Giving Cancer Doctors Lump-Sum Payments Slashes Costs

The costs of cancer care fell 34 percent in a study in which UnitedHealth Group Inc. (UNH) paid doctors a lump sum to treat each patient, rather than for each drug or service they provided.

The study was designed to test the theory that paying doctors a percentage of the cost of medicines they prescribe encourages them to use more expensive treatments, rather than the best or most cost-effective ones. Five medical groups using the per-patient payments spent $64.8 million over the three-year study, compared with what the researchers estimated would have been $98.1 million under the per-treatment payments.

“It was a huge difference, we expected savings but not this great,” said Lee Newcomer, the study’s lead author and senior vice president for oncology for Minnetonka, Minnesota-based UnitedHealth. “We were able to reduce the total cost of cancer care by a third despite increased drug spending.” The study was published July 8 in the Journal of Oncology Practice.

Oncologists in private practice traditionally have made much of their income by marking up expensive chemotherapy drugs that they give in their offices, raising concerns about incentives to overuse high-priced, brand-name drugs when cheaper ones might work just as well. More recently, the cost of cancer therapy has come under close scrutiny, and the American Society of Clinical Oncology made value in cancer care a major component of its annual meeting in early June.

Rising Cancer Costs

With 1.6 million people in the U.S. expected to be diagnosed in 2014, the National Cancer Institute expects cancer therapy costs to reach almost $207 billion in 2020, up from $124.6 billion in the previous decade. Treating the disease now accounts for 11 percent of UnitedHealth’s commercial health plan spending and is expected to increase, the company said.

In a result the researchers called unexpected, chemotherapy costs for patients actually increased during the study, while other costs -- such as for hospitalization or therapeutic radiology -- went down, more than offsetting them.

That could have been caused by feedback UnitedHealth gave the doctors during the study. UnitedHealth gave doctors information on their spending and the use of certain procedures, as well as how often patients were hospitalized.

The data helped the practices identify areas where they could be more efficient, said Bruce Gould, medical director for Northwest Georgia Oncology Centers, a group oncology practice which participated in the trial.

First Feedback

“This is the first time we had gotten feedback in terms of what things cost and where we as physicians are spending money,” said Gould. “With the feedback we were able to get back to the group and improve the efficiency of care.’

In the experiment, 810 patients with breast, lung and colon cancer were treated. Drug markups were eliminated and replaced with flat, per-patient fees that varied for each type and stage of cancer.

On chemotherapy, the physician groups spent almost $21 million, compared with what UnitedHealth predicted would be $7.5 million. The study couldn’t distinguish whether the costs of the therapy rose or if doctors were recommending chemotherapy more often.

UnitedHealth will look at the spike in drug costs, and plans to as much as triple the number of patients in the program, said Lynne High, a spokeswoman for the company. ‘‘We have solid evidence it works,” Newcomer said.

To contact the reporter on this story: Sonali Basak in New York at sbasak7@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Drew Armstrong, Angela Zimm

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