Insurance Companies Lower Cancer Care Cost By Limiting Physician Drug Mark-Up

Spending on cancer treatment may grow as much as 65 percent by 2020, according to government researchers. (Bigstock)

Alan: The cost of American healthcare is astronomical because capitalist interests all across the "medical spectrum" net more money the higher their gross receipts. The dawn of healthcare transparency will lead to continual revelation concerning the inflated billing practices that had become normalized (in non-transparent darkness) by capitalist pigs. 

One of the great health-care challenges of the next few years is getting control of the skyrocketing costs of treating cancer. The U.S. spends as much as $127 billion on cancer care in a year, and that is projected to grow to at least $158 billion — and could be as much as $210 billion — by the end of this decade as the Baby Boomers get older, government researchers say.

Insurers and health-care providers are looking at different ways to rein in these costs. WellPoint, as the Wall Street Journal reported a few weeks ago, has a new program offering oncologists $350-per-month for each patient receiving care in accordance with the insurer's prescribed guidelines. Other insurers are changing their payment strategy to avoid settings where care is more expensive.

And we now have the initial findings from one of the more high-profile efforts to cut spending on cancer treatment. A four-year-old pilot program launched by United Healthcare, the nation's largest insurer, offered encouraging but mixed results — the program providing up-front payments to doctors produced significant savings, but spending on chemotherapy drugs still increased more than expected.

Here's what United did differently with its pilot program. The insurer worked with five oncology practices to pay them immediately for an "episode of care," which typically lasts between six and 12 months, instead of paying for each service provided. The medical groups selected which of 19 episodes each patient would receive, and United delivered a set fee up front. Doctors could change a patient's drug regimen at any time, but they'd only be paid more if they lowered the total cost of care or improved patient outcomes.

"We started with the assumption that oncologists make about 70 percent of their income from purchasing chemotherapy drugs at wholesale and basically selling them at retail," said Lee Newcomer, United's senior vice president of oncology, who wrote about the pilot results in the peer-reviewed Journal of Oncology Practice. "There's been a strong incentive if you use more medicines you make more money."

The insurer spent about $64.8 million on 810 patients with breast, colon or lung cancer during the course of three years, much less than the $98.1 million it figures it would have paid under the traditional reimbursement system. Unexpectedly, though, spending on chemotherapy drugs accounted for almost $21 million of those costs, much more than the $7 .5 million the insurer would have otherwise paid. And that's one of the more puzzling results of the program — it was designed to drive down drug spending by stripping incentives for doctors to pick higher-cost treatments.

"That was a total surprise," Newcomer said in a phone interview. Still, United said the program produced about $33 million in savings, with the doctors receiving a raise worth about one-third of that. However, the study wasn't set up to identify exactly where those savings came from, though Newcomer points to reductions in hospitalization and the use of radiation oncology as two of the likely drivers.

The doctors and United designed the program with more than 60 measurements for comparing program quality and costs, and doctors received performance data about how they compared to other groups — something the doctors didn't have access to before. They met once each year to pore over the data and discuss how to improve their performance.

Newcomer said United is now looking to triple the size of the payment program, but it won't work for just any group. The insurer is specifically looking at medical practices of at least 15 doctors that are located in an area with a large number of United patients. It also takes a major commitment from the practice.

"We like to see very strong clinical and business leadership," he said. "Someone has to be a champion. It takes extra work."

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico