Physician Behavior Impact When Revenue Shifted From Drugs to Services
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
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.
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.
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