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. 

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

Rewarding for outcomes, not volume

In the current fee-for-service payment system, doctors are paid for volume of services performed, but are not held accountable for the outcomes or “value” of those services. In addition, the same amount is paid for services regardless of how many services are delivered, but the cost per service is higher when fewer services are delivered.

“Because oncology practices and hospitals have significant fixed costs, the fewer services they deliver, the more money they lose.  So it’s an inherently win-lose situation when patients are kept healthy or when avoidable services are reduced,” said Miller.

Citing the hospital emergency room as an example, Miller explained how we all want the hospital ER to be there, ready to deliver services, whether it has any emergencies or not, "however, the only way a hospital can cover the costs of the ER is to get more patients to use the ER, which means that financial goals and quality goals are misaligned."

Miller’s answer to this scenario is to align financial and quality incentives with a patient’s condition instead of to the services received. “If you pay based on the patient’s condition, then higher payment is only made when the patient has higher needs.”

Instead of renegotiating multiple individual service payments with a payer, a bundled payment, based on the patient’s condition, would provide the flexibility to deliver high-quality care, while also increasing accountability for the total costs of services delivered, he suggested.

Miller explained that practices get much higher reimbursement for the administration of IV chemotherapy than for administering an IV saline solution to a patient who is dehydrated due to nausea. IV hydration is a very high-valued but "undercompensated" service that potentially spares that patient from being admitted to a hospital, thereby reducing the total cost of care.

“Bundled payment lets you do both things,” said Miller. “It lets you pay for the treatment that’s considered a high-value service and it encourages reducing costs by avoiding emergency room visits and hospitalizations.”

Patient-centered oncology payment reform

The American Society of Clinical Oncology (ASCO) also weighed in on the theme of removing the barriers created by the current payment system to delivering high-quality, affordable care. In a recently released proposal, ASCO calls for the restructuring of the way oncologists are paid for cancer care by providing payments that support the full range of services they provide to their cancer patients.

The basic concept behind the Patient-Centered Oncology Payment model is to give more payment to practices where it’s needed, Miller explained. Practices may then be able to afford to pay for triage nurses, for example, or for providing the expanded clinic hours necessary so patients can access care when experiencing complications and potentially avoid going to the ER or be admitted to a hospital.

In turn, practices are asked to take accountability for following the ASCO guidelines and to reduce avoidable services such as hospital admissions and ER visits, the unnecessary use of supportive drugs, the use of expensive chemotherapy where lower cost drugs are available, and the unnecessary treatment that occurs at the end of life.

Focusing on reducing avoidable services in order to achieve savings, Miller indicated, avoids providing incentives to practices to reduce desirable services or ration care. Moreover, practices are not put at risk for costs they can’t control.

“The problem with current shared savings models,” said Miller, “is that oncology practices are given more money only if they reduce spending elsewhere… Practices that stint on care would be rewarded financially for doing so, even though it would harm patients.” However, by providing significant and predictable resources, matched to where practices actually incur cost, providers are rewarded based on their ability to follow appropriate use criteria that may keep patients out of the hospital. Resources are tied to appropriate use, not to savings, he said.

It’s not about giving oncologists “incentives” to do something they’re resistant to, he added; it’s about enabling them to deliver a service that they want to provide but can’t under today’s payment system.

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


While an increase in upfront payment is certainly enticing, providers are understandably skeptical about payment reform given the problematic structure of many alternative payment models. Physicians have already been forced to change care to align with Medicare payment systems composed of costly and sometimes ineffectual metrics. There’s also the fear of being held accountable for outcomes outside of their control.

“It’s important to make sure you’ve got the right measures that are focused on things that oncologists can reasonably expect to control,” said Miller, “which is why the ASCO model is focused on specific guidelines already in place.”

According to Miller, payers may find the ASCO payment model attractive because it’s designed to work in ways a health plan can administer. It proposes adding new billing codes for currently unfunded services and adjusting the payment amounts for services that are based on performance measures. Condition-based payments, although ultimately necessary, he said, would be more complicated to implement.

While payers might find bundled payments acceptable or desirable in theory, they may not have the systems needed to implement them in practice. New software systems and programs would have an associated cost. “There needs to be enough consensus that bundled payments are needed in order to make this worthwhile for payers to invest in,” Miller said.

Inevitably, there’s going to be uncertainty on both sides: Can oncology practices meet performance targets, and will savings actually offset higher payments? In order to make this work—to benefit patients and save money for payers in a way that’s feasible—genuine partnerships between oncology practices and payers are essential.

“Oncology practices can’t change the way they deliver care unless payers agree to pay them differently,” Miller said. “Practices will need claims data from the payers to be able to estimate what the potential savings or impact of these changes would be.”

Accountability angle

With direct payment supporting the services they want and need, the biggest win may be for patients. Whereas shared savings models might encourage rationing of care, the ASCO model, driven by appropriate use criteria, prevents both overuse and underuse of medical procedures. There are no rewards for simply spending less (or more) on a patient.

“Holding practices accountable for delivering services that are by definition good for the patient means that patients are more likely to get these services reliably… Better care also means patients aren’t spending what may be the last months of their life sitting in the emergency department.”

In addition to receiving the services that they need, patients no longer have to worry that their physician is somehow being secretly rewarded for spending less on their care, and patients don’t need to spend money on cost-sharing for drugs or tests that they don’t really need, he added.

“If oncologists take accountability for reducing the avoidable services, which drive a significant portion of cancer spending,” said Miller, “then we’ll have financially viable oncology practices that are paid adequately to deliver high-quality care and not put at risk for costs they cannot control. That’s a true win-win-win.”


Despite the turmoil surrounding payment reform, one thing is certain about the future of oncology: lower spending is essential. Payers say they can no longer afford the exorbitant costs of cancer care. But by placing the onus on oncologists to identify what’s needed for high-value care, Miller has broached an elegant solution. Better care for patients, better payment for oncologists, and savings for payers—all at the same time—it almost sounds too good to be true. By giving oncology practices sufficient resources and flexibility to design care that matches patients’ needs, however—and not rewarding them for stinting on care—Miller believes this model can become reality. 

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