March 2016 Edition Vol.11, Issue 3

Better Care, Better Payment, and Savings: A Win-Win-Win Approach to Payment Reform

Better Care, Better Payment, and Savings: A Win-Win-Win Approach to Payment Reform

By Chase Doyle


As doomsday scenarios about the future of health care abound, practical solutions to payment reform are rare, and those that offer plausible benefits to all parties are almost non-existent. In fact, with stakeholders seemingly locked in a zero-sum game, the most obvious question may not be, ‘how can we fix the problem?’ but rather, ‘who will end up with the short end of the stick?’

“Not many people are offering solutions,” said Harold D. Miller, President and CEO of the Center for Healthcare Quality and Payment Reform and Adjunct Professor of Public Policy and Management at the Heinz College at Carnegie Mellon University. “People are spending more time battling over how much to pay for services instead of determining what can be done to deliver services differently in order to improve quality and reduce costs.”

And yet, as Miller presented at the 2016 Cancer Center Business Summit, it is possible for patients, payers, and providers to all benefit from improved delivery and payment for cancer treatment, and it starts with physicians taking charge of the issue.

“Win-win-win approaches start with physicians designing better ways to deliver care at lower cost and then having payers remove the barriers to better care,” he said. “Better care for patients, lower spending for payers, and financially viable physician practices are all possible.”

This isn’t to suggest the solution will be easy. “People keep looking for easy answers to health care payment reform,” said Miller, “but the underlying payment system is fundamentally broken… and oncology is the most broken of all.”

The core of the problem with the current payment system is that an oncology practice doesn’t get paid for all the services it delivers. In fact, said Miller, the gap between payment and services is vast: data from the National Practice Benchmark for Oncology showed that the fee-for-service payment structure only pays for two thirds of the cost that oncology practices incur in caring for patients. The rest of a practice’s revenue comes from drug margins. “Oncology practices couldn’t stay afloat today if it weren’t for the drug margins,” emphasized Miller.

He noted that while people have been led to believe that doctors are lining their pockets with the percentage mark up on infused chemotherapy drugs, in reality, any profits on those drugs are being used to subsidize the rest of the practice—services that aren’t considered in the reimbursement equation. “It’s not that drug payments are somehow enriching them; drug payments are letting them deliver services such as social workers, psychologists, financial counselors, etc. that couldn’t be paid for any other way.”

And, payers have no record that these other services are being delivered because they don’t get billed for them; there are no billing codes. According to Miller, payments are also poorly aligned to the phases of cancer care, such as the critical work that occurs before treatment begins and after treatment ends. 

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