Physician Behavior Impact When Revenue Shifted From Drugs to Services

Shifting physician revenue from drug sales to cognitive services for mature pathways providers did not affect practice behavior in this payer-sponsored Oncology Medical Home.
Published Online: April 21, 2014
Bruce Feinberg, DO; Scott Milligan, PhD; Tim Olson, MBA; Winston Wong, PharmD; Daniel Winn, MD; Ram Trehan, MD; and Jeffrey Scott, MD
Objectives: In partnership with a large nonprofit healthcare insurer for the Mid-Atlantic region of the United States, we launched the first cancer clinical pathway in the United States in August 2008. Due to its early success with regard to savings and physician participation and compliance, a second-generation pathways program—the Oncology Medical Home—was piloted in 2011. This program offered a physician reimbursement model that shifted the source of revenue from drug reimbursement margin to professional charges for cognitive services (evaluation and management codes). We report our observations of the impact of that reimbursement model on physician prescribing behavior.

Study Design: This was a retrospective analysis.

Methods: A select group of practices that participated in the first-generation pathways program were invited to voluntarily participate in the Oncology Medical Home and its cognitive weighted reimbursement design. A matched control group was chosen from the first-generation pathways participants. Comparisons of physician behavior parameters were made pre- and postimplementation and between the Oncology Medical Home practices and the first-generation pathways control group.

Results: Physician behavior was not significantly modified by cognitive weighted reimbursement. No significant change in frequency of office visits for established patients was observed. No change in chemotherapy prescribing was observed. Observed increases in generic regimen use were no different than matched control.

Conclusions: Observations from this oncology medical home pilot program suggest that reimbursement methodology alternatives to the prevailing fee-for-service may have less impact on prescribing behavior than has been conjectured. Future research is ongoing to validate these observations and assess additional influences on prescribing behavior.

Am J Manag Care. 2014;20(4):303-310
Increased use of chemotherapy and more expensive drugs has been correlated with the “buy-and-bill” reimbursement model; therefore, we shifted the primary source of provider revenue from drug reimbursement to professional charges in our payer-sponsored Oncology Medical Home pathways program.
  • Analysis showed that this novel reimbursement model did not alter physician prescribing behavior with regard to the type or frequency of chemotherapy administrations, or established and new patient visits.

  • These observations suggest that medical oncology treatment selection and cancer care practice patterns may not be influenced by fee-for-service reimbursement.

  • Research is ongoing to validate these observations and assess additional influences.
United States direct medical costs associated with cancer are projected to increase exponentially, from $104 billion in 2006 to over $173 billion in 2020.1 Variability in medical practice plays a large role in increasing costs without achieving better patient outcomes.2 Clinical care pathways have been cited as solutions to help bend the rising costs of cancer care by reducing unnecessary and costly treatment variation while improving quality of care.1-5

In August 2008, a large nonprofit healthcare insurer for the Mid-Atlantic region of the United States partnered with Cardinal Health to launch the first inclusive provider network cancer care pathway in the United States. This program marked a milestone in the evolution of cancer treatment by demonstrating that an oncology pathway program can be deployed across an entire plan network comprised of disparate providers (single/group, community/academic, independent/affiliated) benefitting all parties by improving consistency and quality of care while reducing costs without reducing provider reimbursement.6,7

We previously reported that high participation and compliance levels in our pathways program led to changes in physician patterns of care that resulted in significant decreases in overall oncology expenditures.8 Similar physician behavior changes were observed in a Blue Cross Blue Shield Michigan pathway program, where aligned stakeholder incentives drove high levels of provider participation and compliance.5,9 Despite these and other pathway program successes, critics suggest that the observed savings benefits are small and unsustainable.10

The fee-for-service payment system has been identified as one of the main drivers of cancer care cost—the more physicians do for patients, the more reimbursement they receive.11 In this model, oncologists directly purchase chemotherapy from manufacturers and/or wholesalers (typically below, at, or slightly above average sales price [ASP]) and are reimbursed by the payer at prices usually exceeding ASP by 6% (Medicare presequestration) to 30% or more (commercial payers). Studies have shown that providers’ choice of chemotherapy can be affected by reimbursement, resulting in their prescribing chemotherapy more often and utilizing more costly brand name chemotherapy over less expensive brand or generic alternatives.10-12 Many argue that this “buy-and-bill” model encourages physicians to overprescribe chemotherapy, creates incentives for price inflation, and distorts clinical decision making, thereby driving up the costs of cancer care.10,11,13

With these factors in mind, we piloted a second-generation pathways program, the Oncology Medical Home, in January 2011. The goal of this program was to decrease cancer costs beyond those observed with the first-generation pathways model, and as such, it would address the concern that chemotherapy prescribing is influenced by a “pay-for-volume” rather than a “pay-for-value” reimbursement methodology. In the Oncology Medical Home, physician reimbursement would shift the drug reimbursement margin to professional charges for cognitive services through a dramatically enhanced professional service evaluation and management (E&M) fee schedule. Other cost-saving measures for the Oncology Medical Home included physician commitment to an intensive continuous quality improvement initiative and an end-of-life program, which have been previously presented and will be addressed in a future manuscript.14-17

This new cognitive weighted reimbursement model provokes several questions. If payment is based on professional charges rather than drug reimbursement, will physicians then evaluate patients more frequently? If chemotherapy reimbursement margins are at or near cost, will the use of chemotherapy decrease? Will there then be a shift away from brand name drugs to less costly brand drugs and/or generic drugs? To answer these questions, we evaluated the impact of the change in reimbursement on business practices and prescribing behavior for physicians participating in the Oncology Medical Home.


Program Descriptions

The first-generation oncology clinical pathway program was initiated in August 2008 as a collaborative effort between the payer and its contracted providers. Participation in the program was voluntary; however, providers were given financial incentives to participate in the form of an increased brand and generic drug (Jcode) fee schedule as compensation for the additional work flow required to maintain program compliance. A physician steering committee led participating physicians, who jointly and independently developed the content, structure, and implementation of the pathways.

The Oncology Medical Home was initiated in January 2011, with first patients accrued April 1, 2011 (with the delay needed for fee schedule implementation). The mechanism of drug reimbursement was changed for Oncology Medical Home–participating physicians from drug reimbursement margin to cognitive weighted reimbursement (Figure 1). A portion of the overall reimbursement to participating physicians was transferred from intravenous drug fees to E&M code reimbursement, while keeping revenue at the same level, when weighted by utilization. Twelve months of claims for intravenous chemotherapy, supportive care, and E&M codes were analyzed. The change in reimbursement between the preprogram rate of 24.5% margin over ASP and the Oncology Medical Home rate of 8% margin over ASP was calculated for each drug for which there were claims. Fourteen generic drugs were kept at higher reimbursement as an incentive for use where the level of reimbursement was the same for both Oncology Medical Home and control practices. In total, 70 drugs were reduced in price. This reduction was transferred as an increase to a select list of 17 E&M and chemotherapy administration codes. This resulted in an aggregate 62% increase in these fees, with an emphasis on new patient consult codes, which were increased by 166%. When weighted by utilization, the increase in revenue to the Oncology Medical Home physicians was equal to the value of the decrease in drug revenue.

Study Population

The Oncology Medical Home program was offered to a subset of first-generation pathways participants, who had recently organized to form a membership association, Therapeutics and Research in Oncology (TRIO). The TRIO practices operate independently, retaining their individual tax identification numbers, and consist of providers from small and large practices, urban and rural geography, representing the payer’s 2 largest metro areas. The initial membership in TRIO included 42 physicians in 16 practices, all of whom participated in the first-generation pathway program. Thirty-three physicians in 13 practices subsequently chose to participate in the Oncology Medical Home. Reasons for nonparticipation included sale of practice to hospital, retirement, and distrust of program.

Selection of the Study and Control Groups for Comparative Analyses

Of the 50 practices that participated in the first-generation pathways program, 32 were chosen for initial data evaluation based on the following criteria: (1) consistent data volume throughout the baseline and evaluation periods, defined as April 2010 to March 2012; (2) volume of >100 patients during the baseline period; and (3) location in Virginia, Maryland, or Washington, DC. Ten of these 32 practices were TRIO practices that participated in the Oncology Medical Home. Data from all 32 practices in the baseline year were used to create propensity scores via logistic regression.

K-nearest neighbor analysis of scores and 1-1 matching with replacement resulted in the pairing of 8 Oncology Medical Home practices to 7 first-generation pathways control practices.18 The logistic regression for Oncology Medical Home participation included the covariates of cancer and chemotherapy-treated patient volumes, cancer type, patient age group, extent of treatment, and Charlson comorbidity scores.19

Study Methods

Comparisons of physician behavior were made between the Oncology Medical Home participating practices and the first-generation pathways control group for the year prior to (year –1) and the year following (year +1) Oncology Medical Home implementation. Behavioral comparisons included number of patients per practice, number of visits per patient, number of patients receiving chemotherapy, chemotherapy administrations per patient, and use of all generic chemotherapy regimens. Claims data from the insurance network database were collected for year –1 (representing April 1, 2010, to March 31, 2011) and for year +1 (representing April 1, 2011, to March 31, 2012).

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