November 2013 Edition Vol.7, Issue 10

The Evolving Landscape of Payment Care Delivery and Manufacturer Implications of Coverage Expansion

The Evolving Landscape of Payment Care Delivery and Manufacturer Implications of Coverage Expansion

By Gordon Gochenauer, Director, Oncology Commercial Strategies,
Kantar Health


The U.S. continues to grapple with healthcare costs that consume an ever-increasing proportion of gross domestic product (GDP) but does not translate into a relatively better national health status than countries that spend much less on healthcare. This spending growth is unsustainable for the public and private sectors, a view that has become more pronounced during the recent economic recession and growing government deficits.  The Patient Protection and Affordable Care Act (PPACA) of 2010 established a framework for reorganization of the U.S. healthcare delivery system with several key initiatives:

  • Payment and Care Delivery: Accountable care organizations (ACOs) continue to form, further enabling the expansion of clinical pathways.
  • Coverage Expansion: State health insurance exchanges are likely to increase cost sensitivity, affecting prescribing attrition and abandonment. Medicaid may become a more important player in oncology.
  • Insurance Regulation and Affordability: Elimination of annual and lifetime limits will assist patients financially, but affordability challenges remain, especially for oral cancer drugs.
  • Quality and Health Information Technology (HIT) Initiatives: Growing adoption of electronic medical records (EMRs) enable development of ACO models and pathway implementation. Data will slowly become available to inform evidence-based medicine.

Community Practices

ACOs are intended to bring physicians into an integrated system that shares the rewards of efficient, coordinated patient care. Continued inadequate reimbursement from payers, both public and private, has increased the attractiveness of participation in novel delivery and reimbursement arrangements for community oncology practices. In a 2013 Kantar Health oncologist survey, respondents cite a strategic desire to provide the community with coordinated, integrated care as the primary driver of hospital affiliation, unlike the practical goals (financial survival and business efficiency) that drove affiliations up through 2012.

Practice and hospital participation in novel reimbursement mechanisms, particularly ACOs and enhanced reimbursement for the use of pathways, is growing. According to Kantar Health’s oncologist and practice manager surveys, ACOs are the fastest growing novel reimbursement arrangement with 30% of practices participating, covering 10% of all cancer patients. Participation is expected to grow to 50% within the next one or two years as practices and hospitals experiment with value-based reimbursement and coordinated care.

Pathways are currently the most common novel reimbursement mechanism in community oncology practices, with 43% of practice managers reporting their use, covering 11% of their patients; both hospitals and practices expect involvement to grow in the future, according to Kantar Health’s surveys. Cancers most commonly affected by pathways include colorectal, breast, non-small cell lung (NSCLC) and prostate cancer, although some programs include a wider array of cancers, including non-Hodgkin’s lymphoma, multiple myeloma, renal cell carcinoma and melanoma. Some payers believe that including only the top four or five cancers in pathway programs is sufficient to restrain drug expenditure growth. One important key of ACO initiatives is that the expansion of health information technology (HIT) allows pathway programs and other initiatives to combine management of oral and physician-administered injectables across a patient’s pharmacy and medical benefit, thereby crossing a line once perceived as insurmountable to manage across a patient’s continuum of oncology drug utilization.

Patient Out-of-Pocket Cost

While expanded insurance coverage as a result of the ACA is helping patients gain access to healthcare, challenges to affordability are likely to remain. OOP costs are not necessarily alleviated as a part of the ACA, particularly for commercial plans, as these costs continue to trend upward. Kantar Health’s 2013 Managed Care Organization (MCO) survey showed that nearly 30% of the commercial lives managed by the surveyed MCOs do not have an annual out of pocket (OOP) maximum for drugs covered under the medical benefit. Without an OOP limit in place, patients may experience financial hardship―especially cancer patients who generally have a higher rate of financial need.

Additionally, high-deductible health plans (HDHPs) are appealing to payers and employers since greater patient exposure to cost through high deductibles presumably lowers expenditures on nonessential care. Studies have shown patients in these types of plans are healthier1; and may be less at risk for certain types of cancer. Although the percentage of patients enrolled in HDHPs has increased 30% annually from 2006 to 2012, enrollment was similar in 2013 as in 2012 (20% vs. 19%), it is important to note that enrollment patterns vary by firm size. Workers in large firms (200 or more workers) are more likely than workers in small firms (3-199 workers) to enroll in preferred provider organizations (PPOs; 62% vs. 47%). Workers in small firms are more likely than workers in large firms to enroll in point-of-service (POS) plans (16% vs. 5%).

For many commercial plans, oral cancer drugs are managed and placed on specialty tiers, which are traditionally Tier 4 or higher. The specialty tiers decrease the patient’s ability to afford treatment, as an average co-pay of $79 is 172% higher than the most common tier (Tier 2) for commercial payers. Cancer patients can be on multiple drugs, for numerous conditions, resulting in significant OOP costs.

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