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Oncology Alternative Payment Models: Lessons From Commercial Insurance

The American Journal of Managed CareMarch 2022
Volume 28
Issue 3

Developing alternative payment models for commercial populations in specialties such as oncology is rife with practical challenges. Leading payers and practices share lessons to date.


Many payers and clinicians are committed to advancing value-based care through the establishment of alternative payment models (APMs) that incentivize practices and clinicians to improve quality and reduce cost. A multistakeholder working group has observed that in specialty fields such as oncology, despite many attempts to design and implement APM pilots for commercial and Medicare Advantage populations, practical challenges and small numbers of episodes and patients present headwinds to viability and scalability. Despite this, some payers report emerging good practices and are optimistic about APMs. Careful and realistic consideration of the specific goals of a proposed model is warranted, as is close examination of the feasibility of transferring risk.

Am J Manag Care. 2022;28(3):98-100. https://doi.org/10.37765/ajmc.2022.88835


Takeaway Points

Despite enthusiasm for piloting alternative payment models (APMs) in specialties such as oncology, commercial payers and practice partners have encountered difficulties in designing and implementing these models.

  • Small numbers of episodes are a significant impediment to transferring financial risk, and they inhibit quality measurement, establishment of accurate financial benchmarks and targets, and the overall viability of APMs for commercial populations.
  • Payers and practices struggle to assess APMs’ returns on investment.
  • However, some payers report emerging good practices, such as focusing models on common cancer types for which data suggest potential opportunity to affect variability or cost.


In developing alternative payment models (APMs), payers and practices seek to positively disrupt the current fee-for-service (FFS) paradigm and empower clinicians to deliver high-quality patient care at lower costs. In specialties such as oncology, the feasibility and efficacy of transferring financial risk to practices remain hotly debated. Commercial payers have experimented with various approaches to incentivize value-based care, and early lessons show that designing viable and scalable approaches to transferring risk in commercial models is challenging.

In this article, a group of payers and practices share their experiences in designing and launching APMs that aim to hold oncology practices accountable for defined quality measures and cost-reduction targets for commercial or Medicare Advantage populations.

Why Pursue an APM?

Payer and practice motivations for pursuing APMs are nuanced. Payers aim to hold practices accountable for delivering high-value care, which is often conceptualized as lower-cost, higher-quality care. Some payers recognize the paradox that rewarding high-quality, evidence-based care may not always result in immediate cost savings,1 and thus they may prioritize reducing variability of expected cost.

Practices often participate in APMs because they feel that the FFS system does not provide clinicians with enough autonomy or flexible resources to improve patient care. Others, anticipating that APMs will become widespread, want to lead the transition to value-based care, improve rapport with local or regional payers, and serve as thought leaders in the community.

How Should Practices Be Held at Risk in an APM?

Some stakeholders note that risk may incentivize more significant cost reduction and quality enhancement.2,3 In designing APMs, practices and payers are affording careful thought to the level and type of risk that practices can accept in APMs.

Some payers are beginning to leverage new financial incentives, including downside risk, to further drive value,4 although full risk for total cost of care is unlikely in commercial oncology APMs in the short term. Risk levels from prior and current pilots have varied: Some commercial payers have omitted risk for underlying FFS payments but not for enhanced care coordination payments paid to practices.

Some experienced practices are amenable to being financially accountable for delivering high-quality care. However, most favor only undertaking financial risks linked to utilization, such as reduction in emergency department (ED) visits and adherence to clinical pathways.

An unresolved question among both payers and practices is whether the cost of drugs should be included in the components for which a practice is held financially accountable.5,6 If included, novel therapy adjustments or other methodologies would need to better account for new technologies, otherwise practices adhering to evidence-based guidelines and succeeding in reducing ED or acute care visits may not achieve cost savings.7 Unpublished evidence suggests, however, that for commercial populations, the inclusion of drugs within an APM may have fewer drawbacks than previously assumed and that any risk may be partially mitigated through contracting measures (eg, aggregate risk caps) (L. Maini, PhD, University of North Carolina Chapel Hill, and D. C. Johnson, MD, MPH, Blue Cross Blue Shield of North Carolina, personal communications, October 14, 2020, and July 25, 2021).

How Can Commercial APMs Achieve an Appropriate Balance of Risk, Scalability, and Accountability?

Payers and practices attempting to create oncology APMs have encountered challenges in designing models that are viable and enticing to all stakeholders. These challenges include the following.

Small numbers of episodes are an impediment to transferring financial risk and inhibit various aspects of model development. A viable APM that is not unduly influenced by random variation requires many oncology episodes. Small numbers and associated outliers hamper the development of statistically valid quality measures and accurate baseline data sets. While designing an oncology APM that was centered around systemic therapy for all advanced cancers, one payer found that the highest annual volume of eligible episodes for an individual health system within the region totaled approximately 600 episodes. The center with the next highest volume saw fewer than 300 eligible cases. In comparison, a 2-sided risk accountable care organization in the same region required a minimum of 5000 patients per health system to be viable from an actuarial perspective.

Quality measurement can be burdensome for practices. Quality measure reporting is burdensome, especially when practices must report distinct measures across multiple payers. Some payers have tried to overcome this by using proxy measures or standards from other programs, such as Medicare’s Oncology Care Model (OCM). However, some practices still do not have the resources to collect certain quality data.

APMs require investment, yet returns are uncertain. Implementing APMs requires capital investments and workflow changes, such as the establishment of extended care clinics.8 For practices, the ongoing continuity of FFS in parallel to value-based models complicates efforts to engage in value-based interventions. As an example, commercially available pathways solutions can require a 6-figure investment for large cancer practices, but such investments can be difficult to justify to practices’ C-suites without a clear return on investment linked to their utilization. Oncology rapid assessment clinics to divert patients from ED and inpatient admissions face similar challenges. Because most revenue continues to flow through FFS, some C-suites remain focused on these revenue centers and are reluctant to explore APMs, which take added time and resources to implement.

Payers also struggle to convince leadership that oncology APMs have value because short-term cost reductions are hard to achieve. There can also be internal competition for resources between specialty and primary care APMs. Additionally, COVID-19 and associated utilization declines may thwart effective measurement of APMs’ impact in the short term.

Clinical pathways have value but are not an immediate cure-all. Despite challenges in justifying a pathway’s expense, well-designed clinical pathways can have a meaningful role to play in enhancing quality, reducing variation, and promoting appropriate utilization. To have the greatest impact in an APM, pathways would ideally be narrowly focused and offer decision support for end-to-end services, not only for treatment. However, although initial evidence signaled that pathway utilization may reduce total spending,9 recent research findings have called this into question as standards of care and innovation evolve.10

What Good Practices Have Emerged?

Despite these caveats, many stakeholders remain committed to shifting away from FFS. Incremental efforts to date have yielded some good practices:

Blend lines of business. For payers that include Medicare Advantage, commercial, and/or Medicaid patients among their membership, creating a model that can be implemented across all lines of business can help bolster a program’s scale.

Consider highly targeted APMs when shifting to 2-sided risk. For payers that are committed to transferring risk to practices, starting with a targeted APM for large independent practices that are experienced in value-based care may be beneficial. Focusing on highly specific cancers that are common in the population and for which data indicate that a practice may be able to affect variability or cost is an advisable first step into a 2-sided risk approach.

Develop a robust clinical data exchange. Cancer cannot be well described in claims. Payers developing such models need to determine a way to access and interface with clinical data, including the genomic and molecular data that are increasingly important in the precision medicine era. Some payers believe this is so fundamental to success that they caution against further development of an APM until a clinical data strategy is adopted by all parties. Pathways already electronically capture relevant clinical information such as stage and molecular subtype and may be useful in such exchanges.

Consider clear and narrow definitions of eligibility. For commercial payers, a narrow approach to determining eligible episodes may be beneficial. Some, for example, omit from a practice’s accountability any hospital visits that take place prior to active treatment or cases in which a patient sees a provider only once. A narrow approach may also include focusing only on patients on active therapy regimens, not maintenance or low-risk (eg, hormone-only) treatment regimens, which are characterized by distinct treatment pathways and cost implications, as OCM leadership has observed.11

Implement a payer-led approach to eligibility. Determining eligibility of episodes can be a point of contention across payers and practices and entails extensive analysis. Payers could take the lead on identifying these and invite practices to subsequently verify or change episode definitions.

Assess the drawbacks and benefits of using a delegated risk model. Transferring risk to a third-party entity can be an incremental option for pursuing 2-sided risk models. Such entities contract directly with payers to bear risk, and they work with practices on care delivery, quality enhancement processes, and value-based care decision-making. Such an approach moves risk one degree closer to providers of health care while leveraging third parties’ expertise in evidence-based guidelines and analytics. However, these parties extract a portion of the value that practices create, thereby limiting the rewards that practices can reap from enhancing quality and reducing costs.


Many health care leaders continue to be optimistic about APMs, but the practical challenges that payers and practices face in designing and implementing these models are considerable. Looking to the future, a better enabling environment for APMs would entail access to large-scale, robust cost and clinical data sets to better power financial benchmarks.

Author Affiliations: Tapestry Networks (ESh, LG), Waltham, MA; Blue Cross Blue Shield of North Carolina (DCJ), Durham, NC; OneOncology (AJL), Nashville, TN; Corporal Michael J. Crescenz VA Medical Center (RBP), Philadelphia, PA; University of Pennsylvania (RBP), Philadelphia, PA; Horizon Blue Cross Blue Shield of New Jersey (SRP), Newark, NJ; University of Chicago Medicine (BNP), Chicago, IL; Humana (JAR), Louisville, KY; Cigna (BS), Houston, TX; Anthem (ESm), Washington, DC.

Source of Funding: Authors served as participants in an oncology alternative payment models advisory council, which was assembled and independently led by Tapestry Networks, financially underwritten by Amgen, and cohosted by the American Cancer Society. Tapestry Networks is a privately held professional services firm with a mission to advance society’s ability to govern and lead across the borders of sector, geography, and constituency. Tapestry Networks chaired the council as an informal, precompetitive multistakeholder brain trust to share lessons and insights from oncology payment reform experiments. This article does not represent any particular policies or positions of the authors’ affiliated organizations and employers, nor does it reflect consensus across the authors.

Author Disclosures: Ms Shaughnessy and Dr Goh are employed by Tapestry Networks, which was paid by Amgen to run the council from which this work originated. Mr Lyss has received honoraria from Genentech, EMD Serono, Heron, Avalere, and The American Journal of Managed Care®, all outside of this work. Dr Parikh has received consulting fees from GNS Healthcare, Onc.AI, Cancer Study Group, and NanOlogy; grants from Humana, National Institutes of Health, Conquer Cancer, and Department of Veterans Affairs; and honoraria from Flatiron and Medscape; and owns stock in GNS Healthcare and Onc.AI, all outside of this work. Dr Polite has received speaking and consulting fees from Natera, research fees from Merck, and consulting fees from Genzyme, each not directly related to this article. Ms Royalty was employed by Humana at the time this manuscript was finalized and took part in an unpaid collaboration with the American Society of Clinical Oncology and Community Oncology Alliance, all outside of this work. Dr Sagar is employed by and owns stock in Cigna Healthcare/Evernorth. Ms Smith was employed by Anthem at the time this manuscript was finalized. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (ESh, DCJ, AJL, RBP, SRP, BNP, JAR, BS, ESm, LG); drafting of the manuscript (ESh, DCJ, AJL, RBP, BNP, JAR, BS, ESm, LG); critical revision of the manuscript for important intellectual content (ESh, DCJ, AJL, RBP, SRP, BNP, JAR, BS, ESm, LG); supervision (ESh, LG); providing qualitative inputs from practice/clinician view (AJL, RBP, BNP); providing qualitative inputs based on insurer models and/or experience (DCJ, SRP, JAR, BS, ESm); obtaining qualitative inputs (ESh); and synthesizing qualitative inputs (ESh, LG).

Address Correspondence to: Elizabeth Shaughnessy, MA, Tapestry Networks, 303 Wyman St, Ste 300, Waltham, MA 02451. Email: eshaughnessy@tapestrynetworks.com.


1. Bekelman JE, Gupta A, Fishman E, et al. Association between a national insurer’s pay-for-performance program for oncology and changes in prescribing of evidence-based cancer drugs and spending. J Clin Oncol. 2020;38(34):4055-4063. doi:10.1200/JCO.20.00890

2. Kline RM, Muldoon LD, Schumacher HK, et al. Design challenges of an episode-based payment model in oncology: The Centers for Medicare & Medicaid Services Oncology Care Model. J Oncol Pract. 2017;13(7):e632-e645. doi:10.1200/JOP.2016.015834

3. CMS Innovation Center episode payment models. Center for Medicare and Medicaid Innovation. January 2020. Accessed May 25, 2021. https://innovation.cms.gov/files/reports/episode-payment-models-wp.pdf

4. Walker T. Value-based model engages provider specialists. Managed Healthcare Executive. January 17, 2019. Accessed May 25, 2021. https://www.managedhealthcareexecutive.com/view/value-based-model-engages-provider-specialists

5. Dreyer T, Wilfong LS, Patel K, Gamble B, Polite BN. Oncology Care Model: a herculean effort with fixable fatal flaws. JCO Oncol Pract. 2021;17(4):173-176. doi:10.1200/OP.20.00852

6. Kline RM. Bundled payment models in oncology: learning to think in new ways. JCO Oncol Pract. 2021;17(4):169-172. doi:10.1200/OP.20.00735

7. Schleicher SM, Chaudhry B, Waynick CA, et al. The effect of guideline-concordant novel therapy use on meeting cost targets in OCM: results from a large community oncology network. J Clin Oncol. 2019;37(suppl 15):6635. doi:10.1200/JCO.2019.37.15_suppl.6635

8. Kline R, Adelson K, Kirshner JJ, et al. The Oncology Care Model: perspectives from the Centers for Medicare & Medicaid Services and participating oncology practices in academia and the community. Am Soc Clin Oncol Educ Book. 2017;37:460-466. doi:10.1200/EDBK_174909

9. Jackman DM, Zhang Y, Dalby C, et al. Cost and survival analysis before and after implementation of Dana-Farber clinical pathways for patients with stage IV non–small-cell lung cancer. J Oncol Pract. 2017;13(4):e346-e352. doi:10.1200/JOP.2017.021741

10. Schleicher SM, Chaudhry B, Dickson NR, et al. Time to rethink the role of clinical pathways in the era of precision medicine: a lung cancer case study. JCO Oncol Pract. 2021;17(7):379-381. doi:10.1200/OP.21.00073

11. CMS Perspective: Oncology Care Model (OCM) third annual evaluation report and next steps for oncology innovation. Center for Medicare and Medicaid Innovation. January 2021. Accessed May 25, 2021. https://innovation.cms.gov/data-and-reports/2021/ocm-evaluation-pp1-5-perspective

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