Study Finds Cancer Costs Don't Outpace Other Health Care

By Robert H. Carlson

The big surprise that emerged from the recent study conducted by researchers at the actuarial firm Milliman and commissioned by the Community Oncology Alliance (COA) was that over a 10-year period, the total cost of care for actively treated oncology patients has been rising at the same rate as non-cancer patients. 

The findings are in sharp contrast to the commonly held belief that cancer care costs have been rising faster than healthcare spending in other segments of the Medicare and commercially insured patient populations. 

The study's three key findings were:

  1. The percent increase in cost from 2004-2014 for actively treated Medicare fee for service and commercially insured cancer patients is similar to the corresponding increase for the non-cancer Medicare fee for service and commercially insured populations.
  2. The cost of chemotherapy drugs is increasing at a rate significantly higher than other cost components of actively treated cancer patients, driven largely by biologics, but the chemotherapy drug increase has been offset by slower growth in other component costs.
  3. The site of service for chemotherapy infusion has dramatically shifted from physician office to hospital outpatient settings, which has contributed to the increase in cancer care cost.

Percent Increase in Cost

The retrospective “Cost Drivers of Cancer Care” study analyzed claims data for the Medicare and commercially insured patient population covered between 2004 and 2014. 

Two data sources were used, the Medicare 5% sample claim database and the Truven Health Analytics MarketScan Commercial Claims Database (MarketScan).

Results showed that the per patient per year cost increases for the actively treated Medicare cancer patient population was 36.4% vs 34.8% for the Medicare non-cancer patient population. 

Similar results were seen in the commercially insured cancer treated patients vs non-cancer patients:  increases were 62.5% for the actively-treated cancer population vs 60.8% for the non-cancer population. 

"There has been a long-held belief in research and policy circles that cancer care costs in America have gone up disproportionately as compared to other health care costs. This study shows that this commonly held belief is not supported by the evidence," said Debra Patt, MD, MPH, MBA, practicing oncologist at Texas Oncology (Austin, TX), and COA board and study team member.

The Cost of Chemotherapy Drugs

Drug spending, which represented one-fifth of the total costs in actively treated cancer patients in 2014, increased at the highest rate of all component costs, mainly due to the new biologic cancer drugs.

“Historically, the cost focus has been almost exclusively on drug pricing, but that has to be considered in the context of all cancer care costs, including the site of care,” said Ted Okon, MBA, COA Executive Director. 

“If we're going to tackle the increase in the costs of overall medical care we can't look at just the drug side. In cancer care that's only 20 percent — it's meaningful, but it has to be put in perspective,” he said.

Most payers pay less if a chemotherapy infusion is administered in the physician office setting compared to the hospital outpatient setting. For Medicare in 2004, approximately 85% of chemotherapy was administered in a physician's office, but by 2014 that percent was reduced to approximately 56%, said David Eagle, MD, a hematologist/oncologist at Lake Norman Oncology in the Charlotte, NC area, and Past President of the Community Oncology Alliance (COA). 

The Milliman study examined changes in both spending and volume of chemotherapy drugs by site of service. The study shows that a 30% rise in chemotherapy infusions were being administered in the more expensive hospital outpatient setting, with a corresponding decrease in the less expensive practice setting. 

Figure 1 shows the shift in spending on chemotherapy drugs from the practice setting to the hospital outpatient setting.

Study Finds Cancer Costs Don't Outpace Other Health Care (continued)

“We hope this study will help change that trend if the information can be used to educate policy makers,” said Dr. Eagle. “If the goal is to bend the cost curve in oncology, certainly the last thing we should be doing is paying more for the exact same service.”

Dramatic Shift in Site-of-Care

The study also examined cost trends in the site of service for chemotherapy infusion. The proportion of chemotherapy infusions administered in the hospital outpatient department setting nearly tripled, increasing to 45.9% from 15.8% in the Medicare group. In the commercially insured population, the proportion was even more pronounced: from 5.8% to 45.9%.

In terms of cost, the study confirmed that patients treated in the hospital outpatient department incurred higher costs than patients treated in the private practice setting. The difference in cost was $13,167 (37%) higher in 2004 and $16,208 (34%) higher in 2014 for Medicare patients; and $19,475 (25%) higher in 2004, and $46,272 (42%) higher in 2014 commercially insured patients.

“The research showed that if the site-of-care mix between community and hospital in 2014 reverted to the 2004 mix, the savings to Medicare would have been $2 billion,” said Dr. Eagle.

The average annual per-patient per-year (PPPY) allowed costs for infused chemotherapy patients was significantly higher when chemotherapy infusions were delivered entirely in the hospital outpatient setting vs the office setting (Figures 2 and 3).


The shift in site of care to the hospital outpatient setting has added to the rise in PPPY costs for both the Medicare and commercial patient populations. Dr. Eagle stated that COA has seen examples of an oncology practice acquired by a hospital, with the same patients seeing the same doctor at the same clinic and getting exactly the same chemotherapy drug, but the hospital setting was demonstrably more expensive. 

“That won't create any net savings — if anything, the cost of care goes higher,” he said.

Changes in reimbursement have put more pressure on practices, with more physicians being driven toward the hospital setting noted Dr. Eagle.

“A community practice can only take so many reimbursement cuts. Community practices have done everything they can to adapt, but to have a viable practice you have to have a reimbursement level that supports that practice.

“When that equation doesn't add up any more, then practices are under pressure to fold into a hospital,” he said.

Education Outreach

The COA has an ongoing broad effort to educate policy makers on this topic. In June and July, Dr. Eagle along with Dr. Patt, presented these study data in Washington, DC, in briefings with congressional staff members in the House Committee on Energy and Commerce and also with senior officers at the Centers for Medicare & Medicaid Services, to educate them on this issue.

“There is obviously a lot of interest in the cost of cancer care, particularly in the shadow of Medicare Part B Drug Proposal for changes in reimbursement,” said Dr. Patt, who was also a member of the study team.

“It is evident that per capita spending in oncology is less when patients are treated in a physician office setting in comparison with the hospital outpatient department,” said Dr. Patt.

Trend to Partnering

“The trend over the past few years has been for community oncology physicians to find partners — academic medical centers, hospital systems, or large provider networks — so they can continue to survive and continue to provide good care,” said Lee S. Schwartzberg, MD, a hematologist/oncologist and Executive Director of the West Cancer Center, Memphis, TN.

“This is due in part to cuts in reimbursement that make it difficult to operate at a scale that allows the practice to stay open, and that has driven a lot of practices to find a strategic partner,” he said.

In the case of Dr. Schwartzberg's own practice, the physicians have a professional service agreement and co-management with a hospital. “We are not owned by the hospital, it is an inter-relationship with the hospital.”

He said his group made a conscious effort to avoid affecting their patients by changing reimbursement, as the charges and costs are typically higher from hospital-based providers.

“So we kept our contracts with the local and regional payers, which did not hurt the patients, and their co-pays and insurance and cost of drugs stayed the same. This was favorable because we are working with the hospital, and in our case we got 340B pricing.”

Dr. Schwartzberg said the solution his group found may not be for everyone.

“It worked for us, it did not penalize the patients, and it allowed us to work with a bigger partner to provide better care to the entire community, including patients who are uninsured and under insured,” said Dr. Schwartzberg. “But in other settings, in other communities and circumstances, there are practices that need to partner with a hospital and then bill under hospital-based billing.”

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