beneficiaries from large increases. Beneficiaries who are not protected under the statutory provision include those who aren’t eligible for Social Security benefits, enroll for the first time, or are dually eligible for Medicare and Medicaid. Deductibles for Medicare Part A beneficiaries will be $1,316 in 2017, which is an increase over $1,288 in 2016.

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Survey: Most health care consumers don’t understand basic insurance terms

A recent PolicyGenius survey on health literacy found that most consumers do not understand and often overestimate their knowledge of basic health insurance concepts. Most health care consumers could not correctly define deductible, co-insurance, co-pay, or out-of-pocket; only four percent of consumers could correctly identify all four terms.

Health insurance literacy varies by age. Millennials have the lowest understanding of basic health insurance terms: Only 36 percent could correctly identify any of the terms. However, 65 percent of Millennials believed they understood the terms. Baby Boomers, on the other hand, could correctly identify basic insurance terms 47 percent of the time, though 71 percent said they believed they fully understood the terms.

Analysis: Deloitte’s 2016 Health Care Consumer Survey asked consumers about their knowledge regarding health insurance costs both in employer-sponsored and exchange plans. Relative to those with employer-sponsored coverage, more exchange consumers indicated that they understood their premiums, deductibles, and coinsurance costs. Additionally, more exchange consumers could recall their monthly premium and how much it increased over past year than consumers with employer-based coverage.

(Source: PolicyGenius, “Health Insurance Literacy Survey,” November 2016)

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On the Hill & In the Courts

Congress preparing for transition in administration

Last week, lawmakers in the House of Representatives sent letters to all of the outgoing administrative agencies, requesting that they refrain from finalizing any pending rules or regulations. The House then passed the Midnight Rule Relief Act (MRRA) of 2016 on Thursday, November 17. This act, which was introduced in February of 2016, would give Congress the authority to review and reject regulations or mandates that the administration finalizes in its last days in office.

The MRRA would extend the scope of the Congressional Review Act (CRA), which allows legislators to formally reject regulations within 60 days of being finalized by an agency through a “resolution of disapproval.” While the CRA requires legislators to vote on individual rules, the MRRA would allow Congress to block a group of qualifying regulations based on the date that the rule or regulation was introduced.

According to the lawmakers, congressional review of last-minute regulations and guidance is necessary to ensure that an administration’s last-minute rules did not sacrifice quality or thoroughness for the sake of haste. The Senate has not yet introduced a companion bill. If regulations are halted for the last months of the current administration, health care stakeholders raise concerns that the delay may have unintended consequences on the pharmaceutical industry and patients with complex medical needs.

In the meantime, congressional lawmakers and the incoming administration are exploring different pathways by which they can alter or repeal the Affordable Care Act (ACA). A full repeal of the law would require 60 votes in the Senate, so partial repeal through the reconciliation process (which only requires 51 votes) may be more likely. The annual budget reconciliation process allows legislation to bypass Senate filibuster, but can only be used for provisions that affect spending and revenue (taxes). If this path were taken, Congress may repeal major parts of the law, take measures to delay or phase in the repeal, and then repeal additional provisions with later action (e.g., the usual legislative process or another reconciliation bill).

During the fiscal year 2016 budget reconciliation last January, a congressional majority passed the Restoring American’s Healthcare Freedom Reconciliation Act of 2015, which outlined proposed changes to the ACA. While President Obama vetoed the bill, it outlines changes that the Congress and President-elect Trump may seek in the next term, such as:

  • Restricting the federal government’s authority to operate health plan exchanges
  • Phasing out, and then eliminating the cost-sharing subsidies for public exchange beneficiaries with moderate-to-low incomes
  • Repealing the individual mandate and the employer mandate
  • Eliminating the tax on medical devices and the “Cadillac tax” on more expensive health plans
  • Phasing out Medicaid expansion over a period of two years

The new administration could also take swift executive action to repeal sections of the ACA, such as instructing CMS to terminate payments to health plans for reducing cost-sharing for exchange beneficiaries with low incomes.

Many congressional lawmakers support the “Better Way” replacement health care platform from House Speaker Paul Ryan, which retains the ACA provision prohibiting health plans from refusing coverage to individuals with pre-existing conditions. The plan proposes creating high-risk pools for people with pre-exiting conditions and requiring continuous enrollment. However, industry stakeholders have said that repealing the ACA, even in sections, without a comprehensive and timely replacement may disrupt coverage.

(Source: Modern Healthcare, “ACA repeal without replacement could spur insurer exodus,” November 17, 2016; Modern Healthcare, “Repeal and replace Obamacare? It's not gonna be easy,” November 12, 2016)

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Physician advisory committee accepting submissions and comments on proposed payment models

Last week, the Physician-Focused Payment Model Technical Advisory Committee (PTAC) began accepting applications for new payment models to be considered as alternative payment models (APMs) under MACRA. The request for proposals includes initial guidance about the kinds of physician-focused payment models (PFPMs) more likely to be considered. If PTAC agrees that a proposed payment model meets the necessary APM parameters, the proposal will then go to the US Department of Health and Human Services (HHS) for final review for inclusion as an APM.

PTAC is looking for payment models that:

  • Target specific treatments, conditions, or subgroups of patients with distinct needs, such as individuals at risk for a particular condition or people at advanced stages of a condition. 
  • Include all or most of the current eligible payments for the condition, treatment, or population. 
  • Include measures that hold physicians and other eligible professionals accountable for controlling cost and quality of care.

PTAC says that it is unlikely to recommend a proposed payment model that simply expands Medicare coverage to services not currently under the Medicare Physician Fee Schedule. PTAC says it will be more likely to recommend a payment model if providers accept more than nominal financial risk for meeting cost and quality outcomes measures. The committee defines financial risk in three ways:

  • The amount of payment that eligible professionals or the organization could lose if the desired results are not achieved
  • The increase in unreimbursed costs eligible professionals or the organization would incur if the desired results are not achieved
  • The amount that eligible professionals or the organization would be expected to pay to CMS if the desired results are not achieved

PTAC requests comment on the proposed timeline for review, which includes a 16-week process to work with applicants to address any concerns before submitting to HHS.

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CMS: Comprehensive Error Rate Testing program significantly reduced improper Medicare payments

Improper payments for Medicare fee-for-service inpatient hospital services have decreased by $6.03 billion, down from $10.45 billion in 2014 to $4.42 billion by the end of June 2015. The overall improper payment rate declined from 12 percent in 2015 to 11 percent.

CMS says three main efforts have helped reduce improper payments:

CMS calculates improper payments using the Comprehensive Error Rate Testing (CERT) program and uses the results to inform corrective actions. Citing success in reducing improper payments so far, CMS says it will explore prior authorization and pre-claim review programs to further reduce inappropriate spending. CMS also intends to implement targeted interventions for services that are vulnerable to improper payments, such as home health and inpatient rehabilitation facilities.

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CMS announces updates to drug pricing dashboard

Earlier this month, CMS updated the Medicare drug spending dashboard, an interactive online tool that tracks the price of drugs purchased for Medicare beneficiaries. The dashboard shows per-beneficiary spending trends on drugs covered by Medicare Part B and D, spending for the program overall, and spending on drugs that are seeing per unit cost increases.

CMS updated the dashboard to include the most current pricing and spending information for Medicare drugs. It shows data on 80 drugs that represent the highest per-user and Medicare program spending, and drugs with very high per unit cost increases in 2015. The user-friendly tool displays manufacturer information, clinical indications, and drug descriptions to users. For the first time, the update also includes information on Medicaid drug spending. According to CMS, Medicaid drug spending reached more than $57 billion in 2015.

Overall prescription drug costs were estimated at $457 billion in 2015 – 16.7 percent of all personal health care spending. This represents an almost $100 billion increase from $367 billion in 2012. CMS projects that drug spending will increase by 6.7 percent annually through 2025. Improving public transparency around prescription drug spending may help the industry, administration, and lawmakers work together and make informed decisions on the Medicare and Medicaid programs’ future.

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Around the Country

Local government spending on social services associated with improved population health

Researchers at Health Affairs used US Census Bureau data to assess the impact of 14 health and social service expenditure categories on health rankings for US counties over time. Seven categories of investments – community health care and public health, public hospitals, fire protection, K-12 education, corrections, libraries, and housing and community development – had a positive association with county health rankings.

Many health care stakeholders and policy makers have begun to look for ways to address social determinants of health – factors outside of the health care system that contribute to overall health. Though previous studies detected a strong correlation between government spending on public health and improved health outcomes, few studies have looked at which areas of non-health spending may contribute to the improved outcomes.

The researchers used expenditure data from 87,000 local governments from the Census Bureau. They also examined the association between spending and the five health outcomes measures that comprise the county rankings: years of potential life lost, adults in poor or fair health, number of poor physical health days, proportion of births that are low birthweight, and number of poor mental health days. The data demonstrated that spending in seven categories were associated with higher county health rankings. Greater spending in those seven areas is also directly associated with gains in the underlying health outcome measures that make up the county health rankings, regardless of whether the primary goal to is improve health.

Several national efforts exist to increase awareness of social determinants and improve health outcomes, including the Culture of Health Action Framework, Healthy People 2020, and the National Prevention Strategy.

(Source: J. Mac McCullough and Jonathon P. Leider, “Government Spending In Health And Nonhealth Sectors Associated With Improvement In County Health Rankings,” Health Affairs, November 2016)

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Breaking Boundaries

Bringing innovation to the ICU

As critical as a hospital’s intensive care unit (ICU) is to communities, many of the machines and monitors that seem to constantly beep, flash, and run are based on decades-old technology. Further, the many medical devices that monitor patients, provide medicine, or help patients breathe are not typically interoperable – connected to each other or to the electronic medical record. There is no shortage of data generated from these devices, but it is often difficult for clinicians to sort through it all and know where to act first.

Some physicians and other stakeholders are anxious to see progress and change and are developing systems and apps to innovate the ICU. A startup out of Rochester called Ambient Clinical Analytics is selling a system called AWARE, which was created by a team out of the Institute for Patient Safety and Quality at Johns Hopkins. It identifies the most critical information the clinician needs and highlights it. An app called EMERGE, also out of Johns Hopkins, extracts data from patient records to alert clinicians if a planned intervention might cause harm.

Brigham and Women’s Hospital is testing a secure microblogging platform that enables the ICU care team to see all messages related to a patient’s care to encourage improved communications and potentially reduce errors. The challenge, however, is not getting the technology to work, but rather with requiring people to change protocols, workflow, and engrained habits.

Bringing telehealth into the ICU has faced similar challenges related more to resistance to change and altering workflow than to technological barriers. Though studies have shown tele-ICU (using audio, visual or a combination to remotely monitor critical care in ICUs) can improve productivity and collaboration, uptake has been slow. Some clinicians have not liked the idea of remote specialists intervening in patient care. However, as more evidence mounts and leading practices get adopted, that appears to be changing. Studies have also shown that linking family members of patients in the ICU via videoconference has benefits for the clinician and the patient. The video link cut down on distractions and made it easier for clinicians and family members to communicate. In the ICU, it is not always possible for family members to be present, and they are not always comfortable asking clinicians questions in this busy setting. These types of activities and experiments have helped some clinicians see the benefit of different telehealth platforms.

Analysis: Changes in technology – including data storage, miniaturized hardware, and network connectivity – are opening up growth opportunities in the medical technology space. Startups and non-traditional entrants into the health care system are spurring innovation and progress. Going forward, it’s likely that more hospitals and health systems will transition to a “smart ICU” if the technology can be meaningfully integrated into the workflow of the care team.

As described in Deloitte’s paper, Next-generation smart medtech devices: Preparing for an increasingly intelligent future, innovative medtech companies are developing end-to-end solutions that are focused on differentiated sources of value, productivity, and disease management. MedTech companies should consider identifying partners, alliances, and other collaborative opportunities to acquire the capabilities and expertise they may need to develop next-generation medtech devices and thrive in this new environment.

(Source: Jean-Louis Vincent and Jacques Creteur, “Paradigm shifts in critical care medicine: the progress we have made,” Critical Care, December 18, 2015)

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