Cancer Care Payments Tied to Alternative Payment Methods, Says Medicare

Alternative payment methods in cancer care are front and center in a Medicare initiative to have 85% of all fee-for-service payments tied to quality or value by 2016, and 90% by 2018. Further, according to a statement from Sylvia M. Burwell, US Secretary of Health and Human Services, 30% of Medicare payments will be associated with quality or value through alternative payment models by the end of 2016, and 50% of payments by the end of 2018.

These models include accountable care organizations (ACOs) and bundled-payment arrangements under which health care providers are accountable for the quality and cost of the care they deliver to patients. In a statement, Burwell said that the agency plans to develop and test new payment models for specialty care, starting with oncology care, and institute payments to providers for care coordination for patients with chronic conditions.

“We believe these goals can drive transformative change, help us manage and track progress and create accountability for measurable improvement,” Burwell said in a statement.

This marks the first time that Medicare has set explicit goals for alternative payment models and value-based payments. It is hoped that the initiative will move payments away from the expensive fee-for-service system, which pays doctors a flat amount for every surgery and physical they perform — even if they do nothing to actually help a patient.

“Three years ago, Medicare made almost no payments through these alternative payment models, but today such payments represent approximately 20% of Medicare payments to providers,” Burwell said. “As part of this work, we also recognize the need to continue to reach consensus on the quality measures used and address issues related to risk adjustment in these new models.”

The Obama administration sees this new plan as a way to cut health care spending by disincentivizing unnecessary medicine. Wasteful care is a huge problem in the United States: the Institute of Medicine estimates we spend $210 billion annually on medicine that doesn't make us any healthier.

"It's a really big deal for the largest insurer in the United States to signal to hospitals and doctors that it intends to move aggressively in this direction," said Chas Rhodes, chief research officer at the Advisory Board, a consulting firm.

The Affordable Care Act created a number of new payment models that emphasize rewarding quality. These models include ACOs, primary care medical homes, and new models of bundling payments for episodes of care. In these alternative payment models, health care providers are accountable for the quality and cost of the care they deliver to patients. Providers have a financial incentive to coordinate care for their patients — who are therefore less likely to have duplicative or unnecessary x-rays, screenings and tests.

To make these goals scalable beyond Medicare, Secretary Burwell also announced the creation of a Health Care Payment Learning and Action Network. Through the Learning and Action Network, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs. HHS will intensify its work with states and private payers to support adoption of alternative payments models through their own aligned work, sometimes even exceeding the goals set for Medicare. The Network will hold its first meeting in March 2015, and more details will be announced in the near future.