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Squaring Value-Based Payment With Innovation in Oncology

Mary Caffrey
Finding a place for value-based payment with the fast paced innovation in oncology.
In September, CMS Administrator Seema Verma, MPH, described the giant footprint her agency has in the US healthcare system as the nation’s largest insurer. “Everything we do has a large effect on every American,” she told an audience at a September conference. “In every action we take, we examine the impact it will have on the entire healthcare system.”

Few healthcare stakeholders would argue her first point. On the second one, many physicians, especially oncologists, would disagree. Oncologists hear the frustration from patients about what they pay out of pocket for cutting-edge therapies. They know a transition away from old reimbursement models is inevitable, and many are working to adapt. But in court filings, in regulatory comments, and in responses to ever-changing payment rules, oncologists are sounding the alarm: Many say government efforts to rein in Medicare spending will squeeze their margins and push more practices out of existence, instead of taking on the costs of drugs or the byzantine system that rewards pharmacy middlemen.

“For long-term success, Medicare must change course and develop payment policies to support, rather than weaken, the provision of cancer care in the United States,” American Society of Clinical Oncology (ASCO) president Monica M. Bertagnolli, MD, FACS, FASCO, wrote in a September letter that accompanied a regulatory comment to CMS. “We urge CMS to refrain from finalizing any proposals that would result in any cuts in payments for cancer services and to work collaboratively with ASCO to implement global payment reforms, including the development and implementation of new [alternative payment models] that are widely available to all cancer professionals.”1

That last part is the rub: As Bertagnolli’s statement attests, CMS, on one hand, asks oncologists to move toward quality-based models that demand more risk, but at the same time it seeks to disrupt payment streams that practices need to make the transition. Reimbursement challenges and shrinking payments from Medicare are happening at a time when clinical breakthroughs give oncologists new opportunities to extend life. Oncologists who took part in a panel discussion hosted in June by The American Journal of Managed Care® (AJMC®) said that although the transition to value-based reimbursement is the right thing to do, many practices that were already efficient saw red ink during the first year of Medicare’s Oncology Care Model (OCM), a 5-year alternative payment model set to run through 2021.2,3

“We are in the midst of a perfect storm, in which there is a constant down pressure on reimbursement while oncologists are being asked to immerse themselves in genomics, become effective stewards of emerging therapeutics, and magically lead efforts to control anticancer pricing,” said Joseph Alvarnas, MD, a hematologist/oncologist who is vice president of government affairs and senior medical director for employer strategy at City of Hope in Duarte, California, and editor-in-chief for Evidence- Based OncologyTM (EBO). “There is much talk about a move toward reimbursement based on the value of healthcare without clear evidence that there is a consistent, coherent model for what that is and little evidence that economic incentives are being realigned to support these activities.”

For the OCM in particular, there’s a difference between the financial challenges of the model and what it has done for patients, said Jeffrey F. Patton, MD, CEO of Tennessee Oncology, and Aaron Lyss, who is the practice’s director of value-based care, in an interview with EBO. “We’re very happy with the program in general,” Patton said. “CMS has been very open to feedback, and it’s working out to the point that we would not consider pulling out,” he said. Tennessee Oncology has produced savings in the area of post–acute emergency readmissions, and the navigator and palliative care programs have been huge successes. Relative to other government agencies, Patton and Lyss have found the Center for Medicare and Medicaid Innovation (CMMI) within CMS to be responsive.

“The big problem is the drugs,” Patton said. And that’s not all CMMI’s fault. The model started just as new, expensive immunotherapies and a new class of breast cancer drugs—the CDK4/6 inhibitors—were being approved and reaching patients. Given that the pricing elements of the model were necessarily retrospective, “The timing was about as bad as it could have been,” Patton said.

CMS has acknowledged that pursuing high-cost therapies is a balancing act for the 179 practices and 13 payers taking part in this payment model, but that’s by design.3 At the June policy summit of the National Comprehensive Cancer Network (NCCN), Ron Kline, MD, said that if figuring out how to pay for innovation in cancer care was easy, it would have happened already. “We know it’s hard. We know it’s going to take a while,” said Kline, medical officer in the Patient Care Models Group for CMMI.4

But data produced by the Community Oncology Alliance (COA) suggest that some members don’t have time to wait. COA’s annual Practice Impact Report, released in April, found that 1653 practices have closed, merged, or reported financial problems over the past decade.5 The COA report cited the “push and pull” of recent healthcare policy, as well as the effects of the ongoing federal sequester and the 340B drug discount program, which CMS has taken steps to reform. 

Proposals for Medicare Part B Draw Fire

On May 11, 2018, President Donald Trump presented a blueprint that offered more than 4 dozen ideas for trimming out-of-pocket costs for prescription drugs, but the document did not recommend direct negotiations between Medicare and pharmaceutical companies, something Trump called for as a candidate. Instead, the blueprint proposed merging Medicare Part B, which pays for office-administered drugs, like chemotherapy, and Medicare Part D, which pays for prescription drugs patients take at home.6

This proposal and others have alarmed ASCO and COA, who say the plans being discussed could undermine quality care and harm patients.7-9 However, COA has endorsed steps to rein in rebating practices by pharmacy benefit managers (PBMs).10

Since Trump’s proposal, oncology groups have responded to federal actions past and present:
  • In May, COA sued in US District Court, seeking to end application of the 2% federal sequester to Medicare Part B drugs, which COA argues have cost practices $78 million.11 (See Cover.)
  • In August, ASCO voiced opposition to a plan by CMS to allow Medicare Advantage plans to employ step therapy across Medicare Part B and Part D, which oncologists said could cause cancer to progress if patients cannot immediately access an appropriate therapy.12
  • In September, ASCO and other physician groups filed regulatory comments protesting CMS’ proposal to collapse multiple Medicare rate tiers for evaluation and management into just 2 tiers. Physician groups could cause financial harm for practices; ASCO additionally opposed a plan to cut by half an add-on charge for Medicare Part B.1,13
As part of its regulatory comment, ASCO called on CMS to allow more flexibility with payment models beyond the OCM that began last year. ASCO developed the Patient-Centered Oncology Payment (PCOP) Model14 to qualify as an Advanced Alternative Payment Model under the Medicare Access and CHIP Reauthorization Act,15 but it remains unapproved. COA has worked with the Commission on Cancer to launch the Oncology Medical Home recognition process, which seeks to reward practices that deliver efficient, measurable, evidence-based care.16

HHS Secretary Alex Azar, JD, explained the rationale for the step therapy plan this way: “By allowing Medicare Advantage plans to negotiate for physician-administered drugs, like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use.”17

Patton agreed that merging Medicare Part B and Part D would be “disaster,” as would be collapsing the E/M tiers. COA executive director Ted Okon, MBA, took special aim at the administration’s plan for step therapy, including ideas for patients to be encouraged to use less expensive treatments with rewards programs, such as gift cards. “Does CMS truly believe that Medicare seniors will be enticed away from their physician-recommended treatment with the promise of a $50 Amazon gift card?” he asked. “Allowing middlemen to profit [from] denying cancer patients needed medications is immoral and cruel.”18

Factoring in Rising Prices for Cancer Therapies

The OCM does try to account for innovation and high-cost drugs. The episode-based reimbursement model includes both a trend factor and a novel therapy adjustment:
  • The trend factor accounts for the model’s reliance on historical prices as oncology practices continue to see new therapies introduced at higher prices. This factor compares OCM participants with nonparticipants and it examines how costs are changing for each group. The trend factor allows CMS to look at specific attributes in the claims data—such as age, gender, and type of cancer—and make adjustments at the practice level based on the claims mix. Prices are also factored by hospital referral region to account for geographic differences.
  • The novel therapy adjustment, an element of the trend factor, works similarly. This measure seeks to avoid penalizing early adopters of new cancer treatments. Practices benefit if they end up treating more than the anticipated number of patients with a certain cancer or more patients than would be expected to use a newly approved treatment. Prices for novel therapies inside the OCM are compared with prices outside the OCM: Practices within the OCM are paid in full to the point that they match what is being spent across the country, and then they are paid 80% of the remaining target price.
Participants in the AJMC® panel discussion questioned whether the novel therapy adjustment adequately compensates OCM participants.2 “For an academic medical center, we use a lot of the drugs as they come out, if not before [in clinical trials] the approval. So, one of the things we expected was that we would probably get that back,” said Mark Liu, MHA, director of strategic initiatives for the Mount Sinai Health System. “We did get some adjustment, but not nearly as much as we would have expected.”

In the interview, Patton agreed with the panel participants that, “As early adopters of novel therapies, in the current system we are penalized by the novel therapy adjustment,” since it stops paying at 80% of the target price. Innovative practices are never going to withhold the best therapy for cost reasons, Patton said, but there is a penalty.

The Challenge of CAR T-Cell Therapy

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