• Reining in the Costs of Cancer Care

    An interview with Lee Newcomer, MD May 01, 2015

    Payment innovations promise to reduce overall cancer costs, while shifting revenues from hospitals to physicians.

    Lee Newcomer, MD, senior vice president-oncology, genetics and women’s health, UnitedHealthcareThe costs of treating U.S. cancer patients will exceed $125 billion this year, about 5 percent of the country's healthcare spending. Because the incidence of cancer is rising as the population ages, the National Institute of Cancer projects that the national tab for cancer care will rise by at least 27 percent between 2010 and 2020.

    Despite these daunting statistics, the person in charge of paying for cancer care at one of America's largest insurance companies is feeling downright optimistic about cancer costs.

    "Absolutely," says Lee Newcomer, MD, senior vice president for oncology, genetics and women's health at UnitedHealthcare. "There is a lot of opportunity to eliminate care that isn't adding value. If we can focus on that, we can lower these costs."

    A Successful Pilot

    That optimism reflects the results of a three-year pilot with five private oncology practices. Each of the pilot practices has at least 15 oncologists. The insurer paid the groups on an episode-of-care basis that incentivized them to provide cost-effective care. Overall, the practices reduced total costs by 34 percent from predicted costs—$33 million saved on the treatment of 810 patients—while improving their performance on quality measures (Newcomer, L., et al., "Changing Physician Incentives for Affordable, Quality Cancer Care: Results of an Episode Payment Model," Journal of Oncology Practice, Sept. 1, 2014, vol. 10, no. 5, pp. 322-326).

    Among other things, the pilot proved that if oncology practices increase access—same-day appointments, extended office hours, telephone calls with physicians after hours—for cancer patients undergoing treatment, hospital use can be sharply curtailed. And physicians can increase their income.

    "We spent less money on hospitals, and we shared some of those savings with the physicians," Newcomer says. "So the docs are actually making more money than they did in the old model—as they should because they are working harder. And hospitals are being squeezed a little bit in terms of hospital bed-days."

    The pilot has been extended into a second phase. Newcomer and the practice leaders think they can wring even more costs out of care delivery by choosing treatment regimens that offer the best outcomes at the lowest cost.

    Next Big Idea

    Despite his enthusiasm for the episode-of-care approach used in the pilot, Newcomer believes that payment model will work only for large, sophisticated oncology practices because it is too complex for small offices.

    So the search continues for other payment innovations that will reduce cancer care costs. Late last year, UnitedHealthcare announced a new bundled payment pilot with the University of Texas MD Anderson Cancer Center. In this initiative, the insurer will make a single payment to MD Anderson for all services—inpatient and outpatient care, surgery, chemotherapy, emergency care, and ancillary services—provided to a cancer patient in an entire year.

    For now, the program is limited to patients with head and neck cancers, which represent a tiny fraction of cancer care. That is the starting point because that department at MD Anderson had done considerable work to analyze its actual costs of delivering care and identify ways to standardize high-value care.

    Under terms of the arrangement, the insurer will pay less for all the care delivered to head and neck cancer patients in an unmanaged fee-for-service environment, but the hospital stands to make a higher profit than it did under the traditional contract.

    "We are paying them more for valuable services than we used to and they, in turn, have eliminated all the non-value-added services," Newcomer says. "That's exactly what we should be doing across the board. So we anticipate that this is a platform for moving into cancers that have higher volume."

    Take-Away for Hospitals

    Both of UnitedHealthcare's cancer care pilots threaten a major revenue stream for hospitals.

    "That does not mean, however, that profits have to go down," he says. "You can make a larger profit on value-based services to compensate for lost profits on the eliminated non-value-added care."


    Lee Newcomer, MD, is senior vice president-oncology, genetics and women's health, UnitedHealthcare, Minnetonka, Minn.

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