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The American Journal of Managed Care December 2018
Feasibility of Expanded Emergency Department Screening for Behavioral Health Problems
Mamata Kene, MD, MPH; Christopher Miller Rosales, MS; Sabrina Wood, MS; Adina S. Rauchwerger, MPH; David R. Vinson, MD; and Stacy A. Sterling, DrPH, MSW
From the Editorial Board: Jonas de Souza, MD, MBA
Jonas de Souza, MD, MBA
Risk Adjusting Medicare Advantage Star Ratings for Socioeconomic Status
Margaret E. O’Kane, MHA, President, National Committee for Quality Assurance
Reducing Disparities Requires Multiple Strategies
Melony E. Sorbero, PhD, MS, MPH; Susan M. Paddock, PhD; and Cheryl L. Damberg, PhD
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Cost Variation and Savings Opportunities in the Oncology Care Model
James Baumgardner, PhD; Ahva Shahabi, PhD; Christopher Zacker, RPh, PhD; and Darius Lakdawalla, PhD
Patient Experience During a Large Primary Care Practice Transformation Initiative
Kaylyn E. Swankoski, MA; Deborah N. Peikes, PhD, MPA; Nikkilyn Morrison, MPPA; John J. Holland, BS; Nancy Duda, PhD; Nancy A. Clusen, MS; Timothy J. Day, MSPH; and Randall S. Brown, PhD
Relationships Between Provider-Led Health Plans and Quality, Utilization, and Satisfaction
Natasha Parekh, MD, MS; Inmaculada Hernandez, PharmD, PhD; Thomas R. Radomski, MD, MS; and William H. Shrank, MD, MSHS
Primary Care Burnout and Populist Discontent
James O. Breen, MD
Adalimumab Persistence for Inflammatory Bowel Disease in Veteran and Insured Cohorts
Shail M. Govani, MD, MSc; Rachel Lipson, MSc; Mohamed Noureldin, MBBS, MSc; Wyndy Wiitala, PhD; Peter D.R. Higgins, MD, PhD, MSc; Sameer D. Saini, MD, MSc; Jacqueline A. Pugh, MD; Dawn I. Velligan, PhD; Ryan W. Stidham, MD, MSc; and Akbar K. Waljee, MD, MSc
The Value of Novel Immuno-Oncology Treatments
John A. Romley, PhD; Andrew Delgado, PharmD; Jinjoo Shim, MS; and Katharine Batt, MD
Medicare Advantage Control of Postacute Costs: Perspectives From Stakeholders
Emily A. Gadbois, PhD; Denise A. Tyler, PhD; Renee R. Shield, PhD; John P. McHugh, PhD; Ulrika Winblad, PhD; Amal Trivedi, MD; and Vincent Mor, PhD
Provider-Owned Insurers in the Individual Market
David H. Howard, PhD; Brad Herring, PhD; John Graves, PhD; and Erin Trish, PhD
Mixed Messages to Consumers From Medicare: Hospital Compare Grades Versus Value-Based Payment Penalty
Jennifer Meddings, MD, MSc; Shawna N. Smith, PhD; Timothy P. Hofer, MD, MSc; Mary A.M. Rogers, PhD, MS; Laura Petersen, MHSA; and Laurence F. McMahon Jr, MD, MPH

Cost Variation and Savings Opportunities in the Oncology Care Model

James Baumgardner, PhD; Ahva Shahabi, PhD; Christopher Zacker, RPh, PhD; and Darius Lakdawalla, PhD
Geographic variation in cancer treatment spending reveals that chemotherapy and hospital inpatient care may offer opportunities for savings for practices participating in the Oncology Care Model.

Objectives: This study seeks to identify service categories that present the greatest opportunities to reduce spending in oncology care episodes, as defined by the CMS Oncology Care Model (OCM). Regional variation in spending for similar patients is often interpreted as evidence that resources can be saved, because higher-spending regions could achieve savings by behaving more like their lower-spending counterparts.

Study Design: We used Surveillance, Epidemiology, and End Results Medicare data from 2006-2013 for this retrospective observational cohort study. Analysis focused on patients with non–small cell lung cancer, advanced (stage III or IV) breast cancer, renal cell carcinoma, multiple myeloma, or chronic myeloid leukemia.

Methods: Episodes were identified for patients with the 5 included cancers, following the episode definition used in the OCM. We estimated standardized episode-level spending for a standard patient across subcategories of care for each hospital referral region (HRR) defined by the Dartmouth Atlas. The contribution of each subcategory to interregional variation in total spending reflects that subcategory’s potential to yield savings.

Results: Chemotherapy and acute inpatient hospital care tended to be the highest contributors to interregional variation. Imaging, nonchemotherapy Part B drugs, physician evaluation and management services, and diagnostics were negligible contributors to interregional variation for all 5 cancers.

Conclusions: Chemotherapy and inpatient hospital care offer the most potential to reduce spending within OCM-defined episodes. Other sources of savings differ by type of cancer. Assuming patient outcomes are not compromised, low-spending HRRs may be models for lowering cost in cancer care.

Am J Manag Care. 2018;24(12):618-623
Takeaway Points

Innovative payment models, such as the Oncology Care Model (OCM), aim to encourage lower-cost and higher-quality care. An unanswered question is which service categories present the greatest potential to reduce costs within the OCM.
  • Retrospective cohort analysis determined which service categories contributed the most to apparent practice style differences within OCM-defined episodes.
  • Chemotherapy was the largest contributor, followed by hospital inpatient care, to interregional variation in spending for some types of cancer studied.
  • Chemotherapy and hospital inpatient care may merit the most scrutiny when seeking to reduce spending within OCM-defined episodes, but potential effects on patient outcomes must also be considered.
Both public and private payers have targeted cancer care as a prime source of healthcare savings. The testing of new payment models, such as the Oncology Care Model (OCM) by CMS and the Episode Payment Program demonstration by UnitedHealthcare, present 2 cases in point.1-3 Programs like these attempt to generate savings by changing provider incentives, without setting rules regarding how such savings should be achieved. The goal is to give providers the discretion to deliver high-quality, high-value care individualized for each patient. These incentives will have even greater impact if they are coupled with information that can help providers seek out and eliminate low-value care. To that end, the goal of our study was to identify the categories of cancer care that offered the greatest potential opportunities for savings within a treatment episode.

We explored this issue using tools drawn from the established literature on geographic variations in healthcare.4 When the cost of treating similar patients varies widely across geographic regions, efficiencies can be achieved by having high-spending regions emulate low-spending ones.5 The crux of the research problem is to define the concept of patient “similarity” and measure variation across regions that results from practice styles alone and not from variation in patient health.

Our study addresses that issue by considering patient and episode characteristics within an analysis that identifies the subcategories of spending (eg, chemotherapy, acute hospital inpatient care, imaging) most responsible for the interregional variation in total spending. Our particular focus was on spending per cancer care episode using the OCM’s definition of “episode,” because under the OCM, practices have a financial incentive to reduce total Medicare spending on their patients within these OCM-defined episodes.1 We examine interregional variation in spending per OCM-defined episode for 5 cancer types, representing a mix of solid and hematologic cancers that differ in prevalence and level of treatment innovation.

To reduce spending in OCM episodes, subcategories of spending that contribute most to interregional variation in standardized spending per episode may be the lowest-hanging fruit. An important caution, however, is that assessing the impact of differences in spending on patient outcomes is beyond the scope of the current study. Our goal is to flag for providers and health systems those categories of spending that contribute the most to differences in practice styles across regions. These categories ought to be viewed as the highest priorities for careful decision making about how to reach the appropriate trade-off between spending and outcomes.



We used data from the Surveillance, Epidemiology, and End Results Medicare (SEER-Medicare) database for 2006-2013. SEER-Medicare links data from the SEER program of the National Cancer Institute, which contains information from 18 cancer registries, with Medicare claims files. SEER-Medicare covers approximately 28% of the US population distributed geographically throughout the country. Our cost analysis included 2007 through 2013. The year 2006 was included for creating the Charlson Comorbidity Index (CCI) score of comorbidities for each episode, based on the patient’s prior-year claims. We excluded patients who spent time in Medicare Advantage (MA) because of incomplete treatment information and because MA patients were excluded from the OCM. The study was determined to be exempt from institutional review board oversight.

The patient cohort includes those with a new diagnosis of 1 of the 5 selected tumors between January 1, 2007, and December 31, 2011. Patients were required to be covered by Medicare parts A, B, and D from 12 months prior to the diagnosis through the end of data or date of death and to be treated with at least 1 chemotherapy drug in an outpatient setting that would trigger an episode within the OCM, including Part D chemotherapy claims. This restriction was chosen to allow us to define an episode in the same way as the OCM.

Cancers Included

We identified a cohort of patients with 1 of the following 5 tumor types as the primary cancer: non–small cell lung cancer (NSCLC), advanced (stage III or IV) breast cancer (BC), renal cell carcinoma (RCC), multiple myeloma (MM), and chronic myeloid leukemia (CML). These tumor types were chosen to provide variety in prevalence in the population 65 years and older, ensure a mix of solid and hematological tumors, and offer variation in treatment patterns, innovation, and resource mix.

Episode Definition

Episodes were defined as they are in the OCM. Either infusion or injection of outpatient chemotherapy or the filling of a prescription for Part D–covered chemotherapy triggered an episode. The OCM defines chemotherapy in a broad sense and includes antineoplastic drug therapies generally; for example, monoclonal antibody therapies.6 Likewise, we use the term chemotherapy in the same broad sense as the OCM. Following the OCM definition, the episode ended either 6 months later or at death. As delineated in the OCM, subsequent episodes for the same patient were allowed and began at first use of qualifying chemotherapy following the end of the previous episode.

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